The Indian pharmaceutical industry accounts for 8 percent of global production and nearly 20 percent of the world’s generic supply.
On a fine day in February 2015 in Australia, author and historian Greg Jeffery was counting the days before he would die. He was suffering from chronic Hepatitis C. The disease was progressing fast and he was on the way to developing liver cirrhosis, a debilitating condition in which the liver tissue is slowly, but surely, replaced by scar or dead tissue, which soon renders the liver useless.
There was a medication that could save him: Sofosbuvir (trade name Sovaldi). The problem was, to buy the 84-tablet course for nearly $70,000 Jeffery would literally need to sell his house. It was impossible for someone like him to afford the medicine otherwise.
Desperate for alternatives, he landed in India in May 2015, seeking treatment in Chennai.
A few months earlier in January 2015, the Indian courts had rejected a patent claim on Sofosbuvir by Gilead Sciences, which sought to patent a slightly tweaked version of the drug. Thankfully for Jeffery and many like him, the Indian patent system did not allow this practice of filing a new patent on a molecule only because its chemical properties and its ability to be manufactured and dosed had improved slightly. Jeffery could buy the drug in India for Rs. 60,000 ($1000), about 1% of the cost in Australia.
There are millions of stories like that on the continent of Africa, especially from the days when it was facing the HIV epidemic. Health rights activists have alleged that blockades imposed by developed countries at the behest of multinational pharmaceutical companies were responsible for millions of deaths and poverty. These patients, desperate for AIDS-mitigating medications, found solace in the bustling Indian generic drug industry which is deemed their savior, with UNAIDS noting that nearly 86% of the AIDS anti-retrovirals that patients take are from India.
India is informally known as the pharmacy of the world, with an annual turnover of nearly $22 billion, projected to grow to nearly $50 billion by the end of the decade, according to a report by consultancy firm PricewaterhouseCoopers. The Indian pharmaceutical industry accounts for 8 percent of global production and nearly 20 percent of the world's generic supply.
India is also a major exporter of bulk drugs, or the raw chemicals, which are then processed to make finished products. The biggest advantage of Indian drugs is that they are cheap, and those produced by reputed manufacturers are of good quality, comparable to the patented products manufactured by multinationals. Critics often conflate generic drugs with spurious ones or those of low quality. However, there is a clear distinction. Generics are drugs whose patents, and hence monopoly, does not lie with anyone, while spurious drugs are those produced and distributed by illegal, unlicensed "companies" without any regulatory authorization. Generics have been frequently likened to low quality drugs, much to the chagrin of health rights activists and even pharmacists. Some of India's tony companies, such as Cipla, Ranbaxy, Sun Pharmaceuticals are all mainly generic manufacturers.
HIV and AIDS patients in African nations could tide through the major AIDS epidemic thanks mainly to Indian generic anti-retrovirals. Cipla Pharmaceuticals offered anti-retroviral "cocktails" (combinations of drugs, since single anti-retrovirals led to drug-resistance, or the individual drugs being rendered ineffectual) at a meager price of $304 for a year's dose, or less than a dollar a day. On the other hand, Pfizer, the owner of the patents for these anti-retroviral drugs in the USA and elsewhere, was selling the same medications for $12,000 for the year, rendering them unaffordable for AIDS patients in Africa.
Patents and other intellectual property rights certify that an invention is exclusively owned by a person or company that meets three major criteria. The product has to be novel, or to be more specific, something similar to it should not already be registered with the patent office; it has to be non-obvious, i.r. it should not be something that an average professional in the field could readily develop; and it should have industrial applicability.
Patents and other IPRs are one of the most prized possessions of a modern company. For breakthrough technologies, it is a source for massive profits since the company has a monopoly on it. Other companies seeking to use it must pay hefty royalties to use the technology. In the pharmaceutical industry, patents mean absolute market monopoly for the duration of the patent, which is set at 20 years. Pfizer's blockbuster drug Viagra, the first medication to treat erectile dysfunction, earned revenues of $20 billion for Pfizer during 2003-2014, while its largest selling drug Lipitor (atorvastatin), used to treat high cholesterol, had lifetime sales of $123 billion until its patent expired in 2011.
In many developed nations, patents are offered on products. In India, the Patent Act of 1970 awarded patents on processes. This meant that if a company developed a new product like a new medicine or a device, it would not be the sole owner of the product, but rather of the process by which the product was manufactured. Others would be able to reverse engineer the product and come up with another process. This way, no single company or individual would be able to extort or hold the entire industry to ransom by demanding exorbitant prices. This automatically kept competition high and the prices low. Due to this clever ploy, the Indian Patent Act was hailed by patient rights' activists and criticized in equal measure by the multinational pharmaceutical industry.
