shark-from-beneath
1 April 2013Asia

India: a threat to an industry or just misunderstood?

It has been a bruising few months for Western pharmaceutical companies in India. First, there was the compulsory licence awarded for Bayer’s Nexavar drug, allowing local generic company Natco Pharma to sell a version of it. In March this year, that licence was upheld on appeal, albeit in a decision requiring Natco to pay a slightly higher royalty rate.

Between the initial award of that licence and the appeal decision, another case set pulses racing. The patent covering sunitinib, the active ingredient in anti-cancer drug Sutent, was found invalid for obviousness and lack of inventive step. The drug is marketed by Pfizer in India (and was developed by US company Sugen, later bought by Pfizer). The patent was initially revoked in September 2012, and aft er a high court challenge, the Indian Patent Office took another look, upholding the original finding in February of this year.

And then there was the Glivec case, just decided by India’s Supreme Court at the time of writing, in which Novartis was denied a patent for a new version of an old drug (but one which had not been patented in India in its original form) on the grounds that the new version provided no additional “therapeutic efficacy” under the controversial Section 3d of the Patent Act, and therefore was not novel.

These are just a few examples of cases in which Western pharmaceutical giants have found themselves on the wrong side of what they feel are dubious rulings, and with recently-published guidelines for examining biotechnology patents also causing concern, it looks as though India is becoming a dangerous place for innovator companies to do business.

Generic ambition

India’s generic pharmaceutical industry is the world’s largest. Its export value is approximately $10 billion, and the internal market is enormous too. Whichever way you look at it, for now at least, it is in India’s best interests to provide whatever advantages it can to the native industry, and that, for the most part, means generics. Whether that means a conscious policy at government, court or patent office level is another question, but there are clues to the thinking that underpins the Indian view of these things.

“THE GOVERNMENT MUST NOT BRING IN A PATENT REGIME WHERE ALL THE GAINS ACHIEVED BY THE INDIAN PHARMACEUTICAL INDUSTRY ARE DISSIPATED.”

When India signed up to the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement in 1994, it required the country to introduce a patent law that provided protection for intellectual property rights, including for pharmaceutical and chemical substances. More than a decade later, India finally passed a bill that was, at least on its face, TRIPS-compliant, though not without considerable debate and opposition.

Justice Aftab Alam, who wrote the judgment in the Glivec case, gave a useful summary of the debate as context for his judgment. “To anyone going through the debate on the Bill, Parliament would appear keenly alive to national interests, human rights considerations and the role of India as the producer and supplier of drugs to different parts of the world where impoverished humanity is critically in need of those drugs at cheap and affordable prices,” he wrote.

“Cutting across party lines, member after member from the Opposition benches highlighted the grave risk in creating private monopolies in an area like pharmaceuticals, the abuses to which product patents in pharmaceutical products were vulnerable, and the ploys used by big companies to artificially extend the period of patent to keep competitors out and keep the prices of the patented product high.

"It was strongly argued that, while fulfilling its commitment under the TRIPS agreement, the Government must not bring in a patent regime where all the gains achieved by the Indian pharmaceutical industry are dissipated and large sections of Indians and people in other parts of the world are left at the mercy of giant multinational pharmaceutical companies.”

The assumptions inherent in that debate seem instructive: there are the “abuses” to which pharmaceutical patents are prone, the “ploys” used to “artificially” extend patents, and the threat of vulnerable people being put “at the mercy” of big business.

There is also the acknowledgement that, while framed as a debate about public health, this is at least to some degree one about the “gains achieved by the Indian pharmaceutical industry.” Of course, it can be both, but Western companies have long been suspicious that there is some sleight-of-hand here, in which concerns about the health of native businesses are dressed up as noble battles for access to affordable drugs.

That said, it is worth noting that even if India’s patent arrangements favour its domestic industry, that is true in every country in the world. It would be absurd for any government not to try to design its patent law to best stimulate the local economy. And it has oft en been said that patents are there to help the economy, not individual companies. One might equally say that the US gives too much leeway to patentees (and people have).

Two sides to the story

There is always a danger when trying to draw wide inferences from individual cases. While a given case might well have precedential value, it also always turns on specific facts. Just because a compulsory licence has been granted, it doesn’t follow that all or even many compulsory licences will be granted in the future. Similarly, because a patent has been found invalid for lack of novelty does not mean that a rash of patents will suffer the same fate.

And even Glivec, for all that it seems quite shocking— the Pharmaceutical Research and Manufacturers of America said it was “another example of the deteriorating innovation environment”—may not be the disaster that critics claim.

“SURELY IT’S WORTH CONSIDERING A LOWER PRICE IN ORDER TO SELL MORE OF THAT PRODUCT AND HEAD OFF ANY PERCEIVED AFFORDABILITY ARGUMENT.”

Section 3d of the Indian Patent Law seems designed to tackle the notion that large pharmaceutical companies are in the business of “evergreening” their patents, which many people would argue suggests a fundamental misunderstanding of how patents work and what they are for.

It’s a troubling approach, but there is no particular reason to think that the Glivec case will mean no variations on patented technologies will ever be granted. For one thing, Novartis never had a patent for the original version of the active ingredient, imatinib mesylate, in India. It is not at all clear that the result and reasoning would have been the same were that the case.

In all the cases mentioned above, there are some things that can be done by companies eager to avoid such problems in the future. Novartis highlighted that it already gave away 95 percent of the Glivec marketed in India for free, in which case why not lower the price if the suspicion is that courts favour affordability? It’s not an ideal solution, but it might be the most practical.

The same could apply to compulsory licences. If a high price for a drug has the result that, in one of the world’s largest potential markets, most of the population won’t be able to afford it, surely it’s worth considering a lower price in order to sell more of that product and head off any perceived affordability argument. Again, it’s far from an ideal solution, but pharmaceutical companies already adapt their policies and pricing depending on where they operate.

If Western pharma genuinely believes that India’s patent policy is skewed towards domestic generics, then why not try to head off one of the generic competitors’ biggest arguments? It might well affect the profit margins of the innovative company, but it’s surely better to have the whole of a smaller pie than very little of a bigger one.

There’s another, partial solution open to Western companies, and it might be seen as a nuclear option: they could withdraw operations from India. But with that country continuing to make economic strides, and boasting a population of more than 1.2 billion potential consumers, it would take a daring company to do it.

Indian patent law is still in its infancy by international standards, at least as far as it applies to protecting pharmaceuticals. In time, a combination of international and internal pressures may well see it modified, and if not modified, then enforced differently. There are certainly reasons to be concerned, but it seems unlikely that these early bumps in the road will cause Western industry to remove itself from the country. And the Indian courts, parliament and generics industry surely don’t want that to happen either.

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