The Hindu Business Line : Patents vs prices: Sugar coating a bitter pill

At over Rs one lakh per month, any medicine that needs to be taken life-long obviously goes beyond the reach of several people in the country. But reality is not very different at a price of about Rs 10,000 per month, life-long as well. It still remains an expensive medicine to buy every month for your entire life.

The high-profile case fought recently in Chennai over Novartis’ blood-cancer drug Glivec brings home the reality of high drug prices to anyone who has ever taken a medicine in their life. With Glivec priced at Rs 1.01 lakh per month, compared to anywhere between Rs 10,000 and Rs 8,000 for generic copies of the same medicine made by local drug companies, the legal battle played out in Chennai over patents was of great interest to the average citizen.

There is no doubt that new and effective drugs need to be brought into the local market. But the tricky part for the two-year-old product-patent regime in the country is in sugar-coating the bitter pill — in designing a model where the country rewards a company bringing in its new and inventive drug, even as it keeps the medicine at a price affordable to its people.

In the case of Glivec, Novartis may have kept detractors at bay through its patient-assistance programme where the medicine is given free of cost. Over 7,500 patients have got the medicine free in India at what would have earned the company about $500 million if it had sold the drug. And the number is set to increase as the company reiterates its commitment to giving medicine free to patients who are poor or do not get reimbursement.

Glivec case

The legal battle over Glivec at the Madras High Court (HC) started after the Indian Patent office rejected Novartis’ patent application on the cancer drug in January 2006. The Swiss drug-company, in separate litigations at the Madras HC, challenged this rejection and also the provisions of Section 3 (d) of the Indian Patents Act based on which the patent application had been rejected.

In its recent judgment, the Madras HC upheld Section 3 (d) of the Indian Patents Act that disallowed incremental innovation from being patented, unless the innovator proved that it significantly increased therapeutic efficacy of the drugPatient-groups expressed relief as now frivolous extensions on existing medicines would not be given a patent monopoly.

But for Novartis, it was a setback and a cause for concern. With patents on the drug in 40 countries, the company might not have expected that the patenting exercise in India would cause it to be at the centre of a virtual public-relations nightmare. Other multinational companies watched the development keenly to take their cues on bringing in new medicines and investments. The case would show whether the law was going to aid or obstruct the flow of new medicines into the country and the part that generic drug makers would play in this constantly changing scenario.

Patent definitions

Patents are integral to the pricing decision on a drug, with an innovative or break-through drug commanding a high price as the company seeks to recover its investments made into researching the drug. But this again has plots and sub-plots, as pharmaceutical companies often buy promising molecules from government-funded universities. Detractors also say that a large part of the drug company’s investment goes into marketing and not research.

But when a country finally decides to give a company a product-patent on a particular medicine, no other company is allowed to make and market the same drug for a 20-year-period, thus granting the patent-holder effective monopoly for the drug. Given these factors, it becomes imperative that the patent evaluation process be rigorous and Section 3 (d) of the Indian Patent Act seeks to do just that.

Clarity is still required on how the law would define “incremental innovation” and how a company can establish efficacy. A manual of guidelines that help narrow the subjective element and standardise these definitions is in the offing from the Centre. At present, the onus of establishing enhanced efficacy lies with the drug-company. And if the company and the Patent Controller’s office do not agree that a drug indeed has a higher efficacy, the result is litigation.

Affordable models

When a medicine indeed gets a patent after crossing different checks and balances if it is a new drug, it will be priced at a premium. The easiest emotional response to this would be to attack the company and force it to bring down the price. But down the line, such a response will stifle the launch of drugs by the company. The more transparent and rational approach would be for the government to design a system that will support better sourcing of medicines at subsidised prices, improved and even-handed distribution, better health-insurance coverage and most important an increased (even massive) healthcare spending from the Centre.

In critical sectors such as cancer and HIV/AIDS medicines, the Centre is looking at ways to procure the medicine and support patients who cannot afford the medicine. But even a fleeting glance into one of these segments reveal how much more needs to be done on the ground on getting medicines to the people who need it.

The global experience with HIV/AIDS drugs has shown that competition and volumes help bring down prices on drugs. Large trans-national procurement by multi-lateral agencies and private foundations has helped companies provide medicines at reduced prices.

The Centre should look at several more structured procurement programmes tosource medicines from companies at a nominal price. This assures companies their volumes and on-time payments, taking care of bottom-line concerns even as the pipeline of critical medicines continues to flow to the people.

There are provisions in the country, that are still contentious though, where a company bringing in an expensive new medicine can be urged to give licenses to other generic drug-companies, for the payment of a royalty by the latter. The generic drug companies then make and sell the same medicine, at a lower price.

There were several alliances in the last 18 months, where the innovator company has licensed out to an Indian counterpart. And such examples are visible in the case of the bird-flu drug Tamiflu, where Swiss-drug company Roche gave Hyderabad-based Hetero Drugs the license to make and sell in unregulated markets. Or California-based Gilead Sciences which forged an agreement with Indian companies Emcure Pharmaceuticals, Hetero Drugs and Strides Arcolabs to make generic versions of Viread, an anti-AIDS drug. In another deal, Emcure had signed a royalty-free technology-transfer deal with BMS to make aids-drug Atazanavir for India and the African countries.

These deals are not without concerns on what is the motive behind the alliance. But the fact is there are such models available and the Indian pharmaceutical industry can be leveraged to the country’s advantage.

The pharmaceutical industry is also looking at new models and alliances to grapple with the pricing problem. Multinational companies are talking of differential pricing, where a medicine is priced differently in different markets. Some of them are even discussing differential pricing in the same market. A country like India has people who are capable of paying for their healthcare living alongside those who are unable to afford medicines.

But differential pricing opens the multinational companies to uncomfortable questions from the paying population and shareholders and this makes companies wary of the option. Some of them are exploring private alliances with local drug companies where the domestic company sells the medicine under a different name and with a different price.

Alliances between global government-funded universities and local generic companies are also being explored. In such a model, the university ties up with big pharma on a promising drug, but gives them the right only for remunerative markets such as the US, Europe and Japan. For developing countries, however, the university ties up with local generic companies for further development on the same promising drug from the university lab. This way, the drug gets priced in tune with the requirements of the local market.

But all these are business-driven alliances and none can be the complete solution to the country’s ills. They will have to roll-out alongside a dynamic health-insurance and most important a robust Government spending on healthcare.

The Government and companies operating in the local market need to partner and come up with effective and dynamic models to procure and distribute medicines to more people and at nominal prices. Until then, medicines will continue to evoke emotionally-charged reactions, as people are forced to fork out huge amounts to cure their illnesses.

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