Balancing IPR with Public Health Interest: Brickbats, Power Play and Bouquets

It is now a widely accepted dictum that Intellectual Property Rights (IPR), especially pharma patents, help fostering innovation and is critical in meeting unmet needs of the patients.

However, the moot question still remains, what type pharmaceutical invention, should deserve market exclusivity or monopoly with overall freedom in pricing, keeping larger public health interest in mind.

In line with this thinking, for quite sometime a raging global debate has brought to the fore that there are quite a large number of patents on drug variants that offer not very significant value to the patients over the mother molecules, yet as expensive, if not more than the original ones. In common parlance these types of inventions are considered as ‘trivial incremental innovations’ and described as attempts to ‘evergreening’ the patents.

The terminology ‘evergreeningusually ‘refers to a strategy employed by many pharmaceutical companies to extend their market monopoly by slightly changing the existing molecules and obtaining new patents to continue to enjoy market exclusivity and pricing freedom, which otherwise would not have been possible.

Path breaking or jaw-drooping ‘W-O-W’ types of innovations are not so many. Thus most of the patented drugs launched globally over the last several decades are indeed some sort of ‘me-too drugs’ and generally considered as ‘low hanging fruits’ of R&D, not being able to offer significantly greater value to patients than already exiting ones. Many of these drugs have also achieved blockbuster status for the concerned companies, backed by high voltage marketing over a reasonably long period of time. It is understandable, therefore, that from pure business perspective why serious global efforts are being made to push the same contentious system in India too.

Example of some of these molecules (not necessarily in the written order), are as follows:

  • Cemetidine – Ranitidine – Famotidine – Nizatidine – Roxatidine (to treat Acid-peptic disease)
  • Simvastatin – Pravastatin – Lovastatin – Pitavastatin – Atorvastatin – Fluvastatin – Rosuvastatin (to treat blood lipid disorder)
  • Captopril – Enalepril – Lisinopril – Fosinopril – Benzapril – Perindopril – Ramipiril – Quinalapril – Zofenopril (Anti-hypertensives)

However, pharmaceutical companies do argue that such ‘incremental innovations’ are the bedrock for growth of the pharmaceutical industry and are essential to continue to fund pharmaceutical research and development.

An interesting paper:

A paper titled, “Pharmaceutical Innovation, Incremental Patenting and Compulsory Licensing” by Carlos M. Correa argued as follows:

  • Despite decline in the discovery of New Chemical Entities (NCEs) for pharmaceutical use, there has been significant proliferation of patents on products and processes that cover minor, incremental innovations.
  • A study conducted in five developing countries – Argentina, Brazil, Colombia, India and South Africa has:
  1. Evidenced a significant proliferation of ‘ever-greening’ pharmaceutical patents that    can block generic competition and thereby limit patients’ access to medicines.
  2. Found that both the nature of pharmaceutical learning and innovation and the interest of public health are best served in a framework where rigorous standards of inventive step are used to grant patents.
  3. Suggested that with the application of well-defined patentability standards, governments could avoid spending the political capital necessary to grant and sustain compulsory licenses/government use.
  4. Commented, if patent applications were correctly scrutinized, there would be no need to have recourse to CL measures.

A remarkable similarity with the Indian Patents Act:

The findings of the above study have a striking similarity with the Indian Patents Act. As per this Act, to be eligible for grant of patents in India, the pharmaceutical products must pass the ‘two-step’ acid test of:

  • Following the inventive stepDefined under Section 2(ja) of the Patents Act as follows:

“Inventive step” means a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art.

  • Passing scrutiny of Section 3(d) of the law: It categorically states, inventions that are a mere “discovery” of a “new form” of a “known substance” and do not result in increased efficacy of that substance are not patentable.

Supreme Court of India clarifies it:

The Honorable Supreme Court of India in page 90 of its its landmark Glivec judgement has clearly pronounced that all ‘incremental innovations’ may not be trivial or frivolous in nature. However, only those ‘incremental innovations’, which will satisfy the requirements of both the above Sections of the Act, wherever applicable, will be eligible for grant of patents in India. 

An opposite view:

Another paper presents a different view altogether. It states that incremental improvements on existing drugs have great relevance to overall increases in the quality of healthcare.

With the progress of the pharmaceutical industry, such drugs have helped the physicians to treat diverse group of patients. They also represent advances in safety, efficacy along with newer dosing options significantly increasing patient compliance.

