Why SC got it right on Novartis

The judgment will save taxpayers' money without hurting the pharma industry or R&D

In September 2007, Arun Kumar*, a serving officer in the Indian Army, was diagnosed with chronic myeloid leukaemia (CML). For the first three of his years of his treatment, he took the standard prescribed dose of the appropriate medicine, imatinib. Then, owing to a sudden spike in the level of chromosomal abnormality that indicates CML, his doctors switched him to a double dose. Today, after six years of treatment, his cancer is under control. The average monthly cost of his imatinib intake is about Rs 20,000 - and this cost, along with every other aspect of his treatment, is borne by the armed forces - from taxpayer funds. An annual bill of Rs 240,000 for medicines for one individual might sound like a lot of money, but Mr Kumar will be lucky if it stays that way.

For one thing, the forces - like all branches of government - procure generic imatinib. If the government were forced to buy imatinib from Novartis, sold under the brand name Glivec, it would be looking at an annual bill of Rs 30 lakh for Arun Kumar alone, or roughly 12 times what it is currently paying. For another, Mr Kumar might develop resistance to imatinib, at which point it will stop working against his CML, and he will have to switch to dasatinib, the next-level treatment. Dasatinib was originally launched by Bristol Myers-Squibb (BMS), which sells it under the brand name Sprycel at an annual cost of Rs 18 lakh. There is only one generic version of dasatanib available in India. It is produced by Natco and, at Rs 1.1 lakh per year, costs 18 times less - but Natco is currently being sued by BMS for introducing the generic (the outcome of the case is awaited).

This case is the kind of pricing problem we rarely consider in public policy debates around access to medicines, because we forget the government of India - using your money and ours - is the single largest consumer of medicines in the country. Glivec is offered to over 15,000 patients in the country free of cost through a charitable initiative by Novartis, and this is commendable; but none of the hundreds and thousands of public health facilities managed by the government are beneficiaries of this programme. Paul Herrling, the global head of corporate research at Novartis is on record as saying, "90 per cent of all patients diagnosed with that specific form of leukemia get Glivec free from us from our donation program." He should spend more time with his colleagues: according to Novartis' press releases, it is 90 per cent of people using Glivec who get it free. The number of people who need imatinib is far greater than those using Novartis' product. That number, by Novartis' own admission, is about 42,000 people, which means 63 per cent of the patients being treated with imatinib are paying for it in one way or another - and this is why price matters.

The Supreme Court's April 1, 2013 judgment upheld the decision of the Patent Controller to deny Novartis intellectual property protection for Glivec, and this is good for Arun Kumar, good for the country, and good for the market. The judgment, which is clear, detailed and thoughtful - and based on a patent law that happens to be fully compliant with India's obligations at the WTO - has been enthusiastically dissected by people on all sides of the fence.

In the days since the decision, many commentators have put forward a theory that Novartis and their associates have long endorsed: this decision will have long-term negative consequences for patients in India. Three key predictions emerge: pharmaceutical companies will withhold their newest medicines from India, thus endangering human life in the time it takes for generic production to kick in; these companies will end investment in India for research and development, thus impacting the future of innovation in the country; and the environment created by the Supreme Court decision will be regarded as 'hostile', thus preventing us from signing advantageous trade agreements with the rest of the world.

For all the talk, India forms 1.3 per cent of the world's pharmaceutical market by value. Every one of the 20 most valuable medicines in the US market is available in generic form in India. However, only six of those medicines are marketed here by their originator, and in only 2 of those 20 cases was the originator the first to bring the drug to India. Consider atorvastatin, which Pfizer launched under the brand name Lipitor - the highest selling branded drug of all time. Atorvastatin was approved for use in the US in 1996. To date, the brand has not been launched in India; the market is instead served by 56 companies making generic atorvastatin. Western pharmaceutical companies will not neglect India as a result of the Supreme Court decision: they have already been doing so for several decades. You could say this is precisely the problem, and argue that we need a patent regime they are comfortable with. Fine. Except what we would have then is a situation where Novartis launches Glivec in India on the same date as elsewhere in the world - and also at the same price as elsewhere in the world, with no alternative. For the majority of Indians with CML, having imatinib available at an annual cost of between Rs 15 lakh and 30 lakh is equivalent to not having it available at all; neither individuals nor institutions with a public mandate can touch a medicine at that price point. Given the situation, a six-month to one-year time lag, which is what it takes for generic producers to react, is not just a more viable proposition - it's our only proposition.

Novartis has said that innovation in the country will suffer, and to prove its point has announced it will not invest in R&D in India. This would be a concern if Novartis was going to withdraw anything close to the 16 per cent of its global sales it invests in R&D. As it happens, Novartis India currently invests exactly 0.02 per cent of its turnover in domestic research, which at 800 times less than its global research budget is Rs 17 lakh, or the on-road price of a fully-loaded Honda Civic - a figure that is among the lowest in the domestic industry, and one which is unlikely to go much higher regardless of our patent regime, because diseases of the poor have no market and are ill-served by intellectual property protection anyway. Novartis India capped several years of steady growth with a last reported annual turnover of Rs 708 crore ($132 million) and a post-tax profit of Rs 146 crore ($27 million). These are healthy figures, and nothing to sneeze at: there is money to be made in this market.

Nonetheless, should we be worried that the India- European Union free trade agreement is in jeopardy? Yes, but for all the right reasons. The Supreme Court's decision should give the government pause in moving ahead if, as is reportedly the case, the EU continues to insist on aggressive intellectual property and investment provisions that are far beyond the norm. Our government's hand is now forced against signing on to provisions that have the potential to undermine public health, which suggests the EU might have to retract some of its more unreasonable demands if it wants to ink the agreement - and this is cause for celebration.

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* (Name changed to protect identity)
Achal Prabhala works on access to medicines, and Kajal Bhardwaj is a lawyer who works on HIV, health and human rights