Pharma vs. the third world

Big Pharma’s greed and the Third World’s Need

I had written some time ago on the battle that is raging between Big Pharma and the generic drug makers of India, and other developing countries such as Brazil. Like most economic battles, this fight does not get as much coverage or mention in the mainstream media. I too have been guilty of not being able to spend much time on this, but on occasion do come across some good information.

Generic drugs from India and a few other developing countries are a boon to most of the third world that is incapable of paying the high price of drugs produced by Big Pharma. In this article written by a Professor Lofgren in a blog, pharmagossip, the Professor writes on this tussle between Big Pharma and the generic drug industry of India and Brazil.

I have always maintained that Intellectual Property Rights are a tool with which the western organizations have controlled the flow of technology and new ideas in the third world, and that is the case with the pharmaceutical industry as well.

Arguably, billions go into developing a new drug or vaccine, and after its intense animal testing and human testing (most likely third world guinea pigs) a drug or vaccine finally reaches the people. Needless to say, the billions have to be recuperated by the pharmaceutical company, which is usually a member of the Big Pharma block sitting in a developed country.

There are no two ways of looking at the fact that in the end, pharma is business, and for a company that has spent so much on developing a drug, the returns should be the maximum. So a third world patient, or even a middle class or poor first world patient, would be denting the high profitability of this pharma company by paying for a much cheaper generic version of the drug.

This is where IPR come in. The first world maintains that knowledge is property, and if anybody has to use it, it has to pay for it, and this includes information and products that can save the lives of millions, and have been saving the lives of millions. And when the developed world has the power of “globalization” behind it, can it be far behind from arm twisting the economies of the third world into accepting its yet another rule of doing business?

As the blog post I referenced above explains,

India is often called the pharmacy of the developing world, which is no great surprise as more than 50% of its $10bn annual generic medicine production is exported.

But the domestic drug industry behind India's role as global pharmacist stands to emerge rather poorly from the free trade agreement (FTA) that Europe is proposing for India. In late-stage negotiations over the terms of the long-awaited agreement, the EU is calling for intellectual property rights enforcement that goes well beyond India's obligations as a member of the World Trade Organisation and would make it all but impossible for generic drug manufacturers in the country to continue in their present structure. This could delay the introduction of cheaper medicines in India and elsewhere at a time when the global financial crisis has already put the squeeze on life-saving medicines across the world (last year the Global Fund to Fight Aids, Tuberculosis and Malaria cancelled its 11th funding round due to the crisis).

Yet protests on the streets of Delhi against the unfair terms of the EU-India FTA have been little noticed in the west, where such agreements are increasingly being promoted as a route out of domestic crises.

In a recent editorial, however, the former EU high representative for foreign and security policy, Javier Solana, all but admits that a similar agreement that Europe is tying up with Peru and Colombia may be "denying their weaker citizens [human] rights in favour of the interests of business".

In India, such fears are perilously close to being realised, because the EU-India FTA negotiations are not the only way in which the health of Indian citizens is coming under attack from Europe. In an effort to boost falling profit margins in the west, and to prise open more profitable markets elsewhere, European pharmaceutical companies are also chipping away at India's judicial system.

Next month, the supreme court of India will hear final arguments in a long-running case between Swiss pharmaceutical giant Novartis and the Indian government. Novartis is seeking extended intellectual property protection for a marginally modified anti-cancer drug, Glivec, for which the original patent has run out. This is a practice known as evergreening, seen by many as an unfair way for pharmaceutical companies to maintain artificially high drug prices in developing markets. That is certainly the view of the Indian government, which, in 2005, inserted a clause into its intellectual property law deliberately intended to prevent the practice.

[I am a layman, but I do know that when global rules of trade are made, they are made keeping the best interest of the developed world in mind. The rules of IPR, and patents were made and accepted by all. So after a patent runs out, it becomes common property and as in the case of drugs, companies can produce the drug without paying any royalties to the founder. Aspirin, for example, is one such drug that is manufactured around the world in multiple formats. But as the blogpost says, Big Pharma seeks extended IPR protection so prices remain high. As the post discusses, the developed world’s governments are staunchly standing with their Big Pharma brethren. ]

That is certainly the view of the Indian government, which, in 2005, inserted a clause into its intellectual property law deliberately intended to prevent the practice.

