The Hindu Business Line : Patents: A questionable right

Many corporations are being forced to work on known molecules simply to get extended patent rights and, thereby, retain their monopoly pricing. Interestingly, in this context, only a small fraction of new drugs coming into market is innovative.

P. A. Francis

In recent years, the global pharma firms are increasingly getting drawn into expensive legal battles over two contentious issues on patent rights. On the one hand, their marketing exclusivity for patented drugs is being challenged by generic companies in the US and Europe and, on the other, they are being confronted by governments of developing countries over monopoly prices of essential drugs. On both fronts, the multi-national corporations (MNCs) are on the back-foot.

A prominent litigation in this context is that of Glivec, the brand name for a cancer drug, imatinib mesylate, by Novartis for which the Indian Government denied patent in January 2006. Novartis subsequently challenged the constitutional validity of the rejection of its application in the Madras High Court. On August 6, 2007 after long-drawn hearings, the Madras High Court rejected the Novartis’ petition per Section 3 (d) of the amended Patent Act.

The provision does not recognise incremental innovation of known substances unless it significantly improves efficacy of the substance. The objective of the Section is to prevent drug companies from unjustifiably prolonging the life of a patent by claiming new properties.

Novartis, however, holds the view that medical progress occurs through incremental innovation and Section 3 (d) excludes significant modifications of existing molecules and, thereby, denies patients new and better medicines. Glivec costs around Rs 120,000 for a year’s treatment in India whereas the cost of treatment with generics produced by India’s domestic pharma companies such as Natco, Cipla, Ranbaxy and others works out to Rs10,000.

Drug pricing, the issue

Like Glivec, there are many expensive patented drugs being marketed by MNCs for various ailments. Developing countries including India are increasingly under pressure from patient groups and social organisations to take a tough stand against pharmaceutical giants over monopoly prices. Dr Ambumani Ramdoss, Union Health Minister, had once even threatened to use the option of compulsory licensing if Novartis won the Glivec case in the Madras High Court in light of the verdict that action is no longer required.

Pricing of patented drugs constitutes the heart of the matter. Advanced drugs for cancer, HIV, diabetes, cardiovascular diseases and neurological disorders are all under patent and are blockbusters with high price tags. Most of these life-style diseases are increasingly affecting the middle-class and poor people; so monopoly pricing obviously come under public scrutiny forcing governments of developing countries to act.

Compulsory Licensing

What kind of threat did the Union Health Minister hold out? According to the TRIPS agreements under WTO, a country can resort to “compulsory licensing” to make available cheap drugs to fight national health emergencies either through domestic production of patented drugs or import of substitutes. Most governments are reluctant to use this last-resort measure and do so only in the event of inaccessibility of cheaper drugs by the patent-holders.

What has happened in Thailand and later in Brazil is particularly instructive. The Thai Government issued compulsory licences on three drugs a few months ago. That allowed Thailand to import affordable, safe and effective generic versions of the patented drugs from other countries or to produce them on their own through their government pharma company. The first licence was issued on November, 2006 for the HIV drug, efavirenz, a patented drug of Merck. This was followed by issuing of compulsory licenses in January this year, for the heart disease drug, clopidogrel, a patented drug of Sanofi-Aventis and another HIV drug, lopinavir/ritonavir, sold by Abbott.

Thailand has made it clear to the global pharma industry that it will continue to break patents until prices for AIDS drugs come down significantly. Across the world in Latin America, Brazil also issued compulsory licensing for efavirenz early this year.

Muddled law?

Ambivalence in the definition of patentability of drugs in India has led to an increasing number of patent challenges. The laxity of the government in clearly defining this controversial aspect of the new patent law has led to more than a dozen cases pertaining to grant of patents in various courts of the country after the amended Patent Act was notified in January 2005.

Wockhardt’s patent for a new version of nadifloxacin, an advanced antibiotic, was a case of incremental innovation rejected by the Patent Controller early this year. The company then filed a petition in the Bombay High Court challenging that rejection. Since the drug in question does not have the life-saving quality of Glivec, it has not attracted the same kind of attention. But the Madras High Court judgment may just set a precedent.

A good deal of the current litigations, including the Novartis case, arises from an ambivalence on what is “patentable”. A committee headed by Dr Mashelkar was meant to clear the air; instead it added to the confusion on the subject of patentability by its observation that the Indian pharma industry was capable of incremental innovations only and, therefore, the Act should not limit grant of patents to new chemical or new medical entities. With the controversy surrounding the report, the responsibility of finally settling the issue of “what is patentable” in the pharma industry has unfortunately landed with the judiciary.

If incremental innovations need to be rewarded, the question is whether they should be treated on a par with totally new inventions. That in itself does not seem right or justifiable. Assuming it is, what should be the ideal patent term for such incremental innovations and modifications? Considering the poor accessibility of essential drugs at present, these are issues that lie at the centre of all patent legislations in the developing world.

Searching in vain

Global pharmac companies are in the midst of a serious crisis with few new molecules emerging from their R&D efforts. Pfizer, GSK, Merck, Sanofi, to name a few, cannot claim to have any major breakthrough drugs entering the market in the near future. With a large number of patent expirations expected in the next three years and the growing preference for low-cost therapies, generics will profoundly affect healthcare in the years to come.

Lipitor, the world’s top selling cholesterol drug by Pfizer, with $13 billion annual sales is one of the six cholesterol-lowering drugs already in the market. There are whole families of me-too drugs readily available and there is little reason to think that one is better than the other at comparable doses. This unprecedented dilemma is forcing many corporations to work on known molecules simply to get extended patent rights and, thereby, retain their monopoly pricing. It is interesting to note in this context that only a small fraction of new drugs coming into market are innovative.

The few innovative drugs that emerge are usually from publicly-funded research projects of government institutions or university labs. The first of the Lipitor-type drugs, Mevacor, came to the market in 1987 based largely on university research.

Between 1998 and 2003, the US FDA classified 78 per cent of the 487 drugs that hit the market as no better than the existing drugs. Of these, 68 per cent were not new at all but old drugs in new forms or combinations. In other words, the research efforts of the pharmaceutical industry are ending up in “new” products as minor variations of existing drugs.

Where’s the money going?

In the event, is there any justification for patent authorities to grant a 20-year patent for a product that is not new in terms of efficacy and safety? The truth is that despite their tall claims, the drug companies are growing less and less innovative. The prospects of loss of revenue on account of patent expiration push the pharma giants to spend heavily on promotion of existing drugs and their modifications rather than on new molecular research.

A pharmabiz study of top 15 global pharma giants revealed that marketing expenditure, as a percentage of total sales, worked out to 30.5 per cent in 2006. As against this, the R&D spends, as a percentage of total sales of these giants, stood at just 15.1 per cent. This is hardly a healthy trend for an industry that was respected for its innovative research into deadly diseases affecting humanity.

Patent regimes in danger

The global pharma industry should therefore realise that their research efforts for new drugs have to be more genuine and that the pricing of the patented drugs needs to be based on realistic costs and for reasonable profits. Otherwise, the whole edifice of patent systems for the pharmaceutical industry may become irrelevant.

(The author is Editor of Chronicle Pharmabiz, a pharma industry journal.)

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