The recent Supreme Court verdict in the Novartis’ imatinib (Glivec) patent case has generated a lot of heat and uninformed debate in the media. Novartis challenged the order of the Intellectual Property Appellate Board (IPAB), for rejecting a patent for its ‘old wine in a new bottle’, first in the Madras High Court and then in the Supreme Court. Novartis filed world-wide patents for its active molecule imatinib in 1993. In India, the company filed patent in 2003 for imatinib mesylate a beta crystalline form of the active ingredient, under the ‘mailbox provision’.
NOVARTIS Vs. PEOPLE OF INDIA
Novartis’ application for a patent for its beta crystalline form was rejected by the IPAB in 2006 on the ground that the company’s original patent application covered all forms of imatinib. The Madras High Court decreed that IPAB’s rejection of the application under Sec. 3 (d) of the Indian Patents Act as amended in 2005 did not violate Article 14 of the Indian constitution. This is now upheld by the Supreme Court.
The Indian Patents Act of 1970 did not recognize product patents but only process patents. However India agreed to consider patent applications filed from January 1 1995 for granting product patents pending amendment of its laws in line with the requirements of the WTO. The process was known as the ‘mailbox’ provision. Eventually India amended its patents law in 1999, to grant product patents with effect from January 1, 2005. A patent is an intellectual property which has a life of 20 years from the date of filing and which gives its holder exclusive marketing rights. The actual period of exclusive marketing depends on the company’s ability to develop the product for commercialization.
R&D COSTS
There are varying estimates about the cost of research and development of drugs. Several years ago an article in the Readers’ Digest put it at between $100 million and $200 million. Recent estimates vary from $500 million to $1 to $2 billion depending on the therapeutic category and method of calculation used, such as inclusion of capitalization and opportunity costs. This does not mean that the entire amount is spent by a company. There is public funding and tax write-offs on R & D spending, which is a not unlikely incentive for bolstering the figures.
Pharmaceutical companies quite naturally argue that they have to make profits out of successful candidate drugs because they have to incur huge expenditure on R & D, which is a long drawn and uncertain process. This is the reason they claim, new drugs cost so much.
MARKET RISKS
However pharmaceutical companies are aware there is an element of uncertainty in the business. For, even if a company is able to come up with a successful candidate drug, there is no guarantee that a rival company with a competing product might not upstage it. As an illustration, see the case of the first anti-ulcer drug cimetidine. It was introduced by the British multinational, Smith Kline & French (SK&F) in the mid-seventies when the only cure for peptic ulcers was surgery. The drug was indeed a boon for patients as it reduced the necessity for surgery in about 90% of cases. The drug marketed by SK&F as Tagamet entered the Guinness Book of World Records for maximum number of prescriptions received in a year. A few years later another British multinational Glaxo came up with an updated version of the drug ranitidine which it marketed as Zantac. It too entered the Guinness Book of World Records in the year of its introduction, and Tagamet lost 50% of its market share. As a result, many heads rolled in SK&F and its Chairman had to resign. The two companies merged in the mid-nineties to become what is now known as GlaxoSmithKline (GSK). (In its process of mergers and acquisitions, GSK has also absorbed several other companies like Allen & Hanburys, Beecham and Burrows Wellcome.)
The success of the first two molecules, in the class of drugs called H2 receptor antagonists, made other companies board the bandwagon and many variations of cimetidine were launched. These include famotidine, loxitidine, nizatidine and roxatidine. Of these molecular variations only ranitidine and famotidine could achieve significant commercial success, while the others remained small players. For the treatment of peptic ulcer, another class of more powerful drugs known as proton-pump inhibitors emerged with members like omeprazole, esomeprazole, lansoprazole, pantoprazole and rabiprazole, a few years later.
Wouldn’t it be unfair for a company marketing, for instance, roxatidine to claim the same pricing privilege as SK&F which has laid the groundwork for finding a drug for peptic ulcer? On the flip side could SK&F claim that, as there was every possibility of its market monopoly being upstaged, it should be permitted to recover its costs at the earliest? In view of this should the company be allowed to price a tablet of cimetidine at say, $100?
R&D – WESTERN BIAS
It would be unfair to see the Indian Supreme Court verdict as a triumph of left-liberal altruism against Western capitalism for several reasons. Firstly, US courts too held that derivatives of known substances are not eligible for patent protection under the ‘doctrine of inherent anticipation’. Also in the US a patentee cannot claim rights for more than one substance with identical claims, under the ‘doctrine of double patenting’. The third principle governing US jurisprudence in relation to intellectual property rights is the ‘patent misuse doctrine’, which prevents pharmaceutical companies from extending their patent rights by obtaining multiple patents covering essentially the same invention. In her extensively researched paper, ‘‘Trials And TRIPS-ulations: Indian Patent Law And Novartis AG v. Union Of India’’, (Berkeley Technology Law Journal, Vol: 23. Mar 21, 2008. 281-313), Lynda L. Lee opined that the stand of the Indian courts ‘indicates that the objective of India’s Section 3 (d) is not a radical departure from international practices to regulate the patenting of derivatives and new uses.’ It must be noted that the article was based on the Madras High Court judgment and written much before the final verdict of the Supreme Court.
