Price of Life

Amidst secrecy and confusion the Union government changed India’s drug laws. Does this mean you medical bills will shoot up?

By S S Jeevan

Unlike most teenagers, Vidya Kumari didn't find time to make a New Year resolution. This 16-year-old child of a middle-class family in south Delhi spent New Year’s Eve frantically running from pharmacy to pharmacy to check out the price of Gleevec, a cancer drug. Her mother, Gita, suffers from a rare cancer, and the cost of treating her was bleeding the family. The drug now costs around Rs 10,000, but some chemists warned Vidya that its price could soon spiral to Rs 50,000. ‘‘A new law is being passed,’’ she was told.

Beginning January 1 this year, India embraced a new world order and abandoned its decades-old drug policy. The Union government issued an ordinance to amend the Indian Patents Act 1970 to introduce product patent for drugs. In the past, the government would grant patents to companies only on the process used to manufacture them, and not on the final product.

The change is a result of India’s signing the Trade Related Aspects of Intellectual Property Rights (TRIPS) in 1994, when it was given 10 years to comply with World Trade Organisation (WTO) laws. With the new law, the government will now grant patents for all new products developed after 1995.. But there is little clarity as to whether the law will benefit or harm a sector that is viewed by many as the next big success story after IT, and worth more than $4.5 billion. And more importantly whether millions of patients like Vidya’s mother will have to pay more to stay alive.

The road to a new drug regime has been a long one, but not transparent. Between 1987 and 1994 when the WTO treaty was being finalised, there were hardly any discussions in Parliament on the issue. In fact, a committee headed by I K Gujral in December 1993 had warned of ‘‘the grave impact of the proposed patent’ on the drug prices in the country’’. But this didn’t fuel a debate. Even the Arjun Singh Committee report of the 1990s remains confidential till today.

When the patents act was amended - first in 1999 and then in 2002 - the government promised that the third amendment would address social concerns. But critics say no safeguards are in place in the latest ordinance. Worse, they claim that the government has resorted to a Presidential Ordinance that would have far-reaching changes in patent law without even a parliamentary debate.. Now even economists such as Jagdish Bhagwati and Michael Finger, who support the WTO, are questioning whether the TRIPS treaty should be in the WTO.

Rules of the game
The Indian pharmaceutical sector has enjoyed tremendous success for the past 30 years or so. Indira Gandhi’s bold step of abolishing the patent regime in 1970 (which it inherited from the British), and replacing it with the process patent spawned hundreds of Indian companies like Ranbaxy. Companies could produce medicines introduced by international firms via a different process and sell them at less than half the price, thus making huge profits.

This is also how pharmaceutical major Cipla managed to sell its anti-retroviral drugs for HIV/AIDS patients in African countries at less than half the drugs’ global price. There are more than 5,000 Indian drug companies in India today, and the country currently holds a 16 percent share of this $48 billion worldwide market.

But under the new rules, Indian companies will no longer be able to reproduce products that will be patented. Already some 12,000 ‘‘mail box’’ applications alleging patent infringement are pending with the government. And once these applications are awarded a patent, no Indian company can manufacturer them.

Estimates about increase in drug prices vary. According to a study conducted by the Centre for Study of Global Trade Systems and Development, prices of drugs for ailments like hypertension, stroke, ulcer, depression and osteoporosis will go up under the new regime to equal international prices. For instance, Prilosec, used to treat ulcers, currently costs $2.45 in India as against $105.50 in the US.

The government strongly denies any price increase. ‘‘The impact on prices will be minimal. Drug prices will not go up as 97 percent of the drugs are off patent,’’ says Union Industry Secretary Ashok Jha. ‘‘Totally misleading,’’ says former Union finance secretary S P Shukla. ‘‘What is this 97 percent the government is referring to? Is it the turnover, or the drugs in the market, or the patent itself?’’ he asks. Shukla says it was surprising that the government has given this 97 percent figure in 1995, and now 10 years later, is citing the same statistics.

Experts feel that Indian companies may get embroiled in litigations, unless the government specifies which drugs are off patent. There is no specific list of such drugs, adds Shukla. Moreover, doctors say the new law is less flexible.. Now they have a choice of medicines for the same illness in the market and can prescribe cheaper drugs for poorer patients. ‘‘Soon only patented drugs would be available and current drugs would be replaced within five to seven years by new drugs that would all be part of the product patent regime and prohibitively expensive,’’ says a doctor.