The paper claims that even from an economic standpoint, expanding drug classes represent the possibility of lower drug prices as competition between manufacturers is increased’.  It states that any policy aimed at curbing incremental innovation will ultimately lead to a reduction in the overall quality of existing drug classes and may ultimately curb the creation of novel drugs.

Pricing:

Experts, on the other hand, argue, if patents are granted to such ‘incremental innovations’ at all, their prices need to be determined by quantifying ‘Incremental Value’ that patients will derive out of these inventions as compared to the generic versions of respective original molecules.

Use of such drugs may lead to wasteful expenditure:

A large majority of stakeholders also highlight, though many of such drugs will have cheaper or generic alternatives, physicians are persuaded by the pharma players to prescribe higher cost patented medicines with the help of expensive avoidable marketing tools, leading to wasteful expenditure for all. The issue of affordability for these drugs is also being raised, especially, in the Indian context.

  • The ‘2012 Express Scripts Canada Drug Trend Report’ unfolded that the use of higher-cost medications without offering additional patient benefits resulted in waste of $3.9 billion annually in Canada.
  • Another recent Geneva-based study concluded as follows:

Evergreening strategies for follow-on drugs contribute to overall healthcare costs. It also implies that policies that encourage prescription of generic drugs could induce saving on healthcare expenditure. Healthcare providers and policymakers should be aware of the impact of evergreening strategies on overall healthcare costs.”

  • Some other studies reportedly revealed, “Medicines sold in France are 30 times more expensive than what it costs pharmaceutical companies pay to manufacture them.” Industry observers opine, if that is happening in France what about India? Quoting experts the same report comments, “If pharmaceutical companies are forced to follow moral and human values, it could save the tax payer at least 10 billion euros, an amount which could fill up the deficit of the national health care system.
  • Yet another article questioned, “What if a physician is paid speaking or consulting fees by a drug maker and then prescribes its medicine, even if there is no added benefit compared with cheaper alternatives?

More debate:

According to a paper titled, ‘Patented Drug Extension Strategies on Healthcare Spending: A Cost-Evaluation Analysis’ published by PLOS Medicine, European public health experts estimate that pharmaceutical companies have developed “evergreening” strategies to compete with generic medication after patent termination. These are usually slightly modified versions of the existing drugs.

Following are some brands, which were taken as examples for evergreening:

S.No.

Evergreen

Medical Condition

Original Brand

1.

Levocetirizine (Vozet) Allergies Cetirizine (Zyrtec)

2.

Escitalopram (Lexapro) Depression Citalopram (Celexa)

3.

Esomeprazole (Nexium) Acid reflux Omeprazole (Prilosec)

4.

Desloratadine (Clarinex) Allergies Loratadine (Claritan)

5.

Zolpidem Extended Release (Ambien CR) Insomnia Zolpidem (Ambien)

6.

Pregabalin (Lyrica) Seizures Gabapentin (Neurotonin)

Source: Medical Daily, June 4, 2013

In this study, the researchers calculated that evergreening – where pharmaceutical companies slightly modify a drug molecule to extend its patent, had cost an extra 30 million euros to the healthcare system in Geneva between 2000 and 2008. The authors argue that ‘evergreening’ strategies, “more euphemistically called as ‘life cycle management’ are sometimes questionable benefit to society.”

As the paper highlights, in this scenario the companies concerned rely on brand equity of the original molecule with newer and more innovative marketing campaigns to generate more prescriptions and incurring in that process expenses nearly twice as much on marketing than on research and development.

Brickbats:

In this context, recently a lawmaker rom America reportedly almost lambasted India as follows:

I’m very concerned with the deterioration in the environment for protection of US intellectual property rights and innovation in India. The government of India continues to take actions that make it very difficult for US innovative pharmaceutical companies to secure and enforce their patents in India.“ 

On this, the Indian experts comment, if the situation is so bad in India, why doesn’t  America get this dispute sorted out by lodging a formal complaint against India in the WTO, just as what India contemplated to do, when consignments of generic drugs of Indian manufacturers were confiscated at the European ports, alleging those are counterfeit medicines.

Yet another recent news item highlighted a “concerted effort, which involves letters from US corporations and business groups to the president, testimony by Obama administration officials before Congress, and lawmakers’ own critiques, came ahead of US secretary of state John Kerry’s trip to India later this month (has already taken place by now) for the annual strategic dialogue, which will precede Prime Minister Manmohan Singh’s visit to Washington DC in September.”