The reaction of Novartis to the Supreme Court judgement appeared a bit peevish. In a press statement, the company’s Vice Chairman warned that it will discourage R&D spending by multinational companies in India. This is a bit surprising as multinational companies may have been using India as low cost hub for manufacturing and conducting clinical trials but never seem to be bothered about diseases specific to India. For a long time the healthcare fraternity has been complaining that multinational companies focus on diseases prevalent in the western world for researching remedies. For example, we have not seen new drugs introduced to combat malaria and tuberculosis which are endemic to countries like India, in years. The incidence of both the diseases is seeing a resurgence of virulent, intractable forms. Today tuberculosis resistant to multiple drugs – multidrug resistant TB or MDRTB is quite prevalent. On the other hand new drugs for antiplatelet medications atherosclerosis, cancer, diabetes and hypertension and related diseases are introduced by the dozen, every year.
R&D – ALTRUISM OR BUSINESS STRATEGY? THALIDOMIDE TO GATIFLOXACIN
Multinational companies which have been assuming moral high ground for their altruistic R&D efforts ‘to ameliorate pain and suffering of humanity’ have also been guilty of destroying the lives of millions of people for short term gains.
The introduction and withdrawal of thalidomide is a classic example. In the 1950s, Distillers & Co (the makers of Johnnie Walker whisky) purchased Grunenthal, a small German pharmaceutical company. Grunenthal developed a tranquiliser named thalidomide which was then believed to be so safe it could be prescribed to pregnant women to relieve them of morning sickness. It was introduced in several countries in Europe and freely prescribed for pregnant women. In the early sixties a causal link was established between the use of thalidomide and delivery of malformed babies. This property of a drug which causes foetal abnormalities known as teratogenicity, was unknown till then. By 1961 an estimated 10000 to 20000 thalidomide babies were born and the drug was withdrawn.
The thalidomide story should have warned the managements of pharmaceutical companies to be extra careful in vetting and promoting their products. Alas no, drugs with serious adverse effects have been introduced by pharmaceutical companies with unceasing regularity. Here are a few examples, some of which may not be as lethal as thalidomide. Analgin (like penicillin) is known to cause anaphylactic reactions so severe that a single tablet could kill a patient. Anti-inflammatory drugs like oxyphenbutazone and phenylbutazone have been known to cause blood disorders. Later arthritis drugs like celecoxib and rofecoxib were found to cause acute termporary visual impairmant. However all these drugs were marketed by multinationals in India for a long time after they were banned in their home countries. The newer pain-relieving drug, nimesulide has been banned in several European countries but is still marketed in India (not by multinationals; by Indian pharmaceutical companies). Terfenedine, introduced as an advanced, non-sedating anti-allergic had to be withdrawn a few years later as it was found to cause heart-problems. The latest in the series of drugs to be withdrawn was the antibiotic gatifloxacin, which was found to cause cardiac problems. Illich mentioned in his book that the American innovator of chloramphenicol (trade name Chloromycetin) marketed the drug for simple conditions like acne. Originally introduced for treating typhoid, the drug is known to cause bone-marrow depression. (The human body produces red-blood cells in the bone-marrow.)
PRICING DRUGS
An argument that was vociferously voiced in the television debates relates to pricing; especially that pharmaceutical companies which spend millions (billions?) should be allowed the freedom to price their products. And any regulation would be a disincentive for them to introduce newer products. This argument lacks substance because the pricing of drugs is not uniform even in the western world. For example the prices of drugs in Canada are far lower than the corresponding prices of drugs in neighbouring USA. In some cases the Canadian prices are about half of their American counterparts.
The marketing of anti-retroviral drugs (used to treat AIDS) in South Africa offers an object lesson for those who blindly take sides with the advocates of free-pricing. Indian companies like Cipla and Hetero Drugs offered to sell a combination of anti-retroviral drugs at $350 for a year’s course. Four multinational companies challenged them in the South African Supreme Court, on the ground that these companies were infringing their patent rights. They were selling the drugs at $10000 for a year’s course. They had to withdraw their suit following worldwide revulsion. For, more than a third of world’s AIDS population lives in Sub-Saharan Africa.
In the television debates, medical doctors representing Novartis claimed that the company has a scheme for providing the medicine free of cost to ‘below poverty line’ patients. This is not entirely true because the company stopped providing imatinib free after two Indian companies were permitted to introduce low cost alternatives in 2006. (See the research paper cited above.) Even if the company has been providing the medicine free to BPL patients, how does one define a BPL patient? Certainly a household with an income of ₹50000 per month cannot be considered BPL? If the household has a patient who requires imatinib, can it expend ₹1,20,000 a month? Besides, many cancers require multiple regimens of treatment, which include chemotherapy (drugs), radiation and surgery. The latter two are even more expensive than the cost of medicines.
TAILPIECE: By the by, the promotional or marketing budgets of pharmaceutical companies exceed their R&D budgets by a long chalk.
