People's Democracy

TRIPS And Its Impact On Drug Prices And Health Care In India 

Saradindu Bhaduri and Abhay Kumar

 
Surrendering people’s interests and bypassing parliament the government of India promulgated an ordinance to amend Indian Patents Act. According to the government this amendment was necessitated as per the TRIPS agreement under the WTO regime, which required a strong patent regime to be in place by January 1, 2005. However, it is surprising that such amendments in the Patents Act, which will have far reaching consequences on people’s lives and their health care, were brought in without even discussing in the parliament. Protests have already begun. There have been sincere efforts to bring various groups, political parties, mass organizations and individuals on to a single platform for a united protest. In this regard a joint action committee has been formed which intend to organize conventions and protests at various places.  

Some pertinent issues especially related to R&D implications and drug prices are being discussed here.

The three main arguments given by the proponents of strong patent regime in India are:

1. Weak patent regime discourages launch of new drug (by the original innovator) and therefore reduces patient’s welfare (so called)

2. Globally, the cost of R&D has gone up manifolds and therefore it is absolutely necessary to give more protection.

3. India will not suffer since majority of drugs in India are off-patent and so prices will not be affected much (this argument contradicts the spirit of argument 1--- if old drugs are sufficient to treat Indian patients then why seek strong patent on grounds of argument 1?).

DELAY IN LAUNCH OF NEW DRUGS?

The first argument essentially tells us that weak patent regime discourages innovating firms to launch new drugs in India, and therefore causes loss of welfare to Indian patients be denying access to newer and better treatment of their diseases. While this argument may hold some water for countries with low or no reverse engineering capabilities, it certainly a far fetched one in the context of India. In fact, the delays in launch of new drugs have considerably declined over the past decades, much due to strong reverse engineering R&D capabilities of Indian firms. It becomes evident from some examples of blockbuster drugs a drug qualifies for Blockbuster status when its annual global sale is more than one billion dollars. Blockbuster drugs are assumed to derive much of their popularity in the market due to some “major therapeutic gains” (indeed, surprisingly although, major therapeutic gains are rare qualities among newly discovered drugs! According to US Food and Drug Administration only about 10 per cent of new drugs are considered to bring about critical improvement in medical treatment. All other new drugs only brought about marginal gains over existing drugs, although with higher prices).

Let’s take the cases of specialized rheumatic analgesic blockbuster drugs, Celecoxib and Refecoxib, which were globally launched in 1999 (Celecoxib by Pfizer and Refecoxib by Merck). Both drugs were launched in India in 2000 by leading domestic firms, Sun Pharma and Torrent respectively, with a delay of less than two years.  The pattern is also very similar for other blockbuster drug like Sildenafil Citrate (popularly known as Viagra) for erectile dysfunction, globally launched by Pfizer in 1998. It was introduced in India by domestic firms (Ranbaxy, Cadila) in 2001, within three years of its global launch (launch was delayed mainly because of legal court cases by Pfizer India). Likewise, cardiovascular (heart related) blockbuster drug Atorvastatin, globally launched by Pfizer in 1997, was also introduced in India by a few domestic firms (Ranbaxy, Zydus Cadila, Sun Pharma) within three years. More striking is the example of the anti-diabetic drug Rosiglitazone Maleate that was imitated and launched by leading domestic firms (DRL, Sun Pharma, Torrent) within the first year of its global launch in 2000. Thus, these empirical examples suggest that new blockbuster drugs were launched almost simultaneously or some minor delay in India even during the weak patent regime. Thus, imposition of strong patent would serve very little objective in shortening the delay of launch. They will, however, lead to phenomenal increase in prices by creating monopolies in those product segments.

A comparison between their international (in most cases in US) monopoly prices and Indian prices are given in the table below.

 The new patent regime would either raise the prices of new drugs to the international level or would make the Indian population wait until the patent expires and drugs become cheaper. In that case they will be consuming “old drugs” any way, and the purpose of getting quicker access to new drugs will be defeated (which is argument 1)! So actually prices would increase without much welfare gains in terms of access to new drugs. And, moreover, why such a big hue and cry about the welfare of Indian patients when only 13 of 1373 new molecules developed during the last 30 years target diseases of tropical countries like India?

IS HIGHER COST OF R&D JUSTIFIED?

In so far as the second argument is concerned, it is true that cost of R&D has gone up. But it has increased more due to the use of highly automated R&D machines to come out with potent molecules. In the good old days, companies used to rely on “scientific acumen” of their scientists. Instead, now they like to buy machines which run random experiments with hundreds and thousands of molecules (called high throughput screening) in order to increase the possibility of getting a potent drug. But recent studies have shown that use of such highly automated costly machines have done little or no good in terms of R&D productivities of the pharmaceutical industry, Pharmaceutical drug inventions can broadly be divided into two broad groups (a) research, and (b) development. While research stage consists of synthesis and screening of chemical compounds, development stage comprises various clinical trials and approval of drugs for marketing. It has been shown that after automation in the last decade the share of screening and synthesis costs in total R&D costs has gone up from 4-5 per cent to around 14 per cent. In addition, recent NBER (National Bureau of Economic Research, USA) study by famous industrial economist Ian M. Cockburn shows that average research productivity has gone down by more than 60 per cent. While in 1980s the industry used to spend an average of $318 million for one new molecule, it paid around $806 million in the last half of 1990s. He attributes much of this decline in productivity to what he calls “re-tooling in response to innovation in method of invention”.

