Costly to protect, attack pharma IP in India

On April 1, India's apex court rejected pharmaceutical giant Novartis' plea for a patent on cancer drug, Glivec. Within minutes, there were reactions all over social media and news sites hailing the verdict and how it will bring down the price of the cancer drug.

The judgment ended a seven-year legal battle by Novartis to own the exclusive right for manufacturing Glivec.

The apex court judgment can pave the way for cancer patients getting access to cheaper drugs since a one-month dose of Glivec costs around 200,000 rupees (US$3,678), while generic drugs manufactured by Indian companies for the same period are priced at 8,000 rupees (US$147).

According to official estimates, India has over 2.8 million cancer patients. The Supreme Court ruling should benefit these patients by making the drug a lot more affordable.

Impact on the IP ecosystem

The ruling, however, raises two concerns. The first is to do with India's image. Over the last few years, India has acquired the reputation of being investor-unfriendly. Tax authorities have targeted several multinationals for income tax, transfer pricing, and capital gains tax-related issues.

Moreover, the regulatory environment in the country has been rather uncertain. To top it all, there have been scams--such as the 2G scandal--which makes the investment environment all too unpredictable and unfriendly.

Indian newspapers on Tuesday only reaffirmed this concern. The Economic Times carried an article by Ranjit Shahani, vice chairman and managing director of Novartis India, in which he said: "Today's Supreme Court judgment on the Glivec case means that innovator companies like Novartis will see little protection for intellectual property. It means that generic companies will be free to copy, and it means India will not grow into the scientific leader and innovator it has the potential to become.

"There is a much more powerful future for our country, but to achieve it we have to change from being a protectionist economy to one that encourages industry to innovate and make breakthrough medicines," Shahani said.

The Supreme Court dismissed Novartis' plea on the ground that there was no new invention and no new substance used in the drug prescribed for treating blood, skin, and other types of cancer. The court refused to give credence to Novartis' claim that 'Imatinib Mesylate', a substance used in the cancer drug, was a new product and the outcome of an invention. In its 98-page verdict, the bench said patent laws in India should not be developed on the lines where the patent is determined not on the intrinsic worth of invention, but by the artful drafting of companies' claims.

Novartis argued it was entitled to a patent for the amended version of Glivec because the original patented compound was never suitable for being made into a pill. Developing the final chemically-stable form took years of extra work and it was this effort that marked the real breakthrough in developing Glivec as a life-saving cancer medicine, the Swiss company said.

Shahani said Novartis India will continue to file patents and carry on investing in the country, but with caution. It will also continue to refrain from R&D (research and development) activities there. "The intellectual property ecosystem in India is not very encouraging," he told reporters in Mumbai after the ruling.

In an article published Wednesday in The Economic Times, Kiran Majumdar Shaw, chairman and managing director of Biocon, said the Supreme Court decision should not be confused with the patentability of original innovation. "India's patent regime recognizes and respects intellectual property associated with original innovation," she said. Biocon is a biotechnology company based in Bengaluru.

The pharma industry is a unique industry where both protecting and attacking intellectual property (IP) can prove to be a costly affair. If you protect IP, drugs are likely to become unaffordable, especially in a country like India. And if you attack IP, you tend to vitiate the IP ecosystem and discourage companies from carrying out R&D activities in the country.

Need for new models for innovator drugs

The second concern relates to globalization and its impact on countries like India. At some level, globalization assumes all countries--rich or poor--to be equals. China's toy industry has nearly wiped out toy industries across the world, but at the same time, it also made toys a lot affordable. Industries like handicrafts, toys, handloom, and so on, provide livelihood to millions of poor people living here in India.

Each time we buy a Hindu figurine or statue that's manufactured in China, or a sari that's made in China, we are taking away the livelihood of a craftsman belonging to our own soil. But that's the downside of globalization. We can only hope this craftsman finds employment in a rural BPO (business process outsourcing) or a factory near his village. Or perhaps, this craftsman would migrate to a city and become a factory worker or a rickshaw-puller, thereby adding more pressure to the infrastructure in urban India.

The ground realities of each nation are quite different. While the West is concerned about losing jobs to India and China, it is also benefiting from cheaper services, and cheaper mobile phones, drugs, tablets, laptops, clothes, and television sets manufactured in this part of the globe.

But the reverse is not always advisable. Patients in countries like India and China may not be able to pay the price of innovation multinationals often command. While the rich in India can afford the iPhone5 and Blackberry Z10, the poor and the middle-class who are suffering from cancer cannot afford expensive drugs. While there is little impact if mobile phones are unaffordable, there is little point in innovating life-saving drugs if they can't save lives.

According to Shaw, the cost of innovation runs between US$1.5 billion and US$2 billion over 15 to 20 years. Patents ensure pharmaceutical companies are adequately compensated for the billions of dollars they spend on various stages of drug research to bring a drug from the laboratory to the market, and address an unmet medical need. This process necessitates higher price for innovative drugs.

However, most of India can't afford costly drugs. According to the World Health Organization, 67 percent of the population here have no medical insurance, compared with 15 percent in China and about 50 percent in Africa. In India, almost 80 percent of healthcare expenses are borne out of people's own pockets, thus making healthcare inaccessible for many.

India is a market no multinational can choose to ignore. Its domestic drugs market is the 14th-largest globally, with annual growth of 13 to 14 percent. Home to the world's second-biggest population, India is also a market that offers volumes to companies across industries.

Patented drugs in India account for under 10 percent of total drug sales. In a report by Reuters, Deepak Malik, healthcare analyst at brokerage Emkay Global, said multinational companies will have to find new ways of doing business in India. They may consider licensing agreements with local companies to offer cheap versions of branded drugs like Glivec.

"To ensure access to healthcare for all, India must harness innovation in discovering drugs, developing therapeutics, and delivering affordable healthcare," Shaw said.

I wonder how India can address this "innovation paradox". According to Shahani, pharma companies in India need to reach its potential by innovating new drugs rather than imitating and manufacturing generic drugs. "It is time for homegrown pharmaceutical companies to live up to the dreams they have," he said in his article in The Economic Times .

For this very reason, it's unfortunate if companies like Novartis choose not to do R&D in India. "The government, for its part, needs to focus on improving healthcare infrastructure. Access and affordability are two pieces of a complex healthcare puzzle. India's poor will continue to suffer until a variety of issues such as lack of diagnosis, healthcare infrastructure, and distribution are solved. Trained healthcare staff and infrastructure, cultural acceptability of treatment, accessibility of healthcare facilities, and quality of care all play a role in making medicines available," Shahani added.

Addressing the healthcare infrastructure issue will undoubtedly take a long time. Although telemedicine can to some extent bring quality healthcare to India's remote villages, it only addresses diagnoses--and not treatment--of a disease. To address healthcare issues, there is a lot that the government, hospitals, drug makers, innovators, and NGOs (non-government organizations) need to do.

Multinational drug makers like Novartis have little choice but to look for new models for India, especially for innovative drugs.