Patently problematic

Written by Soma Das | Updated: Mar 23 2012, 07:01am hrs
Opinion is divided on the compulsory licensing ruling and both MNCs and local firms are leery of using litigation to approach the issue. Bulk drug procurement, especially for drugs with a limited user base, is one option govt should consider to reduce long litigation in the area

The Indian patent offices ruling on the grant of the first compulsory licence to the generic drug firm Natco on liver and kidney cancer drug Nexavar came about nine days after a grand announcement from the Prime Ministers Office endorsing a health ministry initiative to distribute free essential medicine to all through public health facilities. The Cabinet has already approved the setting up of a Central Procurement Agency for the bulk procurement of drugs. The obvious connect between the two developments is that Nexavar, which prolongs life in the case of kidney cancer by 4-5 years and extends it by 6-8 months in the case of liver cancer, could arguably be classified as an essential drug on many accounts. We will come to the less obvious connection between the two developments later.

Compulsory licensing in Indiaan evolving space Meanwhile, it is interesting to observe how various stakeholders responded to this first of its kind judgement. It passed the litmus test of being a very well-reasoned judgement by patent experts and a befitting last bullet from patent controller PH Kurianhailed for reducing corruption in the patent offices herebefore he moved on to his next assignment. Predictably, multinational pharma firms called the grant of licence a great disappointment and another blow to innovation. Public health groups, on expected lines, lauded the decision, saying India has paved the way by formulating a new model for compulsory licensing. However, contrary to expectations, the domestic generic drug industry, an undisputed beneficiary of compulsory licensing across developing countries, was not found celebrating unconditionally on the grant of the first such licence in their own country.

Why Apparently, they do not believe that a case-by-case litigation model for every drug is actually a sustainable business model for the generic industry. Precisely the reason why, despite the commerce ministry making it clear in early 2011 that India requires no further guidelines on compulsory licensing and exhorting the generic players to come forward and exercise their rights, there has been a less than lukewarm response on the part of the pharmacy of the world to seek such licenses. The reluctance of generic companies to get entangled in protracted legal battles, which may start at the doorsteps of the patent office and drag all the way up to the Supreme Court, stems from a reasoning that they are ultimately expected to sell the patented drug in question at drastically low rates. In this case, Natco has proposed to retail a monthly dosage of generic Nexavar at R8,800, which is around 3% of R2,80,000, the comparable price point of German innovator firm Bayer. Litigation is not only money-draining and time-consuming in India, there is also a cultural stigma attached to being sued in courts. On top of that, the domestic players claim they are left with no business case to invest so much for these drugs and returns on investment, if at all, would not justify such involvement. Domestic drug-makers also claim that Natcos case is actually a test case through which they want to prove to the government by furnishing evidence that a case-to-case litigation model for granting compulsory licence is actually economically unviable for generic companies to pursue.

MNC monopoly in patented drugs

In the meantime, however, Kurian has created a stir through a single interpretation of working the patent in the territory of India to mean manufactured to a reasonable extent in India. In simple terms, not working or not manufacturing enough of the specified drugs within India can now form one of the criteria to seek a compulsory licence for that patented product. As noted by IP expert Shamnad Basheer within an hour of the judgement becoming public, This part of the decision is likely to prove controversial, since almost 90% of all pharmaceutical patents are only imported into India. Therefore, under the terms of this order, all of these drugs are now susceptible to compulsory licenses in India.

That most patented drugs are getting imported is also supported by an observation of Sudip Chaudhuri, professor, IIM Calcutta who reckons that between 1995 and 2010, imports grew at a faster rate than exports, resulting in a dip of drug formulations trade surplus. Imports of formulations have reached to $1,096 million in 2010 or have witnessed a CAGR of 20%, while exports have grown at 17% on a like-to-like basis, even though India is recognised as a pharma product exporter world-wide.

Chaudhuri points out that there are reasons to believe that much of these imports relate to high-priced products of the MNCs for which there are no generic equivalents in the country. In 2010, about 65% of these imports came from the five countriesSwitzerland, the US, the UK, Germany and Francewhere most of the MNCs are located.

He identifies 33 new drugs (as per the US FDAs definition) in which multinationals enjoy a monopoly in the Indian retail market. Of these, at least 25 are patented, many of which are priced exorbitantly and hence now are open for contestation for compulsory licence. For instance, a single 50 ml injection of Roches anti-cancer drug Herceptin costs R1,35,200, Mercks Erbitux costs R87,920, Bristol-Myers-Squibbs Ixempra sells at R66,430, Pfizers Macugen is priced at R45,350, and Sanofi-Aventis Fasturtec at R45,000. It is important to remember that these prices are quoted for single units and not monthly or yearly dosages, which would cost much higher. Most of these drugs are cancer drugs. Some of these belong to the pain management segment or other therapies, like the anti-diabetic, neuro or cardio-vascular categories (the table features a portion of the list of 33 new drugs).

Indias CL model vs other developing countries

Although India may have invoked a compulsory licence for the first time last week, the concept of a compulsory licence is not, however, new to Indian industry. In fact, it would not be an exaggeration to claim that the India factor in a way remains the most persistent force across most compulsory licences invoked in developing countries on the grounds of public health in the last decade. That is because Indian generic players have remained the most reliable suppliers of generic drugs as and when governments in South East Asia, Africa and Latin America have opted to use this instrument to slash the cost of specific patented drugs to address affordability and accessibility issues for these drugs in their countries. A large part of these licences have been invoked in the therapeutic area of HIV AIDS and Indian generic manufacturers dominate the anti-retroviral market, accounting for more than 80% of annual purchase volumes globally.

Now, coming to the less obvious connection between the two developments discussed earlier. The significant difference between the Indian case and examples elsewhere, including Malaysia, Thailand and Brazil, is that in other instances, the drugs are being procured by the government. In the Indian case, however, Natco would be selling the drug in the retail market.

Are we on the right path

At the risk of oversimplifying the entire compulsory licence debate, we can reduce it to two simple options. A loved one is suffering with a near-fatal condition, which of the following options is more desirable than the other (1) To have a medicine as a cure or reliever in the market, which remains completely out of reach for most because it is exorbitantly priced (if you do not pay heed to public health groups). (2) To not have a drug at all for the ailment (if you do not pay heed to multinationals, who say that unless monopoly is honoured during patent regime, innovation suffers). In both cases, most affected people would report the same feeling: helplessness. We may be missing out on a third and better option.

To conclude, can we go back to where we began At a time when India is bracing itself for free distribution of essential drugs by bulk procurement through a central agency, the government should consider making a distinction within the patented drugs category on the basis of market size, prices and availability of alternative therapies for the ailment and interest among the generic drug-makers. Based on these criteria, the government can either seek a deep discount for bulk purchases from the innovator firms or generic firms or leave the field open for litigation.