India's process patent laws were a major obstacle for the multi-national pharmaceutical companies, especially after liberalization, since India was deemed the next big market. Most large pharmaceutical companies are based in the USA and Western European countries, such as Switzerland, France and the UK. Through a fierce urge to create a global framework on Intellectual Property Rights (IPRs), the developed nations pushed for a comprehensive agreement to cement IPRs as an essential element of global trade policy. The rules were enshrined in the treaty, the Trade Related Aspects of Intellectual Property Rights (TRIPS), the overarching patent and IPR governing structure that all signatory nations of the World Trade Organization (WTO) submit to. The TRIPS agreement sought to constrict the freedom of nations to tailor their patent regimes to their own needs and interests. The TRIPS agreement made product patents mandatory, made the international patent filing process more interconnected and in essence, forced all the WTO signatories to accept the Western model for IPRs. Developed nations were to begin implementation of the TRIPS agreement on January 1, 1995, while developing and least developed countries were given extended deadlines of January 1, 2005 and January 1, 2015 respectively. India implemented it in 2005.
The TRIPS Agreement created a major furor among the international public health community and developing nations. The most critical impact of the TRIPS agreement would be on public health programs, which relied on medications produced by generic pharmaceutical companies. The HIV and AIDS epidemic in Africa took millions of lives, and Indian-made generic anti-retroviral medications were the only way these nations would be able to provide medications to HIV and AIDS sufferers.
After much debate about the issue of accessibility, a remedy was devised. The Doha Declaration of 2001 stated that the TRIPS agreement would continue to remain in force, but nations would have the discretion to grant compulsory licenses to generic manufacturers for drugs deemed a public health necessity. The national governments were further given the right to determine the circumstances for granting compulsory licenses for which a minimum royalty of 4% would be paid to the patent holder.
India used the Doha agreement's provisions to issue a compulsory license to the drug Sorafenib (Nexavar) produced by Bayer Pharmaceuticals on March 9, 2012. Sorafenib is used in the treatment of renal, thyroid and kidney cancers. The patented version sold by Bayer costs Rs 2,80,428 per month, while the generic version of Sorafenib is just Rs 8,880 for a month's dose of 120 tablets.
In an off-guard moment during a Financial Times Pharma Summit, Bayer CEO Marijn Dekkers declared, "We did not develop this medicine for Indians. We developed it for Western patients who can afford it." He also described India's patent laws as "essential theft."
He apologized for the FT Summit comment later. In a response to a query for this article, Mark Grayson, Vice President, Communication and Public Affairs at the Pharmaceutical Research and Manufacturers Association (PhRMA), the main lobbying group for the multinational pharmaceutical industry said that PhRMA was committed to working on improving and strengthening India's business environment for innovation. Grayson said, "We continue to have discussions with both the U.S. and Indian governments about the benefits of a robust and predictable environment for innovation and how such policies will support the Indian government's goals of fostering a spirit of innovation, entrepreneurship, and R&D growth." When questioned about the access to medicines, which is hindered by the expensive medications, Grayson reiterated a familiar argument of multinational pharmaceutical industries: "India lacks many other basic facilities without which a sustainable and holistic health coverage plan cannot be thought of. We are committed to working with the government to develop sustainable policy-level solutions to ensure access to medicines without hindering access to medicines. We in fact partner with many other organizations, governmental, non-governmental and others to ensure access to medicines to treat many infections and lifestyle-related diseases."
To justify the high costs of medicines, the pharmaceutical industry argues that it spends nearly $2.6 billion to develop each drug. This figure was estimated by the Tufts University Center for the Study of Drug Development, which receives significant funding from the pharmaceutical industry, underlining a clear conflict of interest. Almost $1.2 billion of the estimated costs are time or opportunity costs, an unacceptably high amount, according to scholars.
Other external, independent estimates of the costs of drug development have yielded figures ranging from $161 million to $1.8 billion. An independent report by the organization Public Citizen in July 2001 noted that 45 of the recent top 50 selling drugs were partially funded by U.S. taxpayers, while another review by the Massachusetts Institute of Technology found that 14 out of the top 21 selling drugs from 1967-1992 were conceived at public institutions.
