Bayer Fights India's Compulsory Licensing Of Cancer Drug By Claiming It Spent $2.5 Billion Developing It

from the ORLY? dept

Back in March last year, the Indian government announced that it was granting its first compulsory license, for the anti-cancer drug marketed as Nexavar, whose $70,000 per year price-tag put it out of reach of practically everyone in India. Nexavar’s manufacturer, the German pharmaceutical giant Bayer, naturally appealed against that decision, and the hearing before the India Intellectual Property Appeals Board (IPAB) has now begun. Jamie Love has provided a useful report on the proceedings; here’s his summary of what’s at stake:

The outcome of this trial, which focuses on the cancer drug Nexavar, is a matter of first impression for the IPAB, and is expected to set precedents on a wide range of issues, including the permissible grounds for granting compulsory licenses, the relationship between the India patent law and the TRIPS Agreement, and the setting of terms and conditions for the compulsory license, including the royalty rates.

Clearly, then, this is a crucially important battle for both sides, and Bayer has started throwing around some huge R&D numbers in an attempt to convince the IPAB that it should be allowed to retain its monopoly in India to recoup those costs:

Bayer presented a January 9, 2013 affidavit from Harold Dinter which made the claim that from 1999 to 2005 Bayer had spent “2 billion euros (approximately US$ 2.5 billion) in the identification and development of anti-cancer molecules leading to the successful approval of Nexavar in 2005.” Dinter did not provide detailed support for the numbers, but said they were based upon Bayer’s general R&D outlays for anti-cancer drugs, including but not limited to Nexavar, and that the estimate was supported by a new December 2012 study by Jorge Mestre-Ferrandiz, Jon Sussex and Adrian Towse, published by the Office of Health Economics (OHE). Despite its name, the OHE is not part of the government, but rather a largely industry funded private consulting firm. The study itself was paid for by AztraZeneca. Dinter and Bayer’s lawyer also made extensive reference to the work of Joseph DiMasi, an academic who is also a drug company consultant.

In other words, it’s the usual “don’t worry about the details, just take our word for it” lack of transparency that characterizes the entire pharma industry. But this $2.5 billion is insanely high, even for an industry that regularly inflates the outlay on drug development by an order of magnitude. As well as the generic implausibility of such a high figure, Love cites a number of specific reasons why it’s extremely unlikely. You can read the details in his post, but here’s a key section:

Bayer’s partner in the development of Nexavar is Onyx Pharmaceuticals. Onyx published annual estimates of its R&D spending on Nexavar.

Bayer paid for all research from 1994 to 1999 ($26.1 million), and this included research on several compounds in addition to the one now marketed as sorafenib/Nexavar. From 2000 onward, Bayer and Onyx split the R&D costs 50:50, and Onyx’s share of the R&D costs were $134.8 million. The outlays on the entire R&D program that lead to the 2005 approval of Nexavar for Kidney cancer were $26.1 + (134.8 x 2) = $295.7 million. Of the $295.7 million, only a fraction was spent on the development of Nexavar for kidney cancer, and some of that benefited from a 50 percent tax credit under the US Orphan Drug Act.

To the put the entire $295.7 million into perspective, ignoring the tax credits, that represents a little more than one quarter of the current global sales for sorafenib/Nexavar, a product that will maintain its monopoly in most markets through 2020.

$295.7 [million] is also just 11.8 percent of the $2.5 billion estimate that Bayer wants the IPAB to accept as its R&D costs.

No wonder that Bayer was unwilling to explain how it arrived at that extraordinary figure. But it’s hard to see how the pharma company expects to win this case citing numbers that are basically an insult to the intelligence of India’s experts.

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Comments on “Bayer Fights India's Compulsory Licensing Of Cancer Drug By Claiming It Spent $2.5 Billion Developing It”

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42 Comments
Ninja (profile) says:

Back in 2007 I saw the formula of the active compound in Nexavar and I was like “oh wow that must be complicated to produce”. And that was just the main compound, there are certainly support substances that will further improve that main compound efficiency to some degree. My point is that Bayer had a head start and already has the expertise to produce said drug and enhance its attributes. The fact that they’d rather lie about the money spent and keep the medicine inaccessible when it already has all the advantages of a head start is simply disgusting.

Anonymous Coward says:

if the yearly cost of this drug is $70,000 and only the minutest number of people can afford to buy it, would someone like to explain to me how Bayer is going to recoup it’s money and how long it’s likely to take? on top of that, how many people have to die simply to keep Bayer not getting much in the way of a return on it’s investment? isn’t it better, as the recoup process isn’t ever going to actually recoup anything much at all, for more people to get the drug and survive? but then i keep forgetting. having money and control are the most important things. people are at the bottom of the pile yet again!

Anonymous Coward says:

But you forgot a few big expenses Glyn!

-Giant bonuses for CEOs and other top executives for inventing the drugs! Like say $100 million for each of them.

-Bribes to everyone involved in the IP system for Drug. These bribes are getting more and more expensive each day with darn trouble makers in India demanding more money with threats of Compulsory Licensing of these drugs!

-Buying back some of the company’s own stock to artificially inflate their profits per share. Because you can’t invent new drugs without massive stock buy backs, even at the cost of laying off of a few thousand employees in R&D.

So see, the $2.5 Billion is actually a LOW BALL number!

Anonymous Coward says:

Who cares

Bayer spent the R&D money, they spent the time and research and took the risk.. They have every right to sell their product for whatever they want, and no other company has a right to sell what they didnt develop.

