Multinational drugmakers square off against the Indian government
The Swiss pharmaceutical giant
Novartis and German drug maker Bayer are challenging the Indian establishment
over the country’s drug-patent rules, an affair that frames the larger
confrontation between the global pharmaceutical industry and the governments of
the emerging economies.
With pharmaceutical sales growth
slowing in the West, multinationals are seeking access in developing markets
where rising affluence and rising rates of so-called affluence-related ailments
is setting the stage for exponential growth.
PriceWaterhouseCoopers, a
consultancy, estimates that from US$12 billion in 2010, Indian drug market
trade is likely to rise to US$74 billion by 2020.
However, legal wrangling over the
terms and conditions under which such commerce can thrive has also become
commonplace. The situation is particularly significant in India – known as the
pharmacy of the developing world -- where big pharma is struggling to forge new
avenues for growth.
Novartis, for instance, has been
challenging India since 2006 for denying a patent for Glivec, or imatinib
mesylate, its populart blood cancer drug which has global sales in excess of
US$4 billion. The Indian patent office has refused Novartis’s application for a
patent on Glivec on the grounds that it is only a slightly modified molecular
version of an original patent that dates from 1993. The product has long been
produced as a generic and marketed in India by local companies at a fraction of
Novartis’ price of approximately US$ 2,000 for a month’s supply, making it
unaffordable for most of India’s 1.2 billion people.
Novartis’ case has now reached
the Supreme Court, which has the other multinational pharmaceutical manufacturers
on tenterhooks. If Novartis wins, no other brands of imatinib mesylate can
either be supplied within or exported from India. The case also has larger
ramifications in terms of what price India’s 1.2 billion people will have to
pay for the new drugs.
Bayer is similarly locked in
court combat with India’s patent drug controller, which in March ordered the
company to license a drug to a local manufacturer. The controller has given a
local firm the go-ahead to produce a generic version of Nexavar, a cancer drug
developed and sold by Bayer, despite the German pharmaceutical giant’s
protests.
Multinational companies are fully
cognizant that having little or no penetration in a key emerging market can
damaging to their business ambitions. The standoff in India thus carries global
resonance. The focus on generics – cheaper copies of expensive branded
medicines whose patents have expired – will have a ripple effect on both
affordability and the dynamics of India's pharmaceutical market.
Generics accounted for around 90
percent of India’s drug sales in 2010. The gulf between the cost of branded
drugs and generic alternatives is often vast. For instance, industry estimates
suggest that over 80 percent of the antiretroviral medicines (ARVs) used by MSF
(Médecins Sans Frontières) or Doctors Without Borders in its HIV/AIDS programs
come from producers of generics based in India. Similarly, 80 percent of the
ARVs purchased with donor funds globally come from India. MSF also relies on
Indian generics for malaria and tuberculosis treatments.
India became the key producer of
affordable medicines because until 2005, it did not grant patents on medicines.
This enabled generic manufacturers to freely produce more affordable versions
of medicines patented elsewhere.
However, to spur the domestic
drug industry and the supply of more affordable medicines to the consumers,
India annulled product patents for pharmaceuticals under the Patents Act of
1970. Only patents for processes were recognized, for a maximum of seven years.
This resulted in the mushrooming of thousands of thriving Indian pharma
companies.
After joining the World Trade
Organization (WTO) in 1995, however, India was forced to reframe its patent
policy. Its new system, in place since 2005, includes special protections for
both patients and generic manufacturers.
“Indian firms are currently
allowed to continue production of drugs marketed before 2005,” said Sarbjeet
Singh, a New Delhi-based lawyer and a consultant with the Ranbaxy group, “But
they can’t produce generic versions of medicines patented in India after 2005.
A violation can trigger high monopoly prices for many more years for new
products unless countermeasures are taken in the interest of public health.”
Adding to the intricacies are
India’s nascent drug-patent laws. While the Indian government is keen to
encourage generics and keep prices down, ambiguity and loopholes in the current
drug legislation offer no clear guidelines.
Faced with dwindling prospects
for profiteering, big pharmaceutical establishments behind the original
products are sometimes employing strongarm tactics to bring Indian
manufacturers of generic products in line. Novartis, for instance, cancelled
its plans to build a US100-million research center after it lost a court case
in the southern city of Chennai against the compulsory license clause in India
patent legislation.
Experts reckon that in the
future, the controversial Anti-Counterfeiting Trade Agreement (ACTA) could also
make export on the part of Indian manufacturers even more difficult.
The larger question arising from
the current controversy is: how should governments in emerging economies
reconcile the advent of foreign players with a fool-proof legal framework that
not only protects domestic players but also assures economically-priced drugs
for the consumers? A sustainable and workable solution, analysts say, should
factor in the government’s concerns on access and affordability without
threatening the long-term growth of the pharmaceutical industry.
The controversy grow with America
seeking new protection for drug makers and China keen on allowing compulsory
licensing. “An amicable way out,” suggests Singh, “is for western giants to be
more flexible about pricing.” He points out the example of Roche, another Swiss
firm, which is slashing the price of four drugs in India. It is re-branding
them and using a local packager to distinguish the Indian products from those
sold elsewhere.
Even so, mounting litigation
between the pharma giants and the Indian government hints at the twisted
complexities of doing business in emerging markets. An economic slowdown,
cutthroat local competition, the governments' efforts to control health-care
costs and support local firms, have hit the prospects of top drug makers.
Be that as it may, analysts
conclude that such markets can still be a fertile playground if mechanisms are
put in place to ensure a level playing field for all stakeholders and the
rights of the consumers are protected.
Neeta Lal
Business & Investment Opportunities
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