The report stated, the above letter complained that over the last year, “courts and policymakers in India have engaged in a persistent pattern of discrimination designed to benefit India’s business community at the expense of American jobs … Administrative and court rulings have repeatedly ignored internationally recognized rights — imposing arbitrary marketing restrictions on medical devices and denying, breaking, or revoking patents for nearly a dozen lifesaving medications.” 


At a recent Congressional hearing of the United States, a Congressman reportedly expressed his anger and called for taking actions against India by saying,

“Like all of you, my blood boils, when I hear that India is revoking and denying patents and granting compulsory licenses for cancer treatments or adopting local content requirements.”

Indian experts respond to these allegations by saying, patent disputes, patent challenges, revocation of patents, compulsory licensing etc. are all following a well-articulated judicial process of the country, where Indian government has hardly any role to play or intervene. American government and lawmakers are also expected to respect the rule of law in all such cases instead of trying to denigrate the Indian system.

The Power Play:

This short video clipping captures the Power Play in America on this matter.

The Government of India responds:

Ministry of Commerce and Industries of India reportedly countered the allegations of the United States over patents to the US Trade Representive arguing that the Indian IPR regime is fully TRIPS-compliant and Indian Patents Act “encourages genuine innovation by discouraging trivial, frivolous innovation, which leads to evergreening”.

Countries adopting the Indian model:

The above report also highlighted as follows:

  • Argentina has issued guidelines to reject ‘frivolous’ patents.
  • Peru, Columbia, other South American countries have placed curbs.
  • Philippines has similar provisions.
  • Australia is contemplating making the law tougher.

Revised report of Dr. R. A. Mashelkar Committee:

Even the revised (March 2009) ‘Report of the Technical Expert Group (TEG) on Patent Law Issues’, the TEG, chaired by the well-known scientist Dr. R.A. Mashelkar, in point number 5.30 of their report recommended as follows:

“Every effort must be made to prevent the practice of ‘evergreening’ often used by some of the pharma companies to unreasonably extend the life of the patent by making claims based sometimes on ‘trivial’ changes to the original patented product.  The Indian patent office has the full authority under law and practice to determine what is patentable and what would constitute only a trivial change with no significant additional improvements or inventive steps involving benefits.  Such authority should be used to prevent ‘evergreening’, rather than to introduce an arguable concept of ‘statutory exclusion’ of incremental innovations from the scope of patentability.”

Bouquets:

As stated above, many experts across the world believe, the criticism that Section 3 (d) is not TRIPS Agreement compliant is unfounded, as no such complaint has been lodged with the World Trade Organization (WTO) in this matter, thus far. The safeguards provided in the patent law of India will help the country to avoid similar issues now being faced by many countries. Importantly, neither does the section 3(d) stop all ‘incremental innovations’ in India.

Quoting a special adviser for health and development at South Centre, a think tank based in Geneva, Switzerland, a recent report indicated, “Many developing countries will follow India’s example to protect the rights of their populations to have access to essential medicines”.

Yet another report quoting an expert articulates, “India’s top court’s decision affirms India’s position and policy on defining how it defines inventions from a patenting point of view for its development needs. It challenges the patenting standards and practices of the developed countries which are the ones really in much need of reform.

The Honorable Supreme Court in its Glivec judgment has also confirmed that such safeguard provisions in the statute are expected to withstand the test of time to protect public health interest in India and do not introduce any form of unreasonable restrictions on patentability of drug inventions.

Conclusion:

Not withstanding the report of the US-India Business Council (USIBC) titled ‘The Value of Incremental Innovation: Benefits for Indian Patients and Indian Business’, arguing for abolition of section 3(d) of the Indian Patents Act to pave the way for patentability for all types of incremental innovations in pharmaceuticals, realistically it appears extremely challenging.

As the paper quoted first in this article suggests, denial of patents for inventions of dubious value extending effective patent period through additional patents, is a significant safeguard to protect public health interest. This statutory provision will also pave the way for quick introduction of generics on expiry of the original patent.

Taking all these developments into active consideration, keen industry watchers do believe, for every effort towards balancing IPR with Public Health Interest, both brickbats and bouquets will continue to be showered in varying proportion together with the mounting pressure of power play, especially from the developed world and still for some more time.

