On December 26, 2004, the Union government of India issued the Patents (Amendments) Ordinance, which will change the way the country does business on protecting the intellectual property rights of pharma companies, amongst others. Now, the ordinance is before the parliament, which has to do one of three things: amend it, pass it or reject it.
So, will the ordinance become law? At risk is the armtwisting deadline set up by the World Trade Organization (wto), egged on by us corporate interests. They want the intellectual property of the large companies to be protected so that they can invest more in research and development and find more cures for new and life-threatening diseases.
At risk also is the issue of the health of millions of Indians, who many believe may be at the losing end if the amendment allows for monopolies in the critical business of medicine to thrive.
But what are product patents and how do they differ from the process patents that were followed earlier? Which life saving drugs could be on the list? How will the Indian pharmaceutical industry cope, as a major quantum of drugs they manufacture goes out of their hands? Will patients now have to pay twice, thrice or ten times of what they pay now for a drug? What about the poor who cannot pay? Will access to drugs be affected once generic equivalents of patented drugs stop being made locally?
Are there any ways India could protect its citizens through the bewildering maze of patentspeak? The very way healthcare operates in this country is about to change. We need some answers, quickly.
clifford polycarp investigates the imlpications of entering a new patent regime.
Patents get a makeover
Santosh Rana has a type of blood cancer -- chronic myeloid leukaemia -- that was detected in early 2003. His doctors prescibed him an anti-cancer drug, Glivec. He could afford it, they said; the cost of treatment would come to between Rs 9,000 to Rs 12,000 per month. But then things changed. Out of the blue, in November 2003, Rana suddenly found he could not afford his cancer treatment anymore. The same drug now cost him Rs 1,20,000 per month.
His doctors explained that what had changed was that Novartis India had been granted exclusive marketing rights by the government. The company had also filed, and won, an injunction against all other Indian companies manufacturing a 'copycat' version of the drug. The very sort of drug that Rana was buying each month.
This was 2003. In 2005, the situation will change even further, as the government gets ready to pass the Patents (Amendment) Ordinance 2004. The Indian Patents Act 1970, was amended in 1999 and 2002, so that India could comply with the provisions set out by the Trade Related Aspects of Intellectual Property Rights (trips) agreement of the wto.
This agreement is meant to protect the rights of the inventors -- from drugs to seeds -- and builds in provisions that do not allow companies to sell what is known in the pharma parlance as 'copycat drugs'. The 1999 amendment provided for exclusive marketing rights, which gave the inventor company 5 years of protection. Now, with the proposed third amendment, this provision will be further tightened.
The ordinance of the government of India provides for product patents, instead of process patents. India's 1970 patent protection act, protected only the process involved in developing drugs and not the end product itself. Several Indian companies had innovated, by producing the same drug through a different process. These drugs, called generic versions, came at much lower costs. But while end users benefitted, the inventor companies cried foul, arguing that the costs of their invention were not paid. This loss, they said, would mean that they would not be able to invest further in drug research, and that would end up endangering even more lives.
Generic versions: mainstay of the poor
The issue of 'generics' has been hot for some years now. In 2001, 30 drug companies filed case against the South African government when it decided to override their patents and buy cheaper, generic drugs from countries like India, to fight the hiv/aids disesase.
The fact was, that under Indian patent law, its pharmaceutical companies like Cipla and Ranbaxy could manufacture drugs, which were under patent protection abroad, if they had modified the process of manufacture. So Cipla made an audacious offer to African governments and the global humanitarian group, Doctors Without Borders. Cipla said that it could supply the triple therapy aids drug for us$350 a year, per patient. The going cost of the same combination-drug therapy was us$10,000 to us$15,000 per patient. The drug combination included: two tablets of stavudine, whose patent was held by Bristol-Myers Squibb of the us , two tablets of lamivudine, patent held by Glaxo-Wellcome of Britain and two tablets of nevirapine, patent held by Boerhinger Ingelheim of Germany. In 2000, Cipla had already tried to sell Duovir, its generic version of Glaxo's Combivir at us$1.74 a day. Glaxo responded with threats to sue Cipla, but also with price cuts, from us $16 per patient to us $2.
