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August 27 2007
SWISS pharmaceuticals major Novartis has decided to move large investments in India elsewhere as, in its view, India's patent system stifles innovation. "It's not a punishment. It's just a question of the culture for investment", its chief executive Daniel Vasella told the Financial Times.
The decision is fallout of the judgment of the Madras High Court in the high-profile legal battle over Glivec, brand name of a drug used in treatment of blood cancer. The original patent of 20 years expired last year and Novartis sought its renewal on the basis of incremental innovations done by the company on the two-decade old drug. When the Indian Government refused Glivec a fresh patent in January 2006, Novartis, in separate litigations, challenged this rejection and also the provisions of the Indian Patents Act based on which its application had been rejected.
On August 6, the Madras High Court rejected the Novartis's petition and upheld the validity of Section 3 (d) of the amended Patent Act, which denies patent for minor innovations on known drugs by stipulating that incremental innovations or any type of modifications must enhance the therapeutic effectiveness of the drug substantially for it to qualify for fresh patent.
Judgment
The judgment has been hailed by patients groups, for good reason. Glivec costs around Rs 120,000 for a month's treatment in India whereas the cost of treatment with generics produced by India's domestic pharma companies such as Natco, Cipla, Ranbaxy and others works out to Rs 10,000.
For the same reason, it has not gone down well with multinational pharmaceutical companies and organisations representing them. They hold the view that medical progress occurs through incremental innovation. Such innovation takes many forms such as improving patient compliance through single dose instead of multiple dosage, improved safety, reduced side-effects, greater tolerability, new indications, new drug delivery systems and so on. All such inventions require substantial R&D investment, including clinical trials. By excluding them from patentability, Indian law deals blow to R&D and innovation and denies patients new and better medicines.
The Organisation of Pharmaceutical Producers of India has pointed out that India's strength lies in such incremental innovations and not in discovery research which requires deep pockets — typically a billion dollars and 10-12 years of painstaking research are required for discovering a new molecule. By narrowing the definition of patentability to NCEs (New Chemical Entities), the government is discouraging R&D and innovation. International organisations, such as the Geneva-based IFPMA and the Washington-based PhRMA have threatened that their companies may not further invest in India and may deprive its people of their new research products.
Model law
These postures and threats are not surprising. What is causing them heartburn is the real possibility that the Indian Patent Act may now become a model law for several developing countries, defeating their objective of establishing a patent regime even more stringent (and lucrative) than TRIPs.
India's revised patent law allows product patents with a validity of 20 years. The present controversy is about minor modifications of existing substances, which are used for evergreening of patents after they have expired and after the companies have rightly reaped benefits for 20 years for their investment in R & D.
Pharma majors, who have enjoyed unfettered freedom to extend their monopoly, are complaining that India is not playing by rules. The commonly accepted international standards for the protection of intellectual property rights are embodied in the TRIPS Agreement, not in their rules. But they want to project their own rules as "international standards" and are sore that India is not complying with them!
New research
These organisations have threatened that their companies may not make further investments or introduce their new research products in India. However, their members made the maximum investment in India between 1970 (the year in which product patent was abolished) and 1995 (the year in which product patent was re-introduced). The decade thereafter (1995-2005) has witnessed their divestment of manufacturing facilities and decline in fresh investments.
Likewise, the threat of depriving Indians of new research products seems hollow. If they do not register their patents in India, Indian companies will be free to "reverse engineer" (for which they have proven capability) the same and provide them at much lower prices. If they register the patent and do not work it, India's patent law has adequate mechanism to deal with such situations and ensure that the product is available to the needy.
In fact, Indian law promotes investment in R & D by differentiating discovery from invention. The higher bar for patentability encourages companies to focus attention on innovation and pursue hardcore research instead of tinkering with known substances. It spurs researchers to achieve significant improvement in efficacy, thereby helping both the progress of science and benefiting the patient, not just the bottom line of the companies.
That, indeed, is the crux of the matter. Today, the average cost of R & D per new drug has increased several times. As drug discovery has shifted from chemistry to biology, more investment is needed in infrastructure and trained manpower. Moreover, clinical trials have become bigger even as the focus of research has shifted towards chronic and degenerative diseases.
Global pharma companies
Hence, even in the US the increased R&D spending has not translated into a larger number of new chemical entities (NCEs), new drugs with completely novel structures. Most of the drugs that are approved by the US FDA (Food and Drug Administration) show small changes from existing drugs and small benefits to the consumer.
Global pharma companies are facing a crisis. Big names such as Pfizer, GlaxoSmithKline, Merck or Sanofi do not have any major breakthrough drugs entering the market in the next few years. At the same time, a large number of patents are due to expire in the next three years.
Faced with this double whammy of few new drugs coming up and several patent expiring, pharma giants spend heavily on promotion of existing drugs and their modifications rather than on new molecular research. In 2006, top 15 global pharma companies spent 30.1 per cent of their revenues on marketing, compared with 15.1 per cent on R & D, as per a study conducted by Pharmabiz, a pharma industry journal.
This is the way it should not be. Big pharma companies making expensive patented drugs will have to learn to price their products reasonably. Advanced drugs for cancer, HIV, diabetes, cardiovascular diseases and neurological disorders are all under patent and are blockbusters with high price tags. Most of these life-style diseases are increasingly affecting the middle-class and poor people. So governments of several developing countries are under pressure to act against monopoly pricing of essential drugs.
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