That clause has proven to be a literal lifesaver many times since, and it ensured that Novartis's original case was thrown out of court in 2006. But Novartis has filed new litigation in an attempt to breach India's legal defences. The final ruling is next month and there is every chance Novartis may succeed. If it does, other pharmaceutical companies will be able to impose higher prices on drugs in India too.

The Novartis case coincides with a third major assault on India's pharmaceutical industry: the final spear in a triple-pronged attack on its generic drug manufacturers by the west.

This involves the attempt by German pharmaceutical company Bayer to revoke the recent granting of a compulsory licence for an Indian firm, Natco Pharma. The licence was to produce a cheaper version of its anti-cancer drug Sorafenib. Bayer does not manufacture the drug in India, and imports in such small volumes that only a tiny fraction of potential patients could benefit. For its brand, Sorafenib, Bayer has charged Indian patients about $69,000 for a year of treatment, an unaffordable amount for most Indian households. Under the licence, Natco will sell the same medicine at 3% of this price, while paying a licence fee – and still make a profit.

It is not only Indian patients who stand to suffer from this triple-pronged attack. So, too, will charities such as Médecins Sans Frontières, which relies on Indian generic producers to supply 80% of the antiretrovirals it uses around the world.

In a recent item on Firstpost, it was reported that India may lose the war against Big Pharma, but is likely to open a new front in its fight, a fight, which I believe, should unite the entire third world and it shouldn’t be the battle of India or Brazil or any other developing country alone.

Earlier, taking on the so-called “Big Pharma” head on, India had given a compulsory licence to Natco Pharma to produce Bayer AG’s cancer drug Nexavar.

Compulsory licence allows a generic drug maker to manufacture and sell a copy of the innovator’s drug after paying a royalty.

Multi-national pharma companies had objected to this as they feared the move will set a bad precedent if other developing countries follow in the footsteps of India.

The government’s aim to give free medicines had also cut out the Big Pharma, as the scheme is likely to focus on the generics.

But while India is trying its level best to champion the cause of cheaper drugs, the developed economies are also tightening laws to squeeze low-cost copy-cat medicines.

A report in The Times of India says the multinational companies are lobbying hard with their respective governments to curb export of generics from India and Brazil.

“Not only has the US devised new treaties to challenge generic drugs being shipped from India, the EU has also upped the ante,” according to the report.

A Group of Ministers in the Government looking into the issue has suggested that the price of patented drugs be linked to a per capita income linked reference pricing mechanism.

From the link above,

The committee, headed by an official from the department of pharmaceuticals, has suggested fixing the price of patented drugs by comparing the price at which these drugs are procured by governments in the UK, Canada, France, Australia and New Zealand. The committee has recommended that the retail price should be fixed by adjusting it to the per capita income of the country.

Tarceva, a Roche-patented lung cancer drug, costs Rs 1.21 lakh in Australia and France while it costs Rs 35,450 in India, says the report of the committee. But when adjusted for per capita income, which is significantly more in these countries compared with India, the price falls to Rs 10,309 and Rs 11,643, respectively, for both countries (see table).

For patented drugs that have similar alternatives in the market, the committee has said the price of these drugs should be fixed in such a manner that it should not lead to an overall increase in the treatment cost. If the global launch of the patented drug takes place in India, the retail price should be based on the cost of developing the drugs and other factors. At present, prices of patented drugs are unregulated.

The Organisation of Pharmaceutical Producers of India (OPPI), the lobby body of multinationals, said the cross-country per capita income-linked proposal is fundamentally flawed and has sought further discussions with the government.

But, the Indian Pharmaceutical Alliance, the representative body of big Indian drugmakers, has supported the reference-based system. IPA said the government should select the developed countries because in these countries, governments foot the healthcare bill and are, therefore, able to negotiate prices better.

There was a news in The Live Mint that the profit outlook of most pharma majors in the developing markets may not be as high as they told their investors, thus adding to the desperation to see that the generic drug makers of the third world are quickly brought under control, even if that means putting medicine out of the reach of millions of poor.

Yes, third world governments will always be taken to be the weaker side when the big corporations of the developed world flex their muscles while being strongly backed by their governments. It is something I am hoping to see change in the coming years, for in today’s globe, its only about making money, and only about economic dominance, and it will do well for most nations fighting it to come together and respond, for the well being of their own people and nation states.