Is the tide against Big Pharma in India turning?

The recent Delhi High Court ruling barring Cipla, India's fourth-largest generic drugmaker by revenue, from making or selling a cheaper copy of Novartis AG's respiratory drug Onbrez domestically, citing infringement of patents held by the Swiss company, amounts to more than a temporary victory for multinational drug firms, known as Big Pharma, in the war against Indian government’s attempts to tweak patent laws to make cheaper versions of overpriced blockbuster drugs available to poor patients at a tiny fraction of the price at which the medicines are sold in the US and Europe.

For one, the Delhi High Court’s ruling starkly contrasts with the Supreme Court’s decision a couple of years ago to refuse marketing exclusivity for a new form of Novartis’ Glivec on the basis that it is not a novel medicine but an amended version of an existing compound. The court then stated that awarding the Swiss firm a patent aimed at protecting Glivec would prevent access to this lifesaving product by millions of Indian cancer patients.

The Delhi High Court’s ruling favouring Novartis also supports a growing belief among a section of industry watchers that the Modi government is slowly shifting from the hitherto followed approach towards Big Pharma that was based on two tenets—that Western pharma firms will have only ‘limited’ patent protection for their drugs in India and that it will be very difficult to get patent in the country for enhanced versions of patented medicines.

A section of analysts say the recent pact signed by Modi during his recent US visit agreeing to set up a bilateral working group on intellectual property as part of the Trade Policy Forum is another indication that India is ready to allow the US a role in its decisions on IP, including those for drugs, which will ultimately favour Big Pharma.

“While establishing a working group does not necessarily mean that the Modi government is willing to change Indian patent laws to further suit the needs and wants of Western companies, it indicates that the US has managed to get the Modi government to provide it with a forum from which to pressure India to adopt tougher patent protection measures,” said Raghuram Selvaraju, Managing Director and senior healthcare analyst in New York based MLV & Co’s Equity Research department.

According to him, the recent decision by the Indian government to revoke the price controlling powers of the National Pharmaceutical Pricing Authority (NPPA) is a more emphatic indication that Modi government is more than ready to lessen its hostility towards muti-national pharma firms.  In July 2014, the Modi government capped the prices of 108 medicines, in addition to the 348 drugs that were brought under the essential list of medicines following the Drug Price Control Order in 2012. However, in September 2014, the government instructed the NPPA to revoke the guidelines that gave it the power to fix prices of drugs that are not on the national list of essential medicines. “If the government is removing the ability of regulators to control the prices of essential medicines, this would seem to be an indication that the Modi administration is bowing to external pressures to make life easier for Western pharmaceutical companies,” said Selvaraju.

The India story

Big Pharma’s fight for protecting patent rights has been particularly fierce in India—characterised by the world’s biggest generics industry, adolescent patent laws, growing demand for medicines and an inability to pay for them—than anywhere else.

For more than three decades, India—that boasts of a surging generics sector where about three-fourths of the market is represented by copycat versions of blockbuster drugs—refused to recognise pharmaceutical patents, allowing domestic firms to copy medicines and make it cheap. However, after the country joined the World Trade Organization (WTO) in 1995, it had to change its patent policy. But the patent law it launched in 2005 denies ‘evergreening’——making minor alterations to existing drugs to secure a new patent. The country patent system also has a provision for ‘compulsory licensing’ under which the government can force a firm to license a patented drug to a generic company under a WTO pact.

“Indian patent law looks similar to Western law, except for the provision that the Indian government can amend it on a case-by-case basis to enable ‘access to lifesaving medicines’ for those who would not be able to get access to such medications if they are allowed to be priced as brand-name products,” says Selvaraju. While Section 3(d) of the amended Indian Patents Act allows drug companies to obtain product patents for new medicines, Section 3 (d) permits only breakthrough innovations and bars new use of known drugs.Swiss firms including Novartis and Roche have had a tough time in India as the government has been trying to enhance people’s access to life-saving medicines invented by Big Pharma.  Since 2006, Novartis has been fighting to win a patent for the enhanced form of Glivec. For the same, reason, the court ruling against Cipla is breather for the Swiss drugmaker.

“Patented drugs are more expensive than generic drugs due to the very high costs involved in research and development. Generic firms such as Cipla do not make such investments and are hence able to offer drugs at lower prices,” said the Novartis spokesperson responding to the recent court ruling against Cipla.

“This ruling in favour of Novartis is against Cipla but, if analysed from a neutral standpoint, it is totally in line with existing laws, rules and judicial precedents. For example, the Indian patents act provides provisions for revocation of patent rights in case such rights are against public interest,” said Rahul Dev, an Indian lawyer.

Roche is another Swiss firm that has found itself at the wrong end of Indian patent laws. After a four-year courtroom battle, it lost Indian patent rights for its blockbuster lung cancer drug Tarceva to Cipla after Delhi High Court ruled in favour of the Indian generic firm.

In addition to Novartis and Roche, German pharma giant Bayer AG and US firm Gilead Sciences  too have been entangled in legal war over patented drugs. While the Supreme Court ruled against Bayer in its attempt to block the sale of a cheap generic version of its cancer drug Nexavar in India, Gilead failed to gain protection from India's patent office and the judicial system for its HIV medicine Viread.

Advocacy groups have been accusing western drugmakers of ‘evergreening’. According to them, cheap generics—unbranded copies which contain the same ingredients as the original but are sold at a much lower price—save the lives of millions of patients who cannot afford to pay Western prices to treat cancer, malaria or HIV.

Understanding the current context

Global pharma firms, which are trying to tackle falling sales in developed countries, have been targeting countries like India where demand for life-saving drugs is surging.  Rising incomes and rates of chronic disease may push drug sales in India from $12 billion in 2010 to $74 billion in 2020, according to consulting firm PwC. Nearly three quarters of the sales are expected to come from generic drugs.

A key issue is the R&D costs involved in creation of drugs. Typically, only one out of 10,000 experimental compounds in development will reach the marketplace at a cost of $1 billion for each medicine approved. Thus pharma firms try to recover cost for the thousands of molecules that fail from each successful molecule that makes it as a drug.

As R&D expenses surge, pharma firms feel that the 20-year patent period limits the cost of innovation and they are tempted to resort to ‘evergreening’. For example, heart medicines Lipitor and Plavix posted combined sales of $14.5 billion in the in the US market in 2011 but their patents expired in 2012.

By 2020 the profits of most Big Pharma firms are expected to decline. This would mean Big Pharma has to significantly cut R&D costs. Also, as governments in developing countries, including India, continue to wield compulsory licences to ensure availability of cheaper copycat drugs, drug firms have to expand into different parts of the healthcare delivery system, shifting from delivering just drugs to comprehensive patient outcomes, in order to remain competitive firms. 

However, going by the court ruling against Cipla, revoking of price cap on non-essential drugs and the decision to set up a patent working group with the US, there is ample reasons for the Big Pharma including Swiss drugmakers such as Novartis and Roche to believe that going ahead the Indian government will be a less fierce foe in their fright for patent protection. 

“Patents are the foundation of innovative drug discovery and essential to advancing medical science and improved treatments for patients. A robust intellectual property system protects the investments into research and development of new products that will improve the quality of life for patients,” said the Novartis spokesperson.

It seems the Modi government may not beg to differ.