Barack Obama and Narendra Modi met in Washington earlier this week. (Photo: Narendra Modi/Facebook)

Affordable medication and intellectual property laws

The Indian generic drugs industry is massive. According to the Indian government, it is “one of the flagship sectors of India” — with huge export ambitions. In 2015, Indian pharmaceutical companies  make up 19% of the American generic drugs market, making it the second largest supplier. But India is not only selling cheap drugs to the West. According to Médecins Sans Frontières (MSF), the country is also the “pharmacy of the developing world”. MSF sources 80% of its HIV/AIDS medication and many other generic drugs from the country. 

by the Know Nothing Enquirer   12/06/2016

However, medication accounts for 42% of health-care spending in India, compared to only 12% in the UK. Increasing the costs of drugs or banning certain generic drugs could have devastating effects for the world’s poor. For example, the annual cost of treating HIV patients with patented antiretroviral therapy is $10,000 instead of $100 — making it simply unaffordable for governments and NGOs in developing countries to conduct large scale public health programmes.


MSF is warning that this is about to happen. Leena Menghaney, the South Asia head of MSF's Access Campaign, says “the US is trying to export its broken intellectual property system to India—a system that has caused medicine prices to skyrocket, leaving patients empty-handed and patients and payers struggling to manage the cost of expensive patented medicines”. 


Of course “drug wars” are nothing new. At the heart of the dispute lies the contradiction that pharmaceuticals are traded in the market economy, yet also viewed as a human right and a public good. nevertheless, pharmaceutical companies rely on intellectual property (IP) laws to ensure profits. Unlike most traditional industries, manufacturing costs are marginal compared to research and development costs. It comes as no surprise that IP issues have been central in trade disagreements between the West and developing countries. 


In 1998, a trade dispute between South Africa and the United States over affordable HIV/AIDS medication prompted a huge public outcry. US pharmaceutical companies were charging exorbitant prices for the drugs, making them unaffordable to many African countries. South Africa reacted by introducing legislation to enable local companies to produce the medication at a much lower price. America initially threatened with sanctions but then settled the case in September 1999. However, TRIPS, the WTO trade agreement on intellectual property, was never revised to enable appropriate public health funding for developing countries’. Instead, in 2001, WTO member states agreed on the Doha Declaration, allowing certain flexibilities for developing countries to access essential medicines - in effect, ignoring IP rights. This, of course, is crucial in the global battle to manage public health crises and prevent diseases from spreading. Yet, it took massive lobbying efforts from NGOs and a huge public outcry for US and European pharmaceutical companies to drop their cases and convince Western governments (i.e. America and the European Commission) to formally allow developing countries affordable access to medication.

Disagreements over IP rights have also toppled trade agreements, such as the Trans-Pacific Partnership (TPP) (India did not join) or the proposed free trade agreement (FTA) with the EU. The country’s Patents Act allows for patents on new drugs but bans the practice of evergreening — where pharmaceutical companies extend their patents by, for example, slightly modifying the mixture of a drug. And of course, recent comprehensive FTAs, such as TTIP, CETA and TPP, have also been widely criticised over their “investor-state dispute settlements” (ISDS). This would allow foreign companies to take member countries over huge amounts of money to “court” — private arbiters who who are not connected to national courts — arguing that future profits have been diminished. ISDS provisions are not only bad for developing countries, they can also potentially undermine public health policies of developed countries.

Robert Reich, Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley, explains why TPP is objectionable. 

 Pharmaceutical companies point out that they have huge innovation costs and rely on IP protection laws. They also highlight that emerging countries are becoming increasingly affluent and can afford to pay their “fair” share. While the middle classes in many emerging countries might be able to afford higher prices, income inequality remains high and public health budgets low. Further, today Indians and Chinese are more likely to die of “rich people” diseases, such as cancer or heart diseases, than ever before. Yet, according to a new study by the Israeli Rabin Medical Centre, India and China have some of the highest prices for patented and generic cancer medications (as a percentage of gross domestic product per person at purchasing-power parity). Chinese cancer patients have to pay 48% of GDPpp for generic medicines. American patients only have to pay 14% of GDPpp. 


Cancer research has made dramatic advances in the last decade. Herceptin, a highly effective drug against HER2+ breast cancer (150,000 Indian women are diagnosed every year, in total 700,000 patients diagnosed with cancer), is patented by the Swiss pharmaceutical giant Roche. In 2013, India issued a compulsory licence to allow generic pharmaceutical companies to produce the cancer medicine. This has significantly decreased the price from a mind-blowing Rs 280,000 ($4,181) per dose to Rs 8,000 ($120) per dose, making medication a viable option for a lot more Indian cancer patients. The high cost of medication is also becoming an increasing concern in Western countries, especially in the US. A year’s supply of Roche’s new breast cancer drug Kadcyla costs $137,000, causing a debate on costs in public health programmes.


Narendra Modi meeting American business leaders in the US. (Photo: Narendra Modi/Facebook)

In fact, India has one of the most progressive IP laws that has managed to balance patent protection and citizen’s rights. It has enabled a generic pharmaceutical industry to thrive. Many people in developing countries (and increasingly developed countries) rely on affordable generic drugs. Compulsory licensing is one of the key instruments of the Indian government. Yet, in a recent document given to the US Trade Representative the US Chamber of Commerce and the US-India Business Council have said that the government of India has “privately assured” them that it will cease this practice. In another case the American pharmaceutical giant Gilead was granted a patent by the India patent office for its hepatitis C drug Solvadi. However, the company had earlier agreed on voluntary licence deals with Indian generic pharmaceutical companies. They had produced an 84 Solvadi course for $900 — instead of the $1,000 per pill Gilead is charging US patients. The patent office’s decision gives the pharma giant exclusive rights to sell Solvadi in India. According to the Caravan magazine, the conduct of the patent office was extremely questionable for many reasons. Most experts disagree with the verdict, the visitors’ book of the government body shows that IP lobbyists visited the offices before the decision was made and the case was kept unusually secret. 


It is in the public interest to prevent pharmaceutical companies from abusing their monopoly positions (i.e. through overcharging patients in developing countries or evergreening) and compromising the lives of the world’s poor. Developing countries fought hard for including exceptions in TRIPS to fight and avoid public health crises. The Indian government has to maintain its position (especially in light of Modi’s visit to America this week to foster business ties with the two countries). It cannot be compromised by the Western pharmaceutical lobby. After all millions of lives in India and many other countries in the Global South are at stake. Western pharmaceutical companies have to rethink their business models in developing and emerging countries. They have to accept the fact that their products have high moral weights to them. A solution could be to drastically vary prices for medicines in different markets. Yet national governments should also be able to use compulsory licensing to meet their public health needs and not overly rely on the goodwill of the pharmaceutical industry. 

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