The Pill Bill

The Pill Bill

The reason all this becomes critical is that it ultimately affects the consumer -- the patient. With patents come monopolies. With monopolies, price hikes. In this situation, the seller determines the price. "It's obvious. As an entrepreneur, if I have the monopoly to sell a product, I will sell it at the price I like," says Dinesh Patel, managing director of the Rs 80-crore Themis Medicare Limited, an Indian company with a few patents and more to come through new drug delivery systems.

Nobody really knows
What will the disappearance of generics do to the price of drugs in the market? Nobody really knows. Nobody really knows how to track what is currently patented.

One way of estimating it could be to work backwards from what the us industry claims it's losing, if the generic market is allowed. The office of the us Trade Representative working hand in glove with Pharmaceutical Research and Manufacturers of America (ph rma), the us pharma industry group, estimates the us industry loses us$1.8 billion in revenues because of the lack of patent protection in India. That's around 40 per cent of the total Indian market of us$4.5 billion, or Rs 8,000 crore. "This figure may not be accurate because they may have valued it at their prices," clarifies D G Shah of Indian Pharmaceutical Alliance, a big Indian pharma grouping. "But our sources in Geneva tell us that phrma has claimed (unofficially) that 15 per cent of the Indian market, in terms of value, includes drugs under patent. This, if we calculate, would amount to Rs 3,000 crore," says Shah. So, potentially Rs 3,000 crore worth of drugs would get into a patent regime and their generic version would have to be scrapped.

The other indicator to estimate what could be the volumes of the patented drugs, currently used in the country, would be through the applications pending at the patent office. These are growing since the ordinance was passed. Last July, the Union ministry of commerce and industry told Parliament there were 4,792 pharma applications in the patent mail box. In February this year, the same ministry reported there were 5,636 such applications pending approval at the Indian Patent Office. But how many of these are really for new chemical entities, as allowed by the current amendment?

This, says industry, is the crux of the problem. The current amendment, which does not restrict patents to a new chemical entity, and in fact allows a dilution in the pre-grant opposition, may lead to huge distortions. This is further compounded by an inexpert patent office and will lead to many of these ostensibly new but actually evergreen applications being cleared; patents being granted. Many such products may already be in the market. "A number of pre-1995 molecules, even those discovered in 1970-75, can come under patents in India," cautions Shah.

Government has its own calculations. Kamal Nath, Union minister of commerce and industry, maintains prices will not spiral. In fact, he goes on to say categorically, research shows 97 per cent of the drugs are off-patent and that none of the 354 drugs in the Essential Medicines List are patented.

But questions still remain: "97 per cent of what?" ask industry and analysts. The number of total drugs sold in India? Or 97 per cent of the turnover of the industry not under patents? "There are 60,000 drugs sold on the market and if we were to calculate, based on the minister's assumption, then three per cent of that number is 2,000 drugs," points out Hamied. Who is to say which these 2,000 drugs are, and what their overall turnover is? Calculating further, three per cent of a Rs 20,000 crore industry would amount to a turnover of Rs 600 crore. The range is mindboggling.

If we take the different claims and their assumptions, there is a fair amount of divergence. While government claims this amendment would affect drugs worth Rs 600 crore, the us government and industry estimation puts it close to Rs 3,000 crore. Still, what does this do to price? After all, it can be argued that market conditions will not allow the companies to sell at much higher rates.

In other words, can we learn from the experience of other countries which have followed the us - trips approach? When the People's Commission used this indicator, they found the comparative prices of some drugs, sold in Pakistan and Indonesia, were between four to 29 times higher than India (see table: Contrasting drug prices). In a situation like this, the role of government is critical. But what are its options? How does it plan to restrict monopolies? Can it control the rise in prices of existing drugs or new products entering the market at high prices?