Adverse Reaction

India’s radical challenge to the global patent regime

01 June, 2013

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IMAGINE THAT YOU HAVE just been diagnosed with a particularly aggressive cancer, one that slowly curdles your blood, clogs your lungs, and suffocates your brain. You haven’t got long to live: less than a third of people with your condition live longer than five years past the date of its discovery. And that’s just mere living. Not necessarily savouring, or thriving, or loving—just continuing to breathe, likely in a hospital, possibly in a coma, and maybe on life support.

Now, imagine someone offers you a drug that is guaranteed not only to extend your life for five, ten, even fifteen years, but that could also force your cancer into complete remission and allow you to live a rich, active life into your old age. All you have to do is take this pill once or twice a day. How much would you pay for that pill? How much would you spend to save your own life? Eight thousand rupees a month? What about 80,000—or even 800,000? And if this miracle drug existed, how much should its maker charge you?

ON MONDAY, 1 April, a two-judge bench of the Supreme Court delivered its ruling in a dispute between the Indian government and the Swiss pharmaceutical giant Novartis AG. Novartis was seeking to secure a patent for a new version of a blockbuster cancer drug called Gleevec, which was saving hundreds of thousands of lives around the world. The US and at least 35 other countries had already approved patents for the drug, but Indian authorities had so far been intransigent.

However it came down, the ruling would have major implications. A patent would grant Novartis monopoly rights to manufacture, market, and sell Gleevec in India until at least 2018. This would curb the manufacture of generic copies, which Indian pharmaceutical corporations had been producing for more than a decade. That would frustrate domestic companies’ attempts to profit from the drug, but it could also hurt patients both here and abroad: Indian generic versions of Gleevec were available, in countries where Novartis lacked patent protection, at roughly Rs 100,000 per patient per year, less than one-twelfth the cost of Novartis’s branded version.

Objectors to Novartis’s patent application (including the national Cancer Patients’ Aid Association and the Indian generic pharmaceutical manufacturers Cipla, Ranbaxy and NATCO Pharma Ltd) maintained that this new version of Gleevec was insufficiently inventive to be worthy of a patent. “The argument was that it was merely a marginally improved form of an old substance,” Shamnad Basheer, a professor at the National University of Juridical Sciences, Kolkata, who was an intervenor-cum-amicus-curiae in the case, told me. As a result, the objectors said, Novartis’s attempts to secure a patent should be quashed, and the generic production of Gleevec should be allowed to continue unabated.

Outside the court, other critics accused Novartis of trying to patent this slightly tweaked version of an older invention because it was a relatively cheap and easy way to extend the company’s international monopoly over the drug—a practice contemptuously referred to as “evergreening”. If Novartis were allowed to evergreen its patent, critics said, the court would be rewarding the company (with guaranteed profits) for an invention that had no additional value for society—and this would no doubt encourage other pharmaceutical companies to attempt to do the same.

Novartis, dismissing such accusations, asserted that Gleevec was medically superior to older forms of the same substance, and that a patent would help foster other important inventions. “The case was about protecting intellectual property rights to help further innovation,” Ranjit Shahani, the managing director of Novartis India, told me. “Patents are fundamental to innovation, and we are talking about a lifesaving drug.”

THE PATENT BATTLE OVER this lifesaving drug kicked off in July 1998, when Novartis first applied, at the Chennai Patent Office, for a monopoly over Gleevec. At the time, the company already held patents outside of India for a molecule called imatinib, the chemical on which Gleevec was based. Those patents extended to various unspecified compounds of imatinib, which might reasonably be thought to include the main ingredient in Gleevec. Though this family of chemicals seemed highly promising, and therefore worthy of patent, they had not yet been approved for human use.

