March 28 (Bloomberg) -- In trying to get sophisticated medicines to its neediest citizens, India is increasingly pitting its generic-pharmaceutical industry against international drugmakers, threatening their growth in emerging markets.
An Indian regulatory board this month upheld a ruling that allows Natco Pharma Ltd. to make a low-priced copy of Bayer AG’s Nexavar cancer treatment. The drug is one of at least four that have had their patents weakened, revoked or rejected in India in the past year. The country also has refused a patent for Novartis AG’s Gleevec leukemia medicine, and the Supreme Court will rule April 1 on the company’s appeal of the decision.
Those steps are needed to put modern medicines into the hands of Indians, according to aid groups and doctors. Western drugmakers including New York-based Pfizer Inc. say the country, which has a $30 billion drug market that’s growing 13 percent a year, is abusing international law and allowing domestic companies to profit from products discovered at Big Pharma’s expense.
The dispute illustrates how emerging markets are turning out be less lucrative than drugmakers expected. London-based GlaxoSmithKline Plc has warned that so-called compulsory licensing of patented products may hurt profit growth. One advocacy group now is pushing stricken Western countries such as Greece to follow India’s lead, raising the prospect of further pressure on drug prices.
“Emerging markets are extremely important for drugmakers because they can’t grow in Europe, plain and simple,” Michael Leuchten, an analyst at Barclays Plc in London, said in a telephone interview. “The effect isn’t quantifiable, but it is a stumbling block and companies will suffer.”
India in 1995 agreed to meet intellectual-property standards set out by the World Trade Organization. The country says those standards allow it to invalidate patents and issue compulsory licenses to local generics companies to ensure its citizens have access to medicine.
Indian officials also may be motivated by boosting the domestic drug industry, said Wim Leereveld, who heads the Access to Medicines Foundation, a non-profit group that ranks drug companies on how well they make products available to poor and middle-income countries.
“This is not only about access to medicines; they are also protecting their own businesses,” said Leereveld, whose group doesn’t take funding from drug companies.
An e-mail requesting comment sent to 12 officials at India’s Department of Pharmaceuticals wasn’t answered. Three phone calls to the office of the department secretary, Dilsher Singh Kalha, weren’t answered.
Generic-drug companies Natco and GM Pharma Ltd. won their 2006 effort to contest AstraZeneca Plc’s patent protection in India for its lung-cancer drug Iressa, a decision upheld in November 2012 by the country’s Intellectual Property Appellate Board.
The same month, the board also revoked protection for Roche Holding AG’s Pegasys, a drug to treat hepatitis C, on an appeal by the Sankalp Rehabilitation Trust, a charity that helps injecting drug abusers, and the generics maker Wockhardt Ltd. Pfizer’s Sutent cancer drug, which it had been selling in India since 2007, was stripped of protection last year.
“From the perspective of companies, I can’t think of anything more incredible than to have the government expropriate your intellectual property and have domestic companies exploit it,” said Chris Israel, the U.S. coordinator for international intellectual property enforcement under President George W. Bush who now works for the American Continental Group Inc. lobbying firm in Washington.
Neither the U.S. nor the European Union have sought help from the WTO to stop compulsory licenses. The EU recognizes India’s right to issue compulsory licenses, Helene Banner, a spokeswoman for EU Trade Commissioner Karel De Gucht, said in an e-mailed statement. American Continental’s Israel said such licenses are intended for use in health emergencies such as pandemics, not because prices are too high.
Doctors welcome India’s efforts to make drugs more affordable.
“The Indian drug is so important for 90 percent of my patients, because otherwise they’ll get nothing,” said Bhawna Sirohi, an oncologist at Mumbai’s 900-bed Tata Memorial Centre, which mainly treats poor patients. “I think it’s fantastic.”
Pharmaceutical company executives say patent-sharing bodies known as patent pools and voluntary licenses can make drugs available to the poor. Patents won’t stop medicines from reaching those who need them, Paul Herrling, who heads Novartis’s Institute for Tropical Diseases in Singapore, said in an interview.
“We have a very clear policy not to make the patent a barrier,” Herrling said. The patent situation has led Novartis to re-allocate investments to other emerging markets such as China, Herrling said.
Still, without compulsory licensing, many Indians may not have access to some medicines. About a third of the population lives in poverty, and the income per capita is $1,410 a year, according to the World Bank.
“Even if a month of therapy costs $12, one or two concurrent illnesses are too expensive for a family like that,” said Michael Kleinrock, director of research development at the IMS Institute for Healthcare Informatics, said in a telephone interview. The institute is a unit of IMS Health, which tracks pharmaceutical sales.
Roy Waldron, Pfizer’s chief intellectual property counsel, called on the U.S. government this month to work harder to protect patents in India.
“We believe that Indian generic companies now see any innovative product as fair game for compulsory license,” Waldron said in testimony March 13 to the House Ways and Means Committee’s subcommittee on trade. Pfizer didn’t respond to a request for further comment.
Besides issuing compulsory licenses, India has refused to grant patents in some cases. At the request of a cancer aid society and several generics makers, the government in 2006 denied a patent for Novartis’s Gleevec, a drug that is credited with turning a deadly blood cancer into a chronic disease, saying it wasn’t sufficiently innovative. The Basel, Switzerland-based company appealed, and the case wound up at the Supreme Court, with a decision to be published April 1.
“We are concerned about the current situation in India with respect to the recent decisions by the government that concern not only compulsory licensing, but also the patent status for certain products of some of our competitors,” Eli Lilly & Co. Chief Executive Officer John Lechleiter told reporters at a March 26 briefing in Beijing.
“This is something we’ll continue to try to address with individual governments” and through multinational organizations, said Lechleiter, who’s chairman of Pharmaceutical Research and Manufacturers of America, a U.S. lobbying group.
In the case involving Bayer’s Nexavar, the Indian appellate board said that while Bayer had made “thumping” profits on the drug internationally, it failed to make the treatment affordable to at least 80 percent of Indian patients with liver or kidney cancer. The compulsory license allows Natco to sell a copy for as much as 8,880 rupees ($163) a month, 3 percent of the original price of more than $5,000. Bayer receives a small royalty.
Roche last year said it would rebrand and cut the price of two patented cancer drugs in India, MabThera and Herceptin. Still, India’s Department of Pharmaceuticals in January started the process of issuing compulsory licenses for three cancer treatments including Herceptin, according to the newspaper Indian Express. A Roche spokesman declined to comment on the reports.
India’s efforts may embolden other countries. China last year overhauled parts of its intellectual property law to allow domestic companies to make low-cost versions of medicines under patent protection. In September, the Indonesian government expanded access to HIV drugs and a hepatitis B treatment.
Drug companies are looking to India and other emerging markets for growth because prices are under pressure in Europe. Emerging markets are set to make up 38 percent of revenue by 2020, according to Barclays’ Leuchten. IMS forecasts drug sales on the Indian subcontinent will grow 13 percent a year through 2016.
A non-profit group called Essential Inventions Inc. this month asked the Greek government to use compulsory licenses to supply cancer and HIV drugs to its citizens, David Hammerstein, a member of the group’s board, said in a telephone interview.
“Hundreds of people in Greece are dying because they are not getting the medicines, tens of thousands can’t afford the medicines,” he said. Hammerstein said his group is also thinking of asking the Spanish government to import generics under a compulsory license. He expects a response from Greek officials in a couple of weeks.
“There is a danger it will pick up steam,” said IMS’s Kleinrock. “Companies have to take it seriously.”
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