Patent

Patents do not hinder Access?


Recently, Mr. Ranjit Shahani, the president of Organisation of Pharmaceutical Producers of India (OPPI) and vice chairman and managing director of Novartis India, gave an interview to the Financial Express regarding the importance of patents to the pharmaceutical industry and its effects on access to medicines. I’d like to take this chance to react to his statements. I’ll be extracting certain excerpts but the full interview is available here (and it’s a quick read). Disclaimer: I’ll be focusing on the parts that I disagree with, or don’t understand. There is also a fair bit that I agree with, but would be redundant to repeat here. [Image taken from here]
“Over 99.5% of the domestic pharmaceutical market in the country comprises cheaper branded generics covering all disease areas. Therefore, any fear that intellectual property rights (IPR) would curtail healthcare access is completely unfounded. Patents have little to do with the ability to access medicines.”…”The US, which is the largest pharmaceutical market in the world, has a robust IPR system in place and is also the largest generics market in the world. Over 72% of all prescriptions in the US are for generics.”
He seems to lead the reader towards the conclusion that patents do not hinder access to medicines. Instead he points to other faults in the healthcare system such as infrastructure, etc. He’s certainly right that there are several problems with the healthcare system in India, but saying that there are other problems does not change the fact that patents do directly affect access via price increase. The very fact that exclusion rights are given is so that pharmaceutical companies can recuperate high R&D costs through such pricing. If one must work within the patent system to innovate drugs, then it’s vitally important to ensure a fair tradeoff between access and innovation through exclusion rights– tilting it, if required, towards a country’s particular needs. India, being a developing country with such a large portion of its population poor and in need of medicines, ought to tilt it in favor of access rather than innovation. 
Looking at his statements again, these first 2 lines seem completely disconnected to me. 99.5% of the market is generics – so patents don’t affect access to medicines? Till very recently, India, which is a predominantly poor country, didn’t allow patents on medicines, so naturally nearly all of the market will be on generics.If anything, this first line goes against his point. If 99.5% of the domestic pharmaceutical market comprises of generic medicines, then most certainly a strong patent system would affect this market as it would lead to the introduction of more patented medicines . He then says the US market, with a 72% generic market, is the largest in the world. I’m assuming this is in terms of sales revenues, since in terms of volume 99.5% of India’s pharma market is surely larger than 72% of USA’s pharma market. This again, points to the fact that generics in USA are much more expensive than generics in India. Probably exponentially so, since by sheer population, India is about 4 times that of USA, while 72% of that smaller (by volume) market is larger than 99.5% of the Indian generic market. This merely points towards a strong IPR system facilitating more expensive generic medicines.
“This [referring to apprehensions that new measures resulting from the India – EU FTA may restrict the production of affordable generic medicines across the world] is a misconception that seems to persist. Regulatory data protection does not delay the launch of generics.”
A generic company would either have to duplicate such protected data at its own cost (thus jacking up the price of the generic drug) which would require large chunks of capital – or – they would have to wait till the period of exclusion rights over this test data expires. Thus, it does delay the launch of generics. The more relevant questions ought to be a) whether exclusionary rights granted via patents aren’t sufficient to make up all the related costs, and b) whether, as a policy matter, India wants to trade this for access. Unfortunately, to determine the sufficiency of patent rights to make up these costs, the books of pharmaceutical companies would have to be looked at, and these are notoriously closed off. 
In his closing paragraph, he finally narrows down to the actual issue of trading off of access rights in the short term so as to ensure continuous long term innovation. However, there is no reason India, or the rest of the world for that matter, should continue to use a faulty drug innovation system simply because it has been the path taken thus far. India is indeed uniquely positioned to become a hub of drug innovation as he points out, but this means India should step forward cautiously, ensuring not to make mistakes which may be very costly in the future, and not run straight into the arms of the much critiqued patent systems of the US, EU and Japan.

4 comments.

  1. AvatarAmit Kumar Goyal

    Dear Swaraj,

    I had a few comments:

    1. I agree generics are more expensive in US than in India. But you would have to take in to account the PPP and per capita earnings.

    2. Generics in US have more than 70% share of all prescriptions (which is what Ranjit says in his interview). However, they contribute less than 20% of the total sales value. Which would mean that most people take generic medicines and their cost is not prohibitive. Also, we should take into account that US is primarily a reimbursed market, and access to medicines is much higher there.