However, in India this critical balancing factor seems to have taken its root not just deep and strong, but in all probabilities - both politically and realistically, the law is now virtually irreversible, come what may.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

 

 

Chasing the “Holy Grail”: Reasonably affordable healthcare for all

The Healthcare industry of the world as a whole with a size of several trillion US$ is growing at a fast pace in many countries for various reasons. The industry can be broadly divided into six categories as follows:

  1. Managed Health Care, like the US and many other OECD countries providing ‘Universal Health Coverage’
  2. Medical Equipment and Devices
  3. Pharmaceuticals
  4. Bio-pharmaceuticals
  5. Health Insurance
  6. Health Support Services

Though BRIC countries and other emerging markets are showing promising growth potential, United States of America (USA) still remains the largest entity within the global healthcare industry, followed by European Union (EU) and Japan.

Success requirements:

The most important success requirements for the Global healthcare industry may be listed as follows:

  1. Proficiency in early capturing of the key market trends
  2. Leveraging technology in all areas of business
  3. Continuous product and service innovation
  4. Meeting customer needs even before they feel for the same
  5. Cutting-edge, well-differentiated and well-executed market and marketing strategies
  6. Always in touch with customers with win-win business objectives
  7. Outpacing competition with continuous proactive moves

India:

The success factors for excellence in the healthcare sector of India are no different from other emerging markets. However, some key components of this sectoral space, like optimal infrastructure and efficient delivery mechanisms, especially in the hinterland and rural areas of the country, are still in ‘Work In Progress (WIP)’ stages of development.

Healthcare growth drivers in India:

According to the Investment Commission of India, the healthcare sector of the country has registered a robust CAGR of over 12 percent during the last four years and the trend is expected to be ascending further.

Quite in tandem, other important areas of the healthcare sector have also recorded impressive performance as follows:

Areas Growth %
Hospitals/Nursing Homes 20
Medical Equipment 15
Clinical Lab Diagnostics 30
Imaging Diagnostics 30
Other Services (includes Training & Education; Aesthetics & Weight loss; Retail Pharmacy, etc.) 40

In addition, from the allocation made for health (2.5 percent of the GDP) in the 12th Five Year Plan Document of India, it appears that the country will clock a mid to high-teen growth in its healthcare spending during this period, mainly due to the following reasons:

  1. Economy to turn stronger
  2. Massive public healthcare expansion through projects like Universal Health Coverage (UHC), expanded National Rural Health Mission (NRHM), new National Urban Health Mission (NUHM)
  3. Expanded Rashtriya Swasthya Bima Yojojana (RSBY) for Below Poverty Line (BPL) population
  4. Growing middle income households both in the urban and rural areas
  5. Increasing life-style related health issues
  6. Improving penetration of Health Insurance

Key Challenges:

The path ahead will not really be strewn with the beds of roses. The rural healthcare infrastructure will continue to pose a key challenge, at least in the near term, some of the facts being as follows:

A. Status of Rural Healthcare Infrastructure in India:

Infrastructure and Services Villages [%]
Connected with Roads 73.9
Having any Health Provider 95.3
Having trained birth attendant 37.5
Having ‘Anganwadi’ Worker (Child Care Center in rural areas) 74.5
Having a doctor 43.5

(Source: Ministry of Health and Family Welfare)

B. Hospital Beds per 1000 of population:

Country Hospital Beds Per 1000 Population
India > 0.7 [Urban: 2.2 and      Rural 0.1]
Russia 9.7
Brazil 2.6
China 2.2
World Average 3.96

(Source: Kshema)

Needs more innovative business models:

Being supported by the monetary and other fiscal incentives of the Government, Tier II and III cities of India will continue to attract more investors for their future growth potential. At the same time, anticipated lower profit margins from these areas, predominantly due to relatively lower affordability threshold of the local population and inadequate health insurance penetration in these areas, is expected to make these healthcare providers to plan for no-frill innovative business models, like much talked about ‘the hub-and-spoke model’, as practiced in many other industries.

Some of the key players of the healthcare industry of India like, Apollo and Fortis have already started expanding into tier-II and tier-III cities of the country, prompted by increasing demand for high-quality specialty healthcare services at reasonably affordable prices in the smaller towns of the country.

Meanwhile, Frontier Lifeline Hospital is reportedly in the process of setting up India’s first Special Economic Zone (SEZ) for healthcare, ‘Frontier Mediville’ at Elavoor, near Chennai.

Areas of caution:

While looking at the big picture, the following factors should also be taken note of:

  • At least in the short to medium term, it will be unrealistic to expect that India will be a high margin / high volume market for the healthcare sector in general.
  • The market will continue to remain within the modest-margin range with marketing excellence driven volume turnover.
  • The government focus on reasonably affordable drug prices may get extended to medical devices / equipment and other related areas, as well.