The story of Gleevec’s development begins in 1960, when university researchers discovered a non-inheritable genetic abnormality in the vast majority of people suffering from chronic myeloid leukaemia (CML), an aggressive cancer that causes the body to produce excess quantities of white blood cells. (Worldwide, nearly 1.5 million people suffer from the disease, and there are an estimated 12,000–24,000 new cases in India every year.) Over the course of the next quarter century, scientists in the US and Europe, many of them working for publicly funded institutions, investigated this abnormality, and were eventually able to link it, and the onset of CML, to a single protein. A dozen years later, in 1996, two researchers—Brian Druker at Oregon Health & Science University, a state-funded institution in the US, and Nick Lydon, a scientist at a European pharmaceutical company that became part of Novartis—discovered that the functioning of the protein could be disrupted by a chemical called STI571, which was later renamed imatinib.

The first trial of imatinib in human subjects was conducted in the US, in 1998, the same year that Novartis filed its Indian patent application for Gleevec. The results were astounding: all 31 of the patients in the trial showed complete remission of their cancer. But Novartis, which had partially funded this clinical trial, had to be convinced by Druker that it was on to a winner. Eventually, the company paid heed; in 2001, it gained approval from the US Food and Drug Administration, in one of the fastest drug reviews ever, to make the drug publicly available. Novartis began to market the drug in the US as Gleevec and internationally as Glivec.

Gleevec was a wonder drug. “More than any other medicine in the history of cancer … [Gleevec] would signal the arrival of a new era,” the oncologist Siddhartha Mukherjee wrote in his Pulitzer-Prize-winning history of cancer, The Emperor of All Maladies. Before Gleevec, the progression of CML was grim: 30 percent of patients died within five years of diagnosis, the vast majority of them from infection, haemorrhage, or the sludging of cancerous blood cells in the lungs (leading to respiratory failure) or the brain (leading first to coma, and then death). Gleevec, however, improved this prognosis by a factor of three: roughly 90 percent of patients, taking the pill once or twice per day, survived more than five years past their diagnosis. “Gleevec has changed the landscape of treating CML, and it has given people a new lease of life,” Shahani said. “It’s a gift of time, really.” That gift has been handsomely rewarded: last year, worldwide, Novartis made $4.7 billion from the drug, over 8 percent of its total revenues.

Protesters in New Delhi in March 1999 object to patent standards promulgated during the formation of the WTO. SUNIL MALHOTRA / REUTERS

Monopolising this miracle in India had proven difficult. Novartis first applied for its imatinib patent, in the US, in 1994. (The patent was granted two years later.) At the time, India, unlike many other countries, did not allow monopolies over food or medicine products. Only the processes of manufacturing a food or medicine could be legally monopolised. As a result, Novartis had never sought a patent in India for the family of substances covered by its US patent. In 1995, however, the formation of the World Trade Organization (WTO) began to force Indian patent law into line with US and European standards, which permitted product patents. Although India was given 10 years fully to comply with the new regulations, it was soon required to begin receiving patent applications for drug products. These applications would be considered following the so-called “mailbox procedure”: after receipt, they would lie dormant until the 10-year period was up, and then be considered by the relevant patent authority.

Because the original form of imatinib and its family of various unspecified compounds had been publicised, through the US patent application, before 1995, they were considered under Indian patent law to be “known substances”, and would therefore be ineligible for a patent in India, either then or in a decade’s time. Instead, Novartis filed a mailbox application for the main ingredient in Gleevec, which the company said was a modified version of imatinib not covered by the original patent. Then, in 2002, after Novartis had been granted approval to market Gleevec in the US, the company applied for, and eventually received, exclusive marketing rights in India over the apparently modified drug. These rights would last for five years, or until the rejection of the patent, whichever came first. Equipped with this sanction, Novartis began selling the drug in India at Rs 120,000 per patient per month.

IN 2005, as the internationally agreed requirements for patent laws came into effect, India moved to retain something of the strict standards of its earlier patent regime. Although it now had to accept product patents, it created a legal requirement that new forms of a known substance would only be eligible for monopolisation if they resulted in the “enhancement of the known efficacy” of the original drug. In other words, modified versions of a chemical could only be patented if they did what the original chemical was designed to do, and did it better.

This created a problem for Novartis. In its mailbox application, the company had claimed that the modified version of imatinib had better physical properties than the original family of compounds—as a powder, its grains flowed more easily over one another, it decayed more slowly, and it absorbed less moisture from the atmosphere. On the face of it, these could hardly be expected to meet the standard of efficacy newly enshrined in Indian law.

