How long can India resist US pressure on pharma IP protection?

You will find a climate that encourages investment and rewards enterprise. It will nurture innovation and protect your intellectual property," said Prime Minister Narendra Modi at the Indo-US CEO summit in New Delhi recently in the presence of President Barack Obama.

Modi's words would have been music to the ears of Ian Read, CEO of American drug maker Pfizer. Read has been among the most vocal critics of India's patent laws that, he believes, favour domestic pharmaceutical companies. And his concerns are shared by several other top honchos of US pharma giants.

The US Chamber of Commerce's Global Intellectual Property Center (GIPC) recently ranked India near the bottom in a survey of global intellectual property environment. Indian pharma companies allege that the multinational drug lobby in the US sponsored the survey.

Indeed, well before the Obama visit, apprehensions were growing about the increased pressure on the government of India to dilute its patent rules. "The US is pushing India to play by its rules on intellectual property, which we know will lead to medicines being priced beyond the reach of millions of people," warns Manica Balasegaram, Executive Director of international humanitarian agency Medicines Sans Frontiers' (MSF) Access Campaign.

Apparently, India did not yield ground to US negotiators. But how long can India resist US pressure? The Prime Minister already appears to have taken a conciliatory approach. "India is party to the WTO (World Trade Organization) and if any country has an issue with India's patent laws, then they should raise it at the WTO. We can have bilateral talks with any country on trade, but not IPR (intellectual property rights) laws," says Y.K. Hamied, Chairman of Cipla, India's second-largest drug maker by sales.

Here's the crux of the problem.

Ian Read and other CEOs of US-based pharma majors are miffed that India allows domestic companies to launch cheaper variants of patented medicines in public interest under the "compulsory licensing" clause of the Indian Patents Act. US companies call it patent violation while the Indian government calls it a legitimate right. Indian laws also clearly rule out patents for molecules invented before 1995, incremental innovations and previously known molecules. "At least 500-600 patents would have been denied under the section on innovations (Section 3d) in India's patent law," says an expert.

In essence, US-based pharma MNCs are wary of litigation and generic companies infringing their patents. "Three-fourth of these products (48 patented drugs launched in India) are under threat," complains Ranjana Smetacek, Director General of the Organisation of Pharmaceutical Producers of India (OPPI), the association of about 30 MNC drug companies operating in the country. "Five patents have been revoked and more than 11 are under challenge by way of infringement. Patents on an additional seven products are involved in pending opposition proceedings, while one patent is under compulsory licensing. A dozen others are under 'review'."

The US is putting pressure on India because increasingly governments around the world are modeling their pharma laws on the lines of the Indian Patents Act. In 2008, for instance, China introduced a new pharma law which has been largely inspired by Indian laws. "Indian patent laws are being modeled or being considered by about 30 to 40 developing countries to ensure rights of their patients and this is one reason for the pressure to change our laws," says Gopakumar G. Nair, Chief Executive of Gopakumar Associates, a leading Indian patent firm.

US companies assert that the fear of compulsory licensing is the primary reason why they are reluctant to launch new drugs in India. Indeed, of the 268 drugs approved by the US Food and Drug Administration since the product patent regime came into effect in India a decade ago, only 48 have been introduced in the country. The Indian pharma industry, however, points out that all the 268 drugs have not been launched in any market other than the US. There is no guarantee that American companies would bring them to India, whether compulsory licensing existed or not, they assert. Besides, those who can afford these high-priced medicines have already been importing them from the US, they add. "The decision to introduce a new drug in a market like India is taken based on several factors including disease and drug profile," says Ranjit Shahani, Vice Chairman and Managing Director of Novartis India.

The Story So Far

Indian pharma's tug-of-war with US companies goes back several decades. In 1972, India adopted the process patent regime. It allowed local firms to develop alternate manufacturing processes (through reverse engineering) of existing patented medicines and sell them in the domestic market as generic or branded generic medicines. It was the genesis of India's domestic pharma industry and the real reason why medicines in the country continue to remain affordable for the common man. The flipside was that it encouraged Indian companies to continue copying patented medicines and not invest in developing new drugs. Some tried - such as Ranbaxy Laboratories, Dr Reddy's Laboratories and Glenmark Pharmaceuticals - but failed.

The West asserted it was blatant patent violations by Indian companies. And under pressure, India adopted the product patent era as part of the WTO-TRIPS (Trade-Related Aspects of Intellectual Property Rights) obligations. Domestic manufacturers feared that it could kill their business and multinationals would dominate the market. That was not to be. First, MNCs rarely launched high-priced patented products in the price-sensitive Indian market fearing copied generics. Two, they feared compulsory licensing. As a result, both MNCs and Indian companies made their money from selling generics in the country. "Ideally, the patent rules should foster and benefit innovation since many Indian companies are also into patenting their products,"says Andreas Barner, Chairman of Germany-based pharma giant Boehringer Ingelheim.