But the matter did not end here. This possibility of sourcing cheaper drugs from developing countries led to changes in the trips agreement. In the trips agreement, one clause, which can be used by governments to regulate access and prices of drugs, even patented drugs, is compulsory licensing. Under this provision, a license without the agreement of the patent owner can be granted, but this can only be done if the owner is not willing to grant a voluntary license on 'reasonable' commercial terms within a 'reasonable' period of time. trips, under compulsory licensing also, allows countries, with limited domestic manufacturing capacity, to import a generic (patented-copycat) version of the same drug for a public health emergency.
In late 2004, the us Senate's Government Accountability Office found after detailed investigation, that the government was paying twice as much for many of its drugs in its global aids programme, because "it would not buy cheaper versions of the India-made drugs because they violate us patent laws, which do not allow copies of the brand-name products."
us companies fought back saying that the issue was not price but safety. Finally, it was agreed that the administration for its aids relief programme would buy the generic version of the drug, but only after approval from the Food and Drug Administration and only for distribution in Africa and the Caribbean countries.
This is not to say that the generic business is not growing in the world. Consumers want it. But companies do not. So, the compromise is that drugs, which are off patents, can be sold as generics. In other words, they can be sold under other names, other than their original brand name. When the drug goes off patent, the price can drop as much as 80-90 per cent. This still brings down the price. France, for instance, has taken steps to encourage generic medicines in order to bring down costs of healthcare. It empowered chemists to sell a generic medicine even if the doctor had prescribed a branded drug. In 2002-2003, the generic market in France was estimated to grow at 45 per cent per annum.
Basically, this generic business rides on the marketing of the branded drugs, while the other, now 'illegal' generic drug, was based on the r&d development costs of the inventor company. But in both businesses, as price comes down, it's the patient who stands to gain.
What about us?
Once the 3rd amendment is passed by the Indian Parliament, the business of generics would be out. The fact is that Indian companies have come to dominate the market in the past 30 years -- from a market share of 30 per cent in 1972 to controlling over 72 per cent of the domestic medicine market in 2004. Cipla's turnover, for instance, crossed Rs 2,000 crore in 2003-2004, a staggering 27 per cent increase in that year. Ranbaxy's turnover is much higher at Rs 5,000 crore. These earnings were predominantly from the 'generics' business but now strategies would need to change to meet the new situation.
The critical issue here is what all this would do to prices of drugs in a poor country like India. The fact is that Indian drug prices, which were among the highest in the world in the pre-1970s are among the lowest in the world currently. The fact also is that India is confronted with a double burden of disease -- traditional diseases like malaria to modern diseases like cancer. It has extremely poor people and with high health costs , it needs to worry about the 'affordability' of its medicines.
What's unclear is how the 'product patent' will affect vast numbers of people in the country. The supporters of big pharma say that the 3rd amendment will not mean much, because most people do not depend on 'patented' drugs for their ailments. They say, in fact, that the 3rd amendment will protect Indian companies that invest in discovering new products. Indian r&d in medicine will prosper. The country will become a global player in the pharma business and also comply with wto and not face the wrath of the us . All win-win they say.
But there are many greys. Nobody seems to know what all this will do to people's health, for there are no reliable estimations of the cost of drugs in relation to healthcare cost.
The fact also is that nobody really knows how many drugs will go under patents. The problem is that this will also depend on the definition of what can be patented and from the year when the patenting of the drug for its 20 year period begins. This is further complicated in the global world of global business we live in today. For instance, GlaxoSmithKline filed a patent for rosiglitazone -- an anti diabetic drug -- in the us; it was granted this in 1987. Technically, its patent would have run out in 2007. But the company filed and got a patent for the same drug in Brazil in 1997. Now, if the company were to use the validity of its Brazil patent to ask for a patent in India, and say it got this from the date of its application in 1997, the same drug could continue to be sold till 2017.