    3. The access scenario in India is abysmally poor. A WHO report says that less than a third of Indian population has access to even the basic essential medicines, which almost brings to par the population you are looking at. Further, less than a third of this has access to advanced diagnostics and medicines where most patented molecules play. So I don’t think that patents would hamper access as much.

    4. I would agree that India needs to protect itself against firvolous patents, and also prevent ever greening of patents. However, India also needs to respect true innovation and provide pharmaceutical companies a way to recover their costs – which is not only spent on R&D, but also on building awareness amongst doctors about newer molecules.

    PS: I work for Bristol-Myers Squibb India, but these views are mine, and do not reflect those of my organization.

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  2. AvatarSwaraj Paul Barooah

    Dear Amit,

    Thank you for your well laid out comments. I’d like to respond as following:

    1 – You’re right. It would be interesting to look into the relative expenses as against their income in both countries. Although as you point out, it would be difficult to measure this taking into account their health insurance programs.

    2 – I’ll give a hypothetical example to point out what I am trying to get at:
    If a medicine “A” costs Rs 500, and the marginal cost for such a medicine is Rs 5. The generic in this market can cost anywhere between Rs 100 – 300 and still be substantially cheaper, and hence more desirable for consumers.
    However, in a market where the branded drug at Rs 500 is Not introduced, generics have to compete against themselves, thus increasing the likelihood that it would be priced closer to marginal costs,eg, Rs 20-50, since this is basically the only cost they are incurring. (numbers being chosen just for the sake of showing the point).

    Also, what you say also points out that branded medicines are prohibitively expensive for a majority of their patients. Till the Hatch Waxman Act, and

    3. There certainly are a variety of factors at issue here and drug availability is a major one. However, a) I don’t recall the details of this report you mention, but by any chance is “a” reason for 66% of the population prohibitive pricing as well?
    and b) Patents wouldn’t hamper access ‘as much’ is speculative, but also irrelevant. It would hamper access. Possibly (I can’t say for certain one way or the other), it’s not the largest barrier, but it certainly is one – and that shouldn’t be discounted. (Ie, Theft is not as bad of a crime as Murder.)

    Also, a great number of much lesser developed countries rely on India for their generics. MSF, UNITAID, Global Fund, PEPFAR, etc source much of their drugs from Indian generics to provide drugs to these countries.

    4 – I completely agree with you on this. However, I’m of the opinion that a strong patent regime is far from the most optimal method of doing so. While a strong patent regime has been pushed for a long time, matching evidence demonstrating its suitability, especially for the developing world, has been lacking.
    Since we are more or less stuck with this due to TRIPs, we ought to continue to make intelligent use of its provisions (such as 3(d)) and find alternate ways to fund innovation while still allowing access.

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  3. Avatarpatent litigation

    I’m generally pretty pro-patent, but nevertheless I think it’s disingenuous to claim that patents do not hinder access to treatment and to medicines. Prohibitive prices preclude treatment, period. There is a profit motive attached to the temporary monopoly granted by patent law. The costs get passed on to consumers. Even strong supporters of patent law should not overlook the obvious realities (including issues of access) that the IP system creates.

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  4. AvatarAmit Kumar Goyal

    Dear Swaraj,

    Sorry for the late response. I am between jobs and a little busy:

    1. In most cases in US, “pure-play” generics, not like branded generics in India, generics’ prices come to settle between 10-20% of the price of the actual drug. However, most people are covered by insurance, and insurers ensure that the cheapest generic is used. In India however, doctors go by their own will, and swayed by pharmaceutical marketing do end up prescribing brands that are way more expensive than others. I don’t think patents have a role to play. Further, your theory of low marginal cost might not hold up for advanced medicines like MAbs and other biologics. What will we do then. For example, the generic version of MabThera by DRL (Reditux) was priced at only half, not lower, when it was first launched. What then?

    2. A major reason was the problem of not having healthcare infrastructure or doctors in rural areas. Its like the 80/20 rule – drugs that could improve healthcare standards significantly mostly fall under price control and are not prohibitively expensive. Having said that, I agree that prices should not be a reason for someone not to get medication.

    3. As an example, the generic of Nexavar (sorafenib) is priced at close to a tenth of the actual drug, but still has few takers, because people still can’t afford it. What do you propose for such cases?

    4. As for other countries relying on India, I think they are covered by our patent laws.

    5 Agree with the last statement. But maybe India could learn from China here. The government could negotiate with the vendors (drug companies) to negotiate very low rates, and ensure that everyone has access to those critical drugs. I think we need to allow access, but we kind of go overboard and tend to blame patents and pharma companies for it, while its the policy makers who need to do some work.

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