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07/06/2012
Big Pharma in legal battles for monopoly prices in India

Two large multinational pharmaceutical companies are fighting for patents and monopoly pricing in Indian courts. The outcomes of the cases – involving Novartis and Bayer – are likely to determine the country’s future as a major global supplier of low-cost essential medicines.

About a third of all drugs are produced in India.



The rise of domestic firms was made possible by India’s abolition of product patents for pharmaceuticals in the Patents Act of 1970 (which came into effect in 1972). Only patents for processes were recognised for a maximum of seven years. This was to encourage the development of a domestic drug industry and the supply of more affordable medicines. The result was a spectacular rise of Indian firms over subsequent decades.



Family-owned companies such as Cipla, Ranbaxy and Dr Reddy’s (often in collaboration with public sector research organisations) developed alternative processes for manufacturing a wide range of pharmaceutical raw materials and generic drugs (alternatives to the originator brands).



Large multinationals’ monopoly on supply of critical HIV antiretroviral drugs, for instance, was first broken by Cipla in 2001, when it commenced supply to developing countries for $350 per annum per patient. The multinational drug companies had charged more than $10,000 per patient per year.



Today, the same drugs are available for about $150 for a year’s supply. Indian manufacturers supply more than 80% of the HIV medicines used to treat millions of people in developing countries, as well as generics to treat many other diseases.



India’s approach to TRIPS


The 1995 Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) created a new era of globalised intellectual property rights. TRIPS gave developing countries, such as India, a ten-year transition period before patents had to be introduced in all product categories. (The least developed countries must be fully TRIPS compliant by 2016).



Indian firms are allowed to continue production of drugs marketed before 2005, but can no longer produce generic versions of medicines patented in India after 2005 (unless voluntarily licensed by the originator company). This will result in high monopoly prices for many more years for new products, including second- and third–line AIDS medicines, unless countermeasures are taken in the interest of public health.



TRIPS triggered a global struggle between public health advocates and some developing countries, and the big pharmaceutical companies backed by the United States and the European Union. Much of this conflict revolves around the public health safeguards contained in the TRIPS Agreement. These were confirmed and extended in the 2001 Doha Declaration on the TRIPS Agreement and Public Health.



Legally, World Trade Organisation (WTO) member countries have significant leeway in their interpretation of TRIPS. But most countries don’t effectively use these options to lessen the impact of patents on affordable access to essential medicines.



India has used them more extensively than probably any other country with its Patents (Amendment) Act, 2005. Two of the safeguards in Indian legislation relate to definition of patentability and compulsory licensing.



Novartis' challenge


Now, Swiss drug multinational Novartis is spearheading a global industry campaign against India’s utilisation of its right to public health safeguards. Indian legislation contains a section intended to prevent the awarding of patents for slightly modified versions of known molecules, unless a “significant enhancement of efficacy” can be demonstrated. This measure is intended to prevent “evergreening”, the extension of monopoly pricing through patenting of trivial modifications.



Novartis’ challenge centres on the anti-leukaemia (blood cancer) drug imatinib mesylate, marketed by Novartis as Glivec (or Gleevec), which has global sales in excess of $4bn. In 2006, the Indian patent office rejected Novartis’ application for a patent on Glivec on the grounds that it’s a slightly modified version of a known molecule.



The original patent on imatinib mesylate dates from 1993, and the product has long been produced and marketed in India by local companies. Novartis charges Rs120,000 (about A$2,400) for a month’s supply, which makes this drug unaffordable to more than 99% of the population. Several Indian manufacturers sell the same drug for Rs8,000 (A$160), 1/15th of Novartis’ price.



Novartis has pursued its case through India’s legal system since 2006. It has now reached the Supreme Court where final arguments are set to commence on 10 July. If Novartis is successful, no other brands of imatinib mesylate can be supplied in India or exported from India.



What’s more, a victory for Novartis will open the floodgates for patent extensions on many well-established medicines, to the detriment of patients in India and throughout the developing world. Novartis' stance has garnered a strong reaction from public health activists and NGOS in India and around the world.



Bayer and compulsory licensing


The second recent development of great importance is the granting of India’s first compulsory licence for production of a drug. A compulsory licence authorises a third party to manufacture and sell a product without the consent of the patent holder in return for adequate compensation.



Multinational drug companies put strong pressure on developing countries for compulsory licenses to only be considered in circumstances of national emergency.



It is, however, clear in Article 31 of TRIPS and in the 2001 Doha Declaration that countries are free to determine “any and all grounds upon which CLs may be issued”. In fact, there is a long history of compulsory licenses for pharmaceuticals in Canada, the United Kingdom, Italy, and more recently in developing countries, such as Brazil, Thailand and Malaysia.



The United States and the European Union, on behalf of their pharmaceutical companies, have brought extreme pressure to bear on developing countries, through so-called free trade agreements and in other ways, to dissuade them from issuing compulsory licences.



On 12 March, 2012, the Indian generic drug company Natco Pharma was successful in gaining a licence for the production and supply of the patented anti-cancer drug sorafenib, marketed by Bayer as Nexavar. Bayer’s version of this drug costs Rs280,000 (A$5,600) a month, an astronomical figure for almost all Indian households. Natco will sell the same drug at 3% of this price, while paying a license fee – and it will still make a profit.



The compulsory licence was issued essentially on the grounds that Bayer’s price is exorbitant. It also doesn’t manufacture the drug in India and imports in such small volumes that only a tiny fraction of potential patients could benefit.



The Indian Controller General of Patents, Designs and Trademarks concluded that the drug “was not bought by the public due to only one reason, that is, its price was not reasonably affordable to them”. This decision in favour of Natco sets a very important precedent for possible compulsory licences on other patented products sold at unaffordable prices.



Bayer filed an appeal against the compulsory licensing decision on May 4 to the Intellectual Property Appellate Board but observers believe it’s likely the decision will ultimately stand.



India is in a very special category within the global pharmaceutical sector because its domestic drug companies have unique technological capabilities. Although they are just as profit-oriented as firms in any other sector, Indian drug manufacturers have made it possible for millions of poor people to access essential medicines. For these gains not to be reversed, it’s essential that Novartis loses its Supreme Court appeal, and that India’s first compulsory licence is followed by many more.