Dispensing with
dear drugs

Dispensing with
dear drugs

The Greater Access to Affordable Pharmaceuticals (gaap) Act may be a bitter pill to swallow for patent holders in the pharmaceutical industry. But it is definitely a shot in the arm for the generic drug segment. The legislation -- passed recently by the us senate -- is meant to plug loopholes in the 18-year-old Hatch-Waxman act, which had been specifically framed to facilitate the entry of generic drugs into the market (see box: Tightening up ). The us congressional budget office estimates that the gaap act would save domestic consumers and government programmes us $60 billion over the next 10 years. Moreover, the new law will benefit countries such as India, which export generic drugs to the us.

The act has acquired greater significance as the patents of more than 85 per cent of currently available drugs are set to expire. Prominent among these are cardiovascular drugs Zoloft and Norvasc, anti-cancer drug Zofran, and the anti-allergic Claritin. World Trade Organisation (wto) rules stipulate that only the patent holder of the drug has the legal right to manufacture and market it during the life of the patent. But once the exclusivity period ends, other manufacturers can market the drug under its chemical or generic name. Patent holders resent this as the generic versions are cheaper and break their monopolies.

Although the Hatch-Waxman act (Drug Price Competition and Patent Restoration Act of 1984) succeeded in opening the prescription drug market to generic competition, generics today constitute less than 10 per cent of the dollar value of all prescription drugs sold in the us. This is because patent holders have used certain lacunae in the law to their advantage.
Prolonging the agony The stakes are high for patent holders. They stand to lose around 80-90 per cent of the market with the introduction of the generic product -- a loss that even higher prices will not be able to offset. Though manufacturers of big brands did initially try to protect themselves by starting their own generic companies, they soon found an easier way to circumvent rules: employing dilatory tactics.

Desperation has driven them to adopting every trick in the book -- from patent evergreening (extension of patents by making cosmetic modifications in the original product), to paediatric exclusivity (buying more time by carrying out tests on children). In addition, patent holders have sought refuge in application of an automatic 30-month stay in patent litigation.

cases in point: New Delhi-based pharmaceutical major Ranbaxy Laboratories Limited is facing litigation over antibiotic Augmentin, whose patent is held by GlaxoSmithKline (gsk) -- a research-based global pharmaceutical company with its operation facility in the us. gsk holds several patents on Augmentin that supposedly seek to block generic versions till 2018. However, since most of these have been invalidated by the court, the product should be patent-free in December 2002. Meanwhile, gsk has filed lawsuits against Ranbaxy and three other manufacturers, alleging that they have stolen the bacteria needed to make Augmentin. Is this a last-ditch measure to protect its second largest product, whose sales touched us $2 billion in 2001? "It is a possibility," says B K Raizada, senior vice-president, Ranbaxy. On the other hand, gsk justifies its move. "We are merely taking steps to protect our trade secrets," claims Siobhn Lavelle, director, uk corporate media, gsk.

Stalling the entry of generic drugs by filing a case of infringement of patent is a common practice. This has allegedly been used by Bristol-Myers Squibb (bms), a company which produces pharmaceuticals and healthcare products, to delay the manufacture of a generic copy of anti-cancer drug Taxol by 30 months. Though bms has not discovered the drug, it has patented the method of its administration and stabilisation.

"Companies have blocked generic competition by incidental features of their products," says Kathleen D Jaeger, president of the Generic Pharmaceutical Association (gpha), a us-based association of generic drug makers. gpha also alleges that patent holders lobby for laws which delay the introduction of generics. It is noteworthy that firms such as Pfizer and Pharmacia (now a merged entity) have been major poll campaign contributors in the us. A Pfizer spokesperson, though tight-lipped on the company's policy on donations, clarifies that the conglomerate globally adheres to a stringent code of ethics and conduct. He adds that the company lays emphasis on transparency in discharging its role as a good corporate citizen.
India gains For India, the passage of the act augurs well. "Generic drugs constitute the entire chunk of the country's pharmaceutical exports," reveals Sandhya Tewari, deputy director, Confederation of Indian Industry (cii).

Dr Reddy's Laboratory, an Indian pharmaceutical company listed on Nasdaq, managed to make a profit of more than Rs 200 crore from the sale of a generic version of antidepressant Prozac. The patent of this drug was held by multinational pharmaceutical manufacturer Eli Lilly and Company. Ranbaxy has recently launched an antibiotic, cefuroxime axetil, whose patent was held by gsk. The company is likely to earn Rs 150 crore to Rs 200 crore from its sales in 2002.

The Indian industry is seeking to cope with the looming threat of wto's copyright laws. The 1970 Patents Act allows manufacturers to copy any drug so long as they follow a production process different from the one used by the patent holder (process patent). Adherence to the agreement on Trade-Related Aspects of Intellectual Property Rights (trips) has necessitated the Indian Patents (second) Amendment Act, 2002, which will come into force from 2005. According to this, manufacturers cannot copy a product even if they use a different process (product patent). This would curtail the industry's right to copy patented drugs by the process of reverse engineering. It is amid such a scenario that the us generic drug market would provide the Indian players with an opportunity to make up for some of the resulting losses.

Selling generics in the us is espe-cially lucrative as the profit margin is much higher there, says P V Venugopal, director, international operations, Medicines for Malaria Venture, a non-profit organisation developing affordable medicines for malaria. Though us-based generic companies will be the biggest gainers, their dependence upon India to provide bulk drugs at a low cost will translate into benefits for the Indian industry too. "Exports are likely to increase as we have very competitive prices," says B K Keayla, convener, national working group on patent laws. "The profits earned by exporting generics to the us can be used to strengthen drug research," says Ashwini Kumar, drug controller general of India, Union ministry of health and family welfare.

Future course
India has managed high returns from generics even though only 20 out of the 20,053 manufacturing units in the country have the licence to export to the us. The rest of the companies are unable to meet the quality standards required by the United States Food and Drug Administration (usfda), points out Prafull D Sheth, president, Indian Pharmaceutical Association, a body of pharmaceutical professionals in India.

In order to sell generics in the us, a licence has to be procured from usfda. Even as this process is quicker than that involving a novel drug, Indian firms find it more economical to collaborate with us-based generic companies. Another way of tiding over this problem is by taking over small generic drug manufacturing units in countries outside India, which are potential markets for the products.

To ensure that more companies are able to export these drugs to the us market, it is also important that the government upgrades its regulatory mechanism to ensure adherence to the manufacturing practices as defined by the us Code of Federal Regulations.

For all the enthusiasm shown by the industry towards the generic drug market, experts sound a word of caution. "If manufacturers raise the price of the product to the level at which they are selling it outside the country, it would be unaffordable for Indians," says Mira Shiva, director, women's health and development and drug policy, Voluntary Health Association of India.

James Love of Washington-based group Consumer Project on Technology avers that diluting patent rules -- not just substituting branded drugs with generics -- is the best way to make drugs affordable.