The pharmaceutical industry spent only 14% of its research funds on basic level discovery of new molecules; the rest of its budget is for applied research and formulation development, relatively low risk endeavors with lower chances of failure. Public Citizen also points out that a most of the research expenditure of companies is tax deductible, which greatly reduces costs.
The global pharmaceutical industry is also critical of Indian laws preventing evergreening. This is a practice by which the pharmaceutical industry seeks to extend a patent on the molecule by claiming some modifications to its dosage, solubility, or by developing a new salt or some similar obvious tweak. India's revamped Patent Act of 1970, updated four times in 1999, 2002, 2005 and 2006, still retains Section 3(d), which states that a new form of an already known substance that does not significantly improve its efficacy is not patentable.
This argument allowed the Supreme Court of India to reject Novartis' contention that its new salt of Imatinib mesylate was patentable. The drug Imatinib mesylate was a major breakthrough for the treatment of leukemia, providing significant remissions and even cures from the disease. However, the cost of Novartis' Imatinib was Rs. 120,000 for a month's dose, while the generic version would cost only about Rs. 8000-9000 per month. Novartis petitioned the Intellectual Property Appellate Board in India, the Madras High Court, and finally the Supreme Court, losing all litigations. It finally lost its battle in the Indian Supreme Court on April 1, 2013.
In another case for the drug Sunitinib, which treats renal carcinoma, patented by Pfizer, the decision is still awaited. The IP Appellate Board revoked the patent in October 2012, but then re-granted it to Pfizer until further decisions were taken.
When asked about the issue of evergreening and its implications on the patent rights of the companies, Grayson noted, "The innovative pharmaceutical industry strongly believes safeguarding incentives for innovation through the granting of patents leads to better medicines for patients. India has many of the necessary components to support a broader ecosystem for clinical research and drug development, but the country has failed to realize this opportunity fully because of certain regulatory and legal obstacles. Because pharmaceutical innovation is the sum of various and often discrete activities, provisions such as Section 3(d) make it difficult for companies to utilize the whole range of scientific knowledge in India. We wish to address this issue for our members at the earliest."
In absence of another blanket agreement like TRIPS, where the U.S. and the EU can corner developing nations in one go to "fill the gaps" in their patent laws, the next step for these nations is of course, to parley with countries individually or as part of regional trade blocs to pressure them to modify their patent regimes.
The efforts are already on, and are apparently showing some signs of success, although actual shifts in national laws may be far away. PM Narendra Modi's declaration in January that India's patent laws need a tweak is one such dangerous sign.
Chinu Srinivasan, a founder member of the All India Drug Action Network and of Locost Standard Therapeutics, a non profit generic pharmaceutical company in Vadodara, says: "Changing laws in India will entail a lot of political and social opposition, but the fact that we are thinking of it is not a good sign. We're already riddled with problems in our health sector and we cannot afford to create one more by making drugs unaffordable. Even now, the prices for essential drugs like Sofosbuvir and Imatinib are well above the reach of the lower socio-economic strata of India, how will anyone be able to afford any medications if the prices rise even further due to patents?
"The Indian government needs to stay firm on its stance of being compliant with TRIPS. As for the pharmaceutical industry, they too, need to push and work for compulsory licenses. If some major companies capitulate and cut deals with the multinationals for voluntary licensing of patented drugs, it would be a disaster."
Emails for responses sent to FICCI's pharmaceuticals and IPR wing remained unanswered.
DG Shah, General Secretary of the Indian Pharmaceutical alliance (IPA), the lobbying arm of the Indian pharmaceutical industry, said: "We are against dilution of Section 3(d) and changing laws like compulsory licenses. India is TRIPS compliant, and even according to WHO norms there should be a valid reason why patent laws need modification. In fact, the U.S. is also seeking to enforce patent-linkage in India, wherein even the drug regulator cannot issue marketing approval as long as the patent is in force. Both these mechanisms are separate and cannot be connected.
"The drug controller general of India is a quality and safety regulator and the patent office and courts are channels for enforcing patents, which they are effectively doing. We do not support an unnecessarily complicated system of patent linkages. We will continue to work with all sectors, including the government, trade bodies and health rights' activists."