Evergreening the patent
'Evergreening' is another problem. The same company, which holds the original patent, can add something new in the composition or change its mixture, which could allow it to get another patent for the same modified product. In 1992, the anti-diabetic drug of Glaxo secured a patent for its modified version under 'rosiglitazone maleate' and so extended the life of its original 1987 patent by another 5 years. While the first version would expire in 2007 in the us market, the second evolved version would expire in 2012. The us has adopted the practice (a loosely defined law helps) where, when a patent is close to expiry or even midway, the patent holders can develop different salts, mixtures, polymorphs, metabolites, hydrates, isomers and derivatives of the same molecule and extend the life of the patent. Low Cost Standard Therapeutics (locost), a Vadodara group working on consumer rights in the context of patents, feels, "Most research and development spending goes into producing 'me too' drugs -- these are slight variations on existing drugs which can then be patented as 'new' drugs and sold at high prices. Often these variations are no better than molecular manipulation or a mere addition of other unnecessary ingredients."
Lack of clarity in Indian law means that evergreening will happen in India as well. And the ambiguity that exists in definitions leaves the crucial decisions to the discretionary powers of the patent examiners, who are not prepared at all to deal with vast numbers of patent applications (see box : Indian Patent Office ). Lack of clear guidelines will only result in endless litigation, with every decision being challenged. The potential for this has already been seen with Exclusive Marketing Rights (emr), where four out of five decisions taken by the patent office are embroiled in high court cases. (An emr is similar to a patent; granted for a shorter duration, about 5 years; India was obliged to provide them as an interim measure prior to introducing product patents). Products involved in such litigation include imatinib mesylate, Novartis' anti-cancer drug and rosiglitazone, GlaxoSmithKline's anti-diabetic drug. Novartis was granted an emr , Glaxo wasn't. Yet, both cases managed to end up in court.
This is why the 'wording' of the patent amendment bill becomes critical. How does the amendment bill define the term 'innovation'? How does the amendment bill provide for 'compulsory licensing' so that there is restricted monopoly in the areas of health?
The ordinance does not do much more than the amended Indian Patents Act in defining what can or cannot be patented in the name of new, or inventive or capable of industrial application. While Indian law defines an invention as a 'new product or process', that possesses a not so obvious feature, with the potential to be developed or used in industrial applications, it makes no attempt to explain what would be considered 'new' or 'novel' or 'state of the art'. In fact, the proposed amendment only muddies the waters futher. It has added the word 'mere' before the phrase new use. In other words, whereas earlier discovering a new use for an existing drug could not be patented, but now, with the addition of the word 'mere' could mean if the new use for an existing drug was not considered mere, it could be patented. All in all, the definition is broad and vague and analysts argue that this will lead to enormous costs of litigation.
As trips does not elaborate the definition of what constitutes an invention, countries can innovate and define more clearly, what they believe constitutes an invention. For instance, countries can set their rules to differentiate between a non-patentable discovery and a patentable discovery, particularly with reference to genetic material. Industrialised countries have continuously expanded the meaning of invention to serve the interests of companies involved with gene technology. In contrast, Brazil, Argentina and the Andean Pact nations exclude patents on natural substances and their reproduction, since no invention is involved. Both these approaches conform to trips. Therefore, other countries have used this opportunity, provided within trips, to their advantage. India can do this as well.
Countries can also interpret and define 'novelty' according to national priorities. For instance, under us laws, an invention is no longer considered 'novel' once information about it is published either in the us or abroad. But if the information disclosed abroad is 'only' by word of mouth or unpublished, then even if it is sold abroad, it can be patented in the us. This interpretation of novelty discriminates against non- us inventors.