Affordability vs Innovation

In March 2012, P.H. Kurien, the then Controller-General of Patents, Designs and Trademarks, awarded the first-ever and, so far, only compulsory licence to Natco Pharma to sell a generic version of Bayer's anti-cancer drug Nexavar. The objective was to make the drug affordable and easily available. Natco's generic version was priced at Rs 8,800 for a month's treatment. The innovator priced the drug at about Rs 2.8 lakh for the same treatment period. Bayer appealed the decision in various courts but could not get the decision reversed. Kurien, currently Principle Secretary for Industries and IT in the Kerala government, declined to comment on the matter.

US firms fear that the government may recommend extending compulsory licensing for non-communicable diseases such as diabetes, arthritis and cancer without any exigencies as elaborated in the Patent Act. "The threat of compulsory licensing continues to hang over us and another big concern for the industry is the lack of effective Regulatory Data Protection for commercially valuable test data in India (clinical trials data)," says OPPI's Ranjana. Patent experts say compulsory licensing is not an easy tool to manipulate. "There has to be negotiation for licence between the innovator and the generic maker and the patent office has to consider various factors for invoking compulsory licensing including factors like emergency situation, affordability and availability," notes IP expert Adheesh Nargolkar, Partner with law firm Khaitan & Co.

But pricing is a major factor for most MNCs to ignore or delay launch of drugs in India, where most lack medical insurance cover. "Many of the global drugs were launched in India at half the price in developed countries and in many cases at 30-40 per cent of the prices in developed countries," says Kewal Handa, former managing director of Pfizer India. Multinationals are careful about launching drugs in India as the cost of drugs in the country is likely to influence pricing in many other countries such as Indonesia and Philippines, he adds.

Differential pricing has another adverse fallout for MNCs. Several syndicates have started importing cheaper drugs from India into the US and UK markets. There has been a massive crackdown on such syndicates in recent years. Indian drug regulators' right to control prices of life savings drugs - through the Drug Price Control Order - is another reason for MNCs to refrain from launching new drugs in the market. "Access to patented medicines is not merely restricted because of prices of the medicines and most innovator companies have extensive 'access programs' to support needy patients," says Shailesh Ayyangar, Managing Director and Vice President-South Asia, Sanofi and President of OPPI.

Patient groups note that India's strict patent regime was one reason for making many drugs available in India at affordable prices. Cancer Patients Aid Association (CPAA) Chairman and Chief Executive Y.K. Sapru notes that interventions and patent challenges by patient groups have helped to reduce the prices of many drugs. "Still, cancer drugs like Herceptin are available in India only at a very high cost," he says.

Experts cite Gilead Lifesciences' blockbuster hepatitis C drug, Sofosbuvir (Sovaldi), as an example on how generic competition can bring down prices. The oral drug, which first received regulatory approval in the US in November 2013, costs $84,000 for a treatment course, or $1,000 per pill. Recently, the Indian Patent Office rejected patent for this drug citing incremental innovations. Gilead subsequently gave licenses to select generic manufacturers for selling this drug in India at lower prices.

A study by Liverpool University observes that Sofosbuvir could be produced for as little as $101 for a three-month treatment. "We know from various manufacturers in India that they could produce this drug in the future for as little as $101 for the full three month treatment course. That's roughly $1 per pill," says Dr. Andrew Hill, Senior Research Fellow, Department of Pharmacology and Therapeutics, Liverpool University.

Differential Pricing Strategy

MNC drug makers claim that despite the 'troubles' in India, they do bring drug innovations to the country. Clearly, a big market like India is difficult to completely ignore. Ranjit Shahani says his company introduced eight new drugs in the Indian market in the past two years in the areas of neurosciences, oncology, pain management and eye diseases.

In the past few years, GSK launched two patented products, Votrient and Revolade. It has also introduced Hycamtin, a GSK product having its patent in the name of SmithKline Beecham.

"In the recent past, we have introduced new medicines in oncology. We have also launched drugs for the treatment of diabetes and knee osteoarthritis," says Sanofi's Shailesh Ayyangar. Roche, which did not bring any new drugs into the Indian market in the last two years, plans to launch two new drugs this year, provided the Drugs Controller General India gives the green signal. Its key products in India include breast cancer drug Herclon and Xeloda, used to treat patients with colorectal, breast, or colon cancer.

Novartis plans to introduce four new products and two line extensions in the areas of congestive heart failure, oncology, pain management and respiratory diseases. "The product patent era did not turn out to be as feared. I think the share of multinationals may increase to about 10 per cent of the Indian pharmaceutical market from the current two to three per cent within the next five years, and then it will be a concern for Indian drug industry and patients," says S.V. Veeramani, President of the Indian Drugs Manufacturers Association and CMD of Fourrts (India) Laboratories.

Handa, the former Pfizer executive, points out that going ahead MNCs are going to adopt differential pricing for their drugs in India and will rope in alliances with domestic generic companies as happened in the case of Sovaldi. "MNCs will resort to such mutually beneficial voluntary licenses that help to avoid litigations," says Adheesh Nargolkar.

Whether or not India will change its patent laws to gain the confidence of US drug firms, most stakeholders agree that availability of affordable quality medicines to Indian population should be the priority of the government. "Unfortunately pricing is the only factor that seems to be in focus with little attention being paid to the larger issues that impede healthcare access such as lack of healthcare infrastructure, absence of large scale health insurance among others," sums up Shahani.