Thus, it perhaps makes sense to seek the justification behind such an economically wasteful expenditure before justifying the imposition of TRIPS on grounds of higher R&D costs!

ONLY MARGINAL IMPACT IN INDIA

The third argument is the most mischievous one making the entire argument stand on its head (see some recent work by Amit S Ray for the Independent Commission of Health in India). It should be remembered that patients do not choose medicines; they have to buy whatever is being prescribed by their doctors. In a world where most medical practitioners depend on company sales representatives for information about drugs and their efficacy; is it not foolish to assume that doctors would be supplied with unbiased and truthful information on old, cheap medicine where new medicines can fetch higher profits to firms. At another level, monopolies in new products would enable firms to provide greater incentives, pecuniary or otherwise, to medical practioners for prescribing newer drugs. Moreover, even if we assume that the imposition of TRIPS would not hurt the majority of Indian patients at present, it is bound to hit hard in the longer run, as share of new drugs compared to older ones will increase in the market. After all, we do not intend to impose TRIPS only for the next one year?

The impact will even be more pronounced in the markets for antibiotic drugs. People (or more appropriately the pathogen!) develop resistance to antibiotic drugs and therefore require newer version of stronger antibiotics (for example Ciprofloxacin is a 4th generation antibiotic sold in the name of Cifran by Ranbaxy). Indian people are more prone to infective diseases compared to the Westerners and tend to consume more antibiotic. They, therefore develop resistance to antibiotics quicker and need stronger, newer version of antibiotic with shorter delay compared to western people. Some studies suggest that while the first generation antibiotic drugs are sufficient for 90 per cent people in the US, it can cure only a meagre 10 per cent people in India primarily because of higher level of resistance to antibiotics among Indian population. Assuming a new antibiotic is developed and sold by the innovator in India under strong patent. Since older drugs would not work, Indian patients will have to buy the newest antibiotic paying the monopoly price!! If even a ciprofloxacin tablet (for which patent has recently expired) costs around 2 dollar per tablet in US and something between 0.05 and 0.2 US dollar in India, one can imagine the impact of strong patent on prices of antibiotics and the health care expenditure of Indian people.

STRONG PATENT AND TECHNOLOGICAL ADVANCEMENT

Finally, a strong patent regime has often been found detrimental to the process of industrial development in particular and scientific advancement in general. Let’s look at the evolution of the patent regime in many of today’s industrialized countries.

India (or rather the British-India) adopted a strong patent regime as early as in 1911, which was in force till 1970 (we must also remember that we have weak patent protection only in a handful of sectors, which includes pharmaceuticals). So, the weak patent regime in India is only about three decades old. This is rather small a duration to expect any technological catch-up process to be successful. In fact, many of today’s developed and industrialized countries had weak patent protection for a much longer period, and some of them even had weak or no patent protection when India (possibly more underdeveloped than at present) was under strong protection! Netherlands did not have a patent regime till 1912. Germany introduced the system of patent in 1877, but continued to have only a very weak patent protection until as late as 1956, and shifted to a strong one only after developing indigenous technological competence in industries like pharmaceutical and synthetic dye. The case of Japan is well known to many. After developing the patent law along the US line in 1885, Japan adopted the German model since 1905, by considerably weakening the definition of “inventiveness”. This change was especially meant for protecting small inventions at a time when Japan's technology lagged behind that of many Western nations. This law (now known as Law No. 123, 1959) supplements Japan's major patent law, Law No. 121, 1959. It reformed the patent regime only at the time of Uruguay round of GATT negotiation in 1995. It should be noted that whether a patent regime is weak or strong depends on multiplicity of factors such as length of protection (number of years), breadth of protection (product or process or both, even within a product or process there can be narrower definition of newness allowing more inventing around and therefore considered as less protective), definition of inventiveness and various enforcement mechanisms. While Germany only allowed for process patent with a duration of 3 to 7 years, Japan had both product and process patents (for 5 to 15 years) but had allowances for small inventions built–in in the definition of inventiveness and various tax enforcement measures. 

Moreover, TRIPS may prove to be a breeding ground for cost inefficient process technologies. Suppose there are two different processes to make a product. Under an intellectual property rights regime, which only grants patents to a particular process (let’s assume that is a high cost one), there are no incentives for investing on R&D to find out another more cost-efficient way to prepare the same product. After all, the proponents of liberalisation de-regularized Indian industries ostensibly to make the Indian industry more cost efficient and internationally competitive! Ironically, TRIPS could lead to somewhat similar situations; where an innovator will have less or no incentive to search for cost efficient processes once they can establish a monopoly in the product market for a duration of 20 years. Historically, declining competitiveness of the US and British synthetic dye industries vis-à-vis the Germans in the early 20th century and US automobile industry vis-à-vis the Japanese in the mid-20th century have primarily been attributed to the cost inefficiency of those countries under strong product patent regime. The consumer may therefore have to pay high prices for inefficient processes of novel drugs under TRIPS- which is in sharp contrast with the stated objectives of the WTO to raise global cost efficiency and, thereby, consumer welfare!

In the light of above discussions it is of paramount importance to debate the whole gamut of issues related to TRIPS and its impact on drug prices inside the parliament and outside. Any attempt to scuttle it has to be resisted tooth and nail.