In Brazil, an invention is novel "if it does not form part of state of the art"; state of the art being defined as "to comprise everything made available to the public by means of a written or oral description, by use, or in any other way, before the filing date of the patent application." France and Pakistan broadly follow the Brazil definition, as do Thailand and uk. China is explicit: "Novelty means, before the date of filing, no identical invention or utility model has been publicly disclosed in publications in the country or abroad, or has been publicly used or made known to the public by any other means in the country, nor has any other person filed previously with the Patent Office, an application which described the identical invention or utility model and was published after the said date of filing."
The basic subject matter of what can be patented, such as pharmaceutical substances, is also somewhat ambiguous. Should it be restricted to new chemical entities (nce), that is to say, the basic chemical molecule that has a certain therapeutic effect? Or, should patenting also be allowed for novel drug delivery systems, basically new ways (such as patches or inhalers) of administering drugs?
And how about innovations like metabolites (a chemical compound created when the patient's body metabolises the active ingredient of a drug) or innovations like polymorphs (includes compounds forming a crystalline structure different from the original molecule)?
The People's Commission on the Review of Legislations amending Patents Act 1970, an independent group chaired by former prime minister I K Gujral, which has been monitoring the patent provisions, argues that the amendment is inadequate. They suggest that the definition of invention must include the concept of basic novel product or process. By restricting invention to basic novelty, it would regulate the applications for patents to a manageable level, argues the commission.
They also say that invention should be further defined to ensure that nothing that is already in the public domain, in the country or elsewhere in the world, is patented. In other words, we should innovate, like the Chinese and others have done, to ensure that we restrict the use of patents to what is legitimate and deserves protection. Patents should not become the route to increase the monopoly of the inventor.
The Indian Drug Manufacturers' Association (idma), the industry association that represents a segment of the industry, wants the amendment to restrict patenting to only nces, or a basic new molecule. Even when it comes to novel drug delivery, idma says that it should be restricted only if the invention is based on a new technology. "Only significantly novel inventions should be granted patents, and we should prevent marginal innovations from being patented," contends Nihchal Israni, chairperson, Intellectual Property Rights Committee, idma and chairman and managing director of Blue Cross Laboratories.
But there are other views. The Organisation of Pharmaceutical Producers of India (oppi), that represents the multinational corporation viewpoint, supports patenting of all of the above, including innovations like metabolites and polymorphs. "Incremental innovations are India's strength. Where it's a low hanging fruit, we should grab with both hands," argues Ajit Dangi, director-general, oppi.
This us-led approach of trips- plus has clearly found favour with the Indian government as well. But can it organise the market here? Does this market wish to be organised?
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?
|Contrasting drug prices
What will happen when the rules
|Drugs, dosages &
500 mg 10s tabs
400 mg 10s tabs
Sodium 50 mg 10s tabs
150 mg 10s tabs
30 mg 10s tabs
100 mg 10s caps
20 mg 10s caps
Report of the Fourth Peoples Commission on Review of Legislations Amending
Patents Acts 1970, October 2004, Annexure-2 Cotton & synthetics
Protect the patient
But even with patents, governments can control prices to ensure that drugs are affordable by people. Governments across the world do this. In different ways.
In India, the Drug Price Control Order regulates a certain number of drugs under price control. The Drug Policy of 1994 brought in the National Pharmaceutical Pricing Authority and reduced the coverage of drugs to 76, which was estimated then to be roughly 50 per cent of the domestic pharma turnover. In February 2002, the government announced the Pharmaceutical Policy, which would bring down the coverage even further. According to a locost analysis, this would have left between 30-40 drugs on the drug control list. This policy never made it through.
The existing criteria, for what is included in price control, is based on the moving annual total value, which indicates the turnover (Rs 25 crore annually) and competition, determined by the percentage of the market share (50 per cent or more) or if the value is more than Rs 10 crore, but less than Rs 25 crore and the market share is 90 per cent or more. In other words, the order was aimed to control prices in situations of monopoly. On the other hand, the National List of Essential Medicines, regulates a list of drugs to ensure that they are available in the health system (see box: Defining what is essential). But as there is no real relationship between what is essential and what is price-controlled, it has lead to litigation. In 2003, Supreme Court directed the government to ensure that essential and life-saving medicines do not fall out of price control.
