Putting Lives Before Patents: India Says Pricey Patented Cancer Drug Can Be Copied

from the hello-compulsory-licenses dept

India has an interesting relationship with pharmaceutical patents. In 1970, India did away with drug patents entirely, believing it would help create a domestic drug industry. And it worked. As we discussed in the past:
2,237 licensed drug manufacturers in 1969-1970 grew to 16,000 by 1991-1993, production of drugs grew at an average rate of 14.4% per year from 1980 to 1993, India became a net exporter of pharmaceutical products, and the market share of foreign multinational corporations (MNCs) dropped from 80-90% to 40% (Fink 2005). In 1995, six of the top ten pharmaceutical firms in India were domestic, and employment in the sector had reached half a million people
Now, remember how people say that without intellectual property, industries protected by those monopolies collapse? Yeah, the opposite happened in India. And yes, many were producing generic versions, but not all of them were. Either way, despite all of this success, the international community, pressured by the big pharmaceutical firms, cracked down on such practices, and demanded that if anyone wanted to join the WTO -- an important organization for large countries to be a part of -- they had to recognize pharmaceutical patents as per the TRIPS agreement. India finally did so in 2005.

However, one key point in TRIPS that developing countries such as India and Brazil have paid close attention to is the fact that they can force a compulsory license on a drug patent holder in the interest of public health.

For the first time since re-instating patents on pharmaceuticals, India has granted just such a compulsory license, covering a kidney and liver cancer drug marketed under the name Nexavar. Indian generic drug company Natco requested a license, noting that Nexavar was in short supply in India and exceptionally expensive. A typical dosage costs around $70,000 per year in India -- something Bayer says is necessary to recoup the drug's R&D costs. However, reports show that it cost less than $300 million to develop this drug (not to mention that the US government subsidized the process) and Bayer has already made billions selling the drug around the world. In a detailed ruling (pdf and embedded below), India's Controller of Patents (nice title) granted Natco the right to make the same drug, requiring it to sell it at a significantly lower price than Bayer sells Nexavar for, and then pay back to Bayer a 6% royalty rate (which is actually at the high end of what the UN recommends). Natco has to make the drug itself and can't name it Nexavar, make it look the same or even state that it's the same as Nexavar -- but it can make its own version of the drug and sell it, and the license lasts the life of the patent. Bayer can and almost certainly will appeal, but this is going to be interesting to watch for a few reasons.

The real question here is how the US will react to this. The Obama administration has been trying to exempt drugs that treat non-communicable diseases (such as cancer medication!) from such compulsory license rights. In the meantime, the big (non-Indian) drug companies have been working hard to lock up the Indian drug market with patents. Not surprisingly, the Obama administration and the big drug companies have a cozy relationship when it comes to dealing with patents in India.

It's likely that you'll start to hear some rumblings from the US government about how this kind of ruling is a "problem" and how India isn't "respecting" international patent law. Expect to see diplomatic pressure placed on India to put limits on its compulsory licensing program, and potentially even noises about how India has to change its patent laws to "update" them and "harmonize" them with the world. Also don't be surprised if stuff like this leads India to jump up the charts on next year's Special 301 reports from the USTR, which list "naughty" countries. It's probably too late to make it into this year's list for this particular move. Is it really any wonder that India is so worried about ACTA? It knows that ACTA is entirely about ratcheting up enforcement, without any exceptions for things like this where something as important as saving lives comes into play.

Filed Under: cancer, compulsory license, health, india, nexavar, patents, pharmaceuticals, trips, wto
Companies: bayer, natco

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  1. icon
    TtfnJohn (profile), 17 Mar 2012 @ 4:35pm

    Re: Re: Re:

    In most industries once the R&D is paid off the price begins to drift down. Notice that I didn't say plummet. Having paid off their up front costs Bayer still wants to charge $70,000 for a years course of treatment with this drug.

    Now, can you see why pharma, big and small, has a bad name?

    For North America and Europe this isn't as much of an issue as it is in places like India because at some point Bayer gets to gouge insurance companies/systems instead of individuals. Or Bayer may hope it isn't. Frequently patients will find themselves waiting to get a drug (perhaps this one) while a mess of hoops get jumped through before an insurance carrier or system demand to know if this is the only medication that will aid the customer so they can avoid the high cost.

    In most other industries once the up front is paid off the next step is to get the product as widely used as possible to gain as much of a profit as possible to plow into the next one coming down the pipeline. It seems to me that lowering the price, even to $35,000 would get the drug more widely used and allow Bayer to make a greater profit which they then could invest in whatever else they're working on. Doesn't seem to work for pharma. (I'm sure there's a convoluted reason why it doesn't which will be explained to me by a pharma defender so I'll wait to see what it is.)

    Then there's the opaque path a lot, if not most, of the research into new medications takes place. Most takes place at publicly funded schools who bear most of the cost or at private universities with injections of public funds as seems to be the case here. So the total risk taken by Bayer in developing this medication is far less than it would have been had it all been done in house. (The same applies when public funds are injected directly into in house research and development by drug companies.)

    While the testing costs remain I'm unsure where "pure research" does as drug companies usually sponsor that at universities often far better equipped for that sort of thing and they aren't the largest sponsors by far.

    As I said. I'm not talking about selling it for pennies. I am talking about getting a price point in a given market where the drug will actually sell and do what it was intended to do. In this case save a life.

    Ultimately if pharma isn't in business to save lives or help repair broken ones then their market, at one point or another, will cease to exist. Over time there won't be anyone left to pay any price.

    That extreme answers your extreme that ANY reduction in price will hurt future developments in the field. Maintaining stratospheric prices after your R&D is paid for is morally unconscionable it's also silly in the market for the simple reason that lowering the price means insurance providers and medical systems will be more likely to approve the use of the drug meaning the more MDs will be likely to prescribe it. Meaning you actually sell more of it. Or, in this case, Bayer does.

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