Since negotiations and agreements at the WTO and UN level are no longer an option, the U.S. and EU pharmaceutical industries have resorted to other modes to dilute India's compulsory licensing laws. The Special 301 Report is an annual report prepared by the Office of the United States Trade Representative (USTR), which designates countries according to the level of trade barriers they impose on U.S. companies in enforcing their IPRs. U.S. companies can submit their complaints to the USTR, and the U.S. pharmaceutical industry has constantly submitted claims to it against India. India has been on the Priority Watch List (PWL) since 2006, a designation which can possibly invite "retaliatory actionsfor "serious intellectual property rights deficiencies," as judged by the U.S. Trade Act of 1974.
Across the Atlantic, members of the European Union are trying to enforce similar clauses beyond the TRIPS agreement. The EU Free Trade Agreement clauses state that if drugs patented in the EU are exported to other nations via an EU country, the EU would impose penalties for patent infringement on the manufacturer, the exporter and even the treatment provider for whom it was being exported.
India has resisted attempts by both these major players to impose additional restrictions on its patent regime. Technically, India is in full compliance with the TRIPS agreement and has only issued one compulsory license of Nexavar since the TRIPS regime has come into force. However, PhRMA and other industry trade groups have consistently petitioned the U.S. Office of Trade to keep India on its Priority Watch List, pressuring the country for stricter patent norms and leaving little leeway for any relief from patents even during public health crises.
Speaking about the possibility of a change in the IP regime of India, Malini Aisola, Programme Coordinator for the Access to Medicines Program at Oxfam India remarked, "The generic industry is a major source of export revenues and it benefits from the patentability standard of section 3(d) that is designed to prevent 'evergreening'. This section 3(d) was invoked in rejecting the patent for a lifesaving drug like Gleevec in India and allowed companies to produce generic versions that brought down prices by more than 90%. No sensible policy makers will do away with such a provision."
Activists are concerned about the pressure coming on India from developed nations, specifically the U.S. about which Aisola added, "During the last year, the U.S. Government has intensified its pressure on India to change its intellectual property laws. It is no secret that the U.S. pharmaceutical industry is behind this with the motive of stifling the Indian generics industry. It is critical to safeguard the Indian industry's ability to supply low cost medicines to poor countries. Changing Indian intellectual property laws will run contrary to the 'Make in India' initiative. We urge the Government of India to strongly resist the U.S. Government's demands that are aimed at dismantling policies protecting public health and access to medicines for the poor, both in India and in the rest of the developing world."
While the United Progressive Alliance, led by the Congress, did not budge on he U.S. demands to tighten patent laws beyond the TRIPS requirements, Modi surprisingly declared that India would need to strengthen its patent laws or risk being ostracized by the global business community. India resumed talks with the EU Trade representative on August 28, 2015, which India had backed out of after EU formalized a ban on medicines manufactured by Indian manufacturers. The EU however, has said that the ban was a minor issue arising only because of improper clinical tests done by GVK Biosciences in assessing whether Indian generics are equivalent to their patented counterparts.
Prime Minister Modi's declaration of the necessity to change India's IP laws and establishment of a working group during his last visit to the USA after the UN General Assembly in 2014 is likely to provide the U.S. pharmaceutical lobby a dedicated forum to pressure India on the IP issue.
On October 3, 2015, the signatories of the Trans-Pacific Partnership reached an agreement about the huge trade liberalization deal that they were negotiating for the past five years. In largely secret negotiations, the signatories, including the USA, Australia, Peru, Vietnam, Malaysia, Mexico, Canada, Japan, Brunei, Chile, Singapore and New Zealand finally agreed on a set of agreements designed to reduce trade barriers within the respective countries.
A new threat looms over the generic industry in the form of this trade deal. The Trans Pacific Partnership has provisions which severely limit patent law provisions like Section 3(d) and increases the ambit of what can be patented. A New England Journal of Medicine article noted that the basic criteria for patentability; innovation, involving an inventive step and having industrial applicability was being modified to allow patents on 'me-too' drugs like Gleevec's modified salt which it failed to patent in India because of Section 3(d).
During the height of the African AIDS crisis in 1998, South Africa was forced to roll back legislation promoting the production and import of generic medications from other countries. The U.S. and EU, under pressure from PhRMA, threatened South Africa with economic sanctions. India is not South Africa, with its newfound financial and political clout on the global scene. Pressuring India to back down is much harder. Nevertheless, the country will be under tremendous U.S. and European pressure to alter its life-saving intellectual property laws. In the cross hairs are millions of patients suffering from chronic, debilitating diseases such as HIV, TB and cancer, who will have no medicines to treat their otherwise curable ailments.
The author is deputy project manager, Policy, Gram Varta Impact Evaluation.