Other countries also used price control mechanisms to check the price of patented drugs. For example, Canada's Patent Act of 1997 created the Patented Medicine Prices Review Board (pmprb). While the board has no jurisdiction over generic drugs, it has a clear mandate to protect consumers by "ensuring that prices charged by manufacturers for patented medicines are not excessive". The board enjoys independence and autonomy, and the government has no power to direct it or review its decisions and orders. Its decisions are subject to judicial review only on jurisdictional and procedural grounds. The Canadian experience has been so successful, that many consumers in the unregulated and steep priced market of the us, actually shop for drugs from Canada.
In the uk as well, the Pharmaceutical Price Regulation Scheme regulates profits within a band of 17-21 per cent. The question now is what will India do?
Licence to cure
Another approach to limit the impact of monopolies is to allow more licenses for the same drug to be manufactured and sold. Licenses could come in three varieties -- voluntary, automatic or compulsory:
A voluntary license, as its name implies, is the result of a negotiated arrangement between the patent holder and any other party interested in commercialising the patented product. The patent holder is usually rewarded in the form of royalty payments at the agreed rate. Such an agreement does not require state intervention.
Automatic and compulsory licenses are measures employed by the State to protect the consumer. trips provides for compulsory licensing, which can be used by the government, in certain prescribed circumstances. For instance, if India decides that aids being a serious epidemic needs cheaper drugs, it could apply compulsory licenses so that industry can supply it generic drugs, even if patented drugs are available.
The existing law allows for compulsory licensing and the proposed amendment has added the provision to facilitate exports to those countries, "with limited or no manufacturing capacity". The conditions, under which compulsory licenses can be issued include shortages in availability, high prices and health emergencies as well as abusive practices. But again the question remains, will the government have the spunk to impose compulsory licenses against large pharma companies and large vested interests?
trips also says that if a patent holder refuses to deal on the terms and conditions offered by a domestic manufacturer, within a reasonable period, the government can go ahead with compulsory licenses. But this trips friendly provision, has for some reason, been ignored by the trips friendly government. Almost all patent acts provide for this. Another approach, less trips friendly, is to include a provision for automatic licenses, also known as license of right, allowing generic manufacturers to freely manufacture and sell a patented drug. The generic manufacturer has to pay a royalty to the patent holder, which is under a ceiling, defined by the government. Here, the royalty received by the innovator serves as a reward and an incentive for investment in r&d. Cipla advocates that the government should be free to grant automatic licenses for drugs required for cancer, malaria, hepatitis and other key diseases.
But the devil is in the detail. So, even as we have hesitantly accepted compulsory licenses, the patent law ensures that the procedure is so cumbersome that it is virtually impossible to use. The amendment does nothing to streamline this process.
The bottomline is that patents will create more monopolistic conditions and distort prices and these could hurt the interests of patients. The business of medicine is after all one that concerns life and death. But what is also clear is that while the trips agreement binds India to have an effective system of patenting, it does not define what this effective system is. What we have is the majority way of doing things -- primarily because trips has been engineered largely by large us corporate interests and the government has then worked hard to push the formula in countries across the world.
But its not really necessary to be so subservient. There can be, and are, less minimilistic approaches to trips, which comes with a flexibility that allows governments to comply and yet protect the interests of their people, and in particular, the interests of poor patients. But the current amendment goes no further than the thresholds of us -compliant regimes.
It's depressing. It's also surprising. And its impact, however poorly understood today, may just become the straw that breaks the back of our already crumbling healthcare system. This amendment leaves India in no position to take centrestage as the champion of the developing world. It presents no new approaches, exercises no imagination and certainly has no provisions that stretch the frontiers of the rules laid down by the Northern corporates. In fact, it goes out of its way to adopt the very provisions that it found offensive in the negotiations under wto.
What, then will Kamal Nath, the minister of commerce and industry do the next time he goes, as the champion of the South, to argue in global forums, ? Roll over and play dead?
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