NO ONE has a RIGHT to anything that someone else builds/designs/records or whatever. If they cant afford it move along to something they can afford. If they can’t afford anything then move along to the grave.

Anonymous Coward says:

Re: Who cares

I hope you get cancer and can’t afford treatments and drop dead. Cause who cares, right?

You’re the kind of person who the world would not be remiss without.

People comes first before profits. Especially when the R&D costs are nowhere near what they’re being made out to be. Put simply, without people Bayer has no one to sell their product to. Meaning they lose. So it’s in their best economic interest to keep these people alive, even if that means having to reduce the cost of purchasing their products.

Luckily, some countries, like India in this case, are putting people before companies’ profits. And rightly so.

Ben S (profile) says:

Re: Who cares

The problem is that the drugs aren’t affordable at all, and Bayer has a monopoly on this drug. What alternative is there when no one else is allowed to make the drug?

Bayer more than made their money back already, and will continue making money off this drug for some time. I’d say the risk is gone at this point. Now they’re just required to accept competition. Competition is good, it forces prices down and quality up.

The whole point of the patent granting a monopoly is to mitigate risk. When you’ve turned a profit, there’s no longer risk. The point of the monopoly is gone once the risk is gone. A monopoly is generally harmful to an economy as well as to the public. The moment the monopoly is no longer needed, it should be removed to lessen the harm caused by the monopoly as much as possible.

The fact that Bayer is resorting to flat out lying to try to maintain its monopoly, even after making a profit on this drug, says all I need to know about them and their motives.

MrWilson says:

Re: Who cares

I trust that you believe so firmly in your assertions that you’ll be killing yourself now to prevent you from using things that others built that you can’t afford. Hint: You can’t go through a day without using something that someone else built that you couldn’t afford on your own.

And our society will be better off for it, so thank you. Tell Ayn Rand “hi” when you’re sent to whichever ring of the hell of whichever belief system you subscribe to.

MrWilson says:

Re: Who cares

I trust that you believe so firmly in your assertions that you’ll be killing yourself now to prevent you from using things that others built that you can’t afford. Hint: You can’t go through a day without using something that someone else built that you couldn’t afford on your own.

And our society will be better off for it, so thank you. Tell Ayn Rand “hi” when you’re sent to whichever ring of the hell of whichever belief system you subscribe to.

Anonymous Coward says:

Re: Who cares

Here’s the thing: 90% of all medicines currently on the market are directly derived from publically-funded research, with the main exception of cancers, in which case Cancer Research charities fund it.

There’s a quote from Scrubs which seems appropriate here:

Pharma rep: Our drug is very good at what it does due to our patented technology.
Cox: Yeah, it’s so darn good that you went ahead and put a 600% markup on it. But who cares about sick people?

art guerrilla (profile) says:

Re: Re: Who cares

also, Big Pharma uses ALL KINDS of bullshit accounting tricks, etc to inflate the ‘costs’ of their ‘R&D’: for instance, a LOT -the preponderance- of ‘R&D’ costs are actually MARKETING COSTS that they throw into the ‘R&D’ budget to make it look ginormous, when it is all their MARKETING crap that is a huge expense…

they are scum…

art guerrilla
aka ann archy
eof

Anonymous Coward says:

Re: Who cares

Yes and No… Ill agree they figured it out, and property rights need to be respected.
Now does India and the rest have every right to tell them they are out of their mind and abusing the Monopoly right granted them.. Hell yes.

Quite frankly Bayer (and most of big Pharma) would do a much better job and have long lasting sustainable profits if they did a better job of saying the “real” cost of R&D was x and the cost to produce is “y” now lets figure out a way to get this in as many hands as possible at the best price for all … its called a Win/Win they make some profit they make back the research money, and we get drugs at responible prices (oh and the generic guys most likely stay the hell away to avoid backlash because your already working to lower the prices and everybody wants to see whats next…

The first one to figure it out will bank more money than they ever did with the old ways…

nasch (profile) says:

Re: Who cares

NO ONE has a RIGHT to anything that someone else builds/designs/records or whatever.

In the absence of artificial restrictions (patent law in this case) anybody would have the right to reverse engineer, manufacture, and sell any drug* as soon as it hit the market, assuming they comply with safety and drug approval regulations. Bayer only has whatever rights India decides to grant them.

* remix songs, rewrite books, etc etc

Anonymous Coward says:

Corporate Economy

I wish I lived the world that is described by the corporations. The trillion dollar copyright economy. The billion dollar research economy. Billions spent on clean energy by the oil companies. Our economy would be ten to twenty times larger if that world actually existed anywhere other than their greedy little minds.

Beech says:

The sad thing is they probably don’t think they’re lying. Just some creative accounting so they can blurt out preposterous numbers with a straight face. I would guess there’s a lot of double-counting or something. Like, “Oh, we need a DNA sequencer” so $2 mil or whatever to buy that. Then they probably charge themselves for using it, like $1000/hour to cover the probability of breaking it, then probably a few hundred thou a year in “depreciation.” Next thing you know buying a $2 million dollar machine “costs” the company $5 million!

MrWilson says:

Re: Re:

Heck, maybe they can add more “losses” to the figure by claiming all the money they’re not making in India because their would-be customers can’t afford $70k a year for the drug. Multiply that by the number of cancer patients in the country, round up for good measure, and you could be getting a sizeable tax refund due to “losses” for years to come. It’s not your fault they’re too poor for your company to try to impoverish them by leeching wealth via unethical monopolies.

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