India is taking strides:

I.   According to the Rural Health Survey Report 2009 of the Ministry of Health and Family

Welfare, in rural India during the last five years:

  • The number of primary health centers has increased by 84 per cent to 20,107.
  • Around 15,000 health sub-centers and 28,000 nurses and midwives have been added.

II   According to RNCOS December, 2010 report:

  • Indian health insurance market is currently not only the fastest growing, but also second largest non-life insurance segment in the country.
  • The health insurance premium in India is expected to grow at a CAGR of over 25 per cent from 2009-10 to 2013-14.
  • By end 2013 India is expected to curve out a share over 3 per cent in the global medical tourism industry with a CAGR in the number of medical tourists to over 19 per cent, during 2011-2013 period.

III.    According to PwC, the medical technology industry of India is expected to grow from US$

2.7 billion in 2008 to US$ 14 billion by 2020.

IV.    Leveraging cutting edge technology, digital bio-surveillance projects are being initiated to

generate data on the prevalence of various diseases and to create actionable databases on healthcare needs in rural India by several private players like, Narayana Hrudayalaya and the Mazumdar Shaw Cancer Centre.

V.     Major healthcare players of India like, Manipal Group, Max Healthcare and Apollo are now

reportedly venturing into new segments such as primary care and medical diagnostics.

Job creation 
in healthcare sector:

The trend of new job creation in the healthcare sector of India is also quite encouraging, as supported by the following details:

  • The Healthcare sectors in India recorded a maximum post recession recruitment to a total employee base of 33,66,000 with a new job creation of 2,95,000, according to ‘Ma Foi Employment Trends Survey 2010’.
  • Despite slowdown in other industries, in the healthcare sector the new job creation continues at a faster pace.
  • With many new hospital beds added and increasing access to primary, secondary and tertiary / specialty healthcare, among others, the ascending trend in job creation is expected to continue in the healthcare sector of India in the years ahead.

Pharmaceutical Industry:

McKinsey & Company in its report titled, “India Pharma 2020: Propelling access and acceptance realizing true potential” estimated that the Indian Pharmaceutical Market (IPM) will grow to US$ 55 billion by 2020 and the market has the potential to record a turnover of US$ 70 billion with a CAGR of 17 per cent.

Currently India:

  • Ranks 4th in the world in terms of pharmaceutical sales volume.
  • Caters to around a quarter of the global requirements for generic drugs.
  • Meets around 70 per cent of the domestic demand for Active Pharmaceutical Ingredients (API).
  • Has the largest number of US FDA approved plant outside USA
  • Files highest number of ANDAs and DMFs
  • One of most preferred global destinations for contract research and manufacturing services (CRAMS)

Conclusion:

Despite all these, the healthcare Industry of India is still confronted with many challenges while striking a right balance between public health interest and expectations for a high margin ‘free market’ business policies by a large section of players in the healthcare sector of India, across its sub-sectors, both global and local, quite unlike many other emerging sectors, like telecom and IT.

Moreover, pharmaceuticals come under the ‘Essential Commodities Act’ of the country, where government administered pricing is common.

That said, without further delay, all stakeholders, along with the Government, should now join hands, to collectively resolve the critical issues of the healthcare sector of the nation, like:

  • Creation and modernization of healthcare infrastructure leveraging IT
  • Universal Health Coverage
  • Win-win regulatory policies
  • Creation of employable skilled manpower
  • Innovation friendly ecosystem
  • Reasonably affordable healthcare services and medicines for the common man through a robust government procurement and delivery system
  • Right attitude of all stakeholders to find a win-win solution for all issues, instead of adhering to the age-old blame game in perpetuity, as it were, without conceding each other’s ground even by an inch.

Now is the high time for India, I reckon, to reap a rich harvest from the emerging lucrative opportunities, coming both from India and across the world in its healthcare space. This, in turn, will help the country to effectively align itself with the key global healthcare need of providing reasonably affordable healthcare to all.

In pursuit of this ‘Holy Grail’, the nation has all the success ingredients in its armory, as mentioned above, to play a key role in the global healthcare space, not just as a facilitator to help achieving reasonable corporate business objectives of the healthcare players, but more importantly to alleviate sufferings of a vast majority of the ailing population, living even beyond the shores of India.

By: Tapan J Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.