Sunday, May 4, 2008

Patent Controversy - by Mr. Y.K. Sapru

Patent controversy (May 4th, 2008)

This refers to the article ‘In Defence of Patents’ (Apr 28), which I feel was full of inaccurate statements, exaggerations and facts which have totally no relevance to the conditions as they exist in a developing country like India.

Firstly, the claim that all discoveries of new drugs require phenomenal investments, and through patenting of drugs alone can the investment be recovered, is a gross exaggeration. The initial developmental work on new drugs is mostly done in research labs attached to universities which are funded by government agencies. Take the case of Glivec which was marketed by Novartis at Rs 1,25,000 for one month’s treatment. It was identified by Dr Brian Drucker at the laboratory of Oregon Health & Science University. Half the funding for this was done by the National Cancer Institute of USA government, 30% by Leukemia & Lymphoma Society (US-based NGO), and 10% by Oregon Health & Science Institute. Novartis has contributed only 10% to the total funding.

Similar is the situation for the vast majority of new compounds marketed by pharmaceutical MNCs. The major expenses that pharma companies pick up are for the clinical trials. These expenses, however much they may be, are way below what the companies recover in the very first year of launch. In case of Glivec, in the first year of introduction, the turnover for the product was around USD 2.5 billion. Similarly, Herceptin, another patented product marketed by Roche, which is a life-saving drug for around 1,00,000 women with a certain type of breast cancer, costs Rs 7-23 lakh for full treatment, depending on the stage of the disease. This product also grossed around USD 2.6 billion in the very first year of its introduction.

Similar is the case for other patented products where the amount recovered after patent due to exorbitant prices is way above the investment. Hence, while patenting of new products may be legitimate, the pricing of the patented drugs needs to be controlled so that there is sufficient incentive for MNCs to invest in research, and yet the patented products are priced at affordable rates.

That prices of patented drugs are high because of high excise duty and other tariffs which amount to 55% in India is also not correct. If a product like Glivec costs Rs 1.25 lakh for one month’s treatment, this figure is arrived at after adding to the net imported cost the company's mark-up, the discounts to distributors and retailers. The 55% tariff is not imposed on Rs 1.25 lakhs but on the basic landed cost, which in most cases, is less than half of the retail price. So to put the blame on high government tariffs for the high prices of patented products is absolutely wrong.

The basic mistake that MNCs are making in developing countries like India while marketing a patented product is to price it at the international cost, which when converted into local currency, amounts to lakhs of rupees. For a country like India which has virtually no health insurance, no government health schemes to cover treatment costs, and where over 75% of the population lives on a mere Rs 40 per day, to have patented drugs priced at lakhs of rupees for the complete treatment is cruel.

Intellectual property rights and patent protection for newly developed drugs is legitimate, but if it is not accompanied by reasonable pricing, thousands of Indians will die as they will not be able to afford life-saving drugs. And in such a situation the government will be forced eventually by NGOs, activists and public opinion to use the National Emergency clause under the New Patent Act 2005 and issue compulsory licenses to generic companies to market the same products at nominal rates or impose price control under the DPCO Act on patented products.

—Y K Sapru
CEO, Cancer Patients Aid Association


Nikhil Nayak said...

Dear Mr Sapru,

Thank you for some interesting facts on costs of research which is very often cited by many.



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