The government counters this claim. It says that it will empower its drug-pricing arm, the National Pharmaceutical Pricing Authority (NPPA), to limit the price of a patented drug. The chemicals ministry and the health ministry are now having hectic parleys to reach a consensus on pricing policy. Experts say the criteria for negotiating the price of drugs is difficult so long as the patent holder chooses not to manufacture it in India. The state can decide on a reasonable profit margin only if it inspects the manufacturing plant and finds out the actual cost of production.

Fair game?
As India grapples with a new world order, it would be interesting to study how developing countries are coping up with the product patent regime. A case in point is that of Pakistan, where consumers could have saved over Rs 100 crore on just nine medicines in 1995, if the companies had offered Indian prices. These medicines constitute 14 percent of the retail market in Pakistan.

Or take the case of the anti-inflexilant cipro flexocine. Ten tablets of the drug cost just Rs 50 in India, whereas the same would cost Rs 400 in Pakistan. The anti-ulcer medicine ranitidine costs Rs 74 a packet in Pakistan, against Rs 5 in India. So countries like Pakistan are fighting a losing battle against monopoly pricing system.

One issue that concerns analysts is that of compulsory licensing. In the interest of producing cheap medicine, the controller of patents is empowered to grant a license to produce any product, even if the patentee has refused to do so. Countries such as Brazil, Canada and China have made provisions for compulsory licence if the patentee has refused to comply. This provision was also accepted in the Doha Declaration. But the ordinance is silent on this, even though this is permitted under the TRIPS Agreement.

On May 6, 1981, Indira Gandhi had said that ‘‘the idea of a better world is one in which medical discoveries would be free from patent and there will be no profiteering from life and death.’’ Much has changed since then. And as governments, multilateral agencies and pharmaceutical companies battle it out in the coming months for a free and fair drug policy, will life-saving medicines become out of reach of millions of patients like Vidya’s mother?

Multinationals such as GlaxoSmithKline Plc, Pfizer Inc, Novartis AG and Aventis, who have watched copies of their drugs being sold by Indian companies for too long, are gearing up to enter the Indian market. They say that Indian drug makers can reverse engineer (copy) a patented molecule within months. For example, copies of Pfizer's cholesterol drug Lipitor and Bristol-Myers Squibb's popular anticlotting drug Plavix were sold in India within two years of their global introduction. These generic drugs were then exported to markets in Asia and Africa, sometimes a whole decade before their patents expired in the United States.

Multinational drug companies argue that discovering a drug takes many years of painstaking research and, not to mention, huge funding. Such high costs cannot be recovered instantly and generic manufacturers cannot eat into their profits. For example, multinational companies invest 14-18 percent of their sales in research and development (R&D), while Indian companies, barring a few big players, hardly spend more than 2 percent. They say that if the domestic industry wants to look beyond generics, it must significantly increase its R&D spending and come up with new chemical entities and novel drug delivery systems.

The big drug makers in India aren't too worried about competition in the domestic market. Several of them, including Dr. Reddy's and Ranbaxy, earn huge revenue from the international generics market. For instance, in the first nine months of the year, Ranbaxy's revenues in the United States totalled $304 million, or 42 percent of the company's total sales.

But there are other problems in the international market. Dr Reddy's, a leading drug company, is fighting a patent case in the US for its hypertension drug against Pfizer Inc. Ranbaxy, which suffered a blow recently after its AIDS drugs were removed from the WHO approved list, has also said that it wants to become a cutting-edge pharmaceutical research company in its own right. Some Indian companies are gearing up for competition in a different way. They are diversifying their business and finding new revenue outlets. For example, Cipla and Ranbaxy are doing contract research for other pharmaceutical companies.

Moreover, some companies are looking at outsourcing of clinical trials to offset their generic loses. According to reports, German manufacturer Mucos Pharma had approached SIRO Clinpharm to find 750 patients to test a drug for head and neck cancer. In just 18 months, the company had recruited enough volunteers across five hospitals. The same exercise in Europe took double the time across 22 hospitals, and to find just 100 volunteers.

(New Indian Express, January 20, 2005)

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