As the ink was drying on the revised regulations, the Novartis application came under heavy fire. Before it could even be taken up for consideration, five different petitioners, including NATCO Pharma—which had recently been enjoined by Novartis from marketing a drug based on imatinib in the UK—and the Cancer Patients’ Aid Association, filed legal objections asserting that the modified form of imatinib was an obvious (and therefore unpatentable) development of the original compound, and that it failed to meet the standard of improved efficacy. Novartis appeared likely to fail in its patent application, and lose its lucrative marketing rights.

The company was forced to switch tack. In order to “reinforce its claim for patent … and to bring its claim within the four corners of the changed law”, the Supreme Court wrote in its April decision, Novartis tweaked its application. In its amended filings, the company now averred that the modified version of imatinib had higher “bioavailability”, a measure of how much of any given dose of a drug reaches its target tissue (but not of the effect it has once there).

Indian authorities didn’t buy Novartis’s claims. When the case was eventually reviewed, in December 2005, the pharmaceutical company’s argument for efficacy was tossed out—along with its patent application and marketing rights—by India’s Assistant Controller for Patents and Designs, who handed down five separate orders against Novartis, one for each of the objections that had been made.

A complex series of legal battles ensued, during which Novartis accused the country of failing to meet its international trade obligations. But the objectors continued to press their case. Finally, in June 2009, India’s Intellectual Property Appellate Board (IPAB) ruled that, although the modified form of imatinib was indeed a novel, non-obvious invention, its claims to enhanced efficacy did not meet the benchmark of the law. “Since India is having a requirement of higher standard, what is patentable in other countries will not be patentable in India,” the IPAB wrote.

Quoting an earlier ruling in the case, the board said that the 2005 efficacy requirement was introduced by the government into India’s patent law “to prevent evergreening; to provide easy access to the citizens of the country to life saving drugs and to discharge their constitutional obligation of providing good health care to its citizens”. The board also expressed concern over the price of the drug. Gleevec, it said, “is too unaffordable to the poor cancer patients in India. Thus … a grant of product patent on this application can create a havoc to the lives of poor people and their families affected with the cancer for which this drug is effective. This will have disastrous effect on the society.”

A shopkeeper in Allahabad sells an Indian-manufactured generic version of the life-saving cancer medicine Gleevec. The price of generic Gleevec is around Rs 100,000 per patient per year, roughly one-twelfth of what Novartis’s branded version costs. RAJESH KUMAR SINGH / AP PHOTO

Novartis, its application rejected, sidestepped an appeal to the Madras High Court and took its case directly to the Supreme Court.

THIS APRIL, when the Supreme Court finally handed down its ruling in Novartis AG v. Union of India and Others, the case had dragged on for four years, through several rounds of painstaking arguments, lobbying on both sides, and intrigue. (At one point, in 2011, when hearings had reached an advanced stage, Justice Dalveer Bhandari was forced to recuse himself from the case; health activists had discovered that he had participated in at least two international conferences organised by the Intellectual Property Owners Association, whose members include Novartis and other multinational pharmaceutical companies.) Justice Aftab Alam and Justice Ranjana Prakash Desai, like the IPAB before them, were acutely aware of the societal ramifications of their decision. “The Court was urged to strike a balance between the need to promote research and development in science and technology and to keep private monopoly (called an ‘aberration’ under our Constitutional scheme) at the minimum,” Alam wrote. “The Court was also reminded that an error of judgment by it will put life-saving drugs beyond the reach of the multitude of ailing humanity not only in this country but in many developing and under-developed countries, dependent on generic drugs from India.” The questions on which they ruled, however, involved legal and scientific technicalities: broadly, what the statutory meaning of “efficacy” was, and whether the modified form of imatinib showed enhancements in efficacy over the original compound.

On both points, the court was clear. “What is ‘efficacy’? Efficacy means ‘the ability to produce a desired or intended result’,” Alam said. “In other words, the test of efficacy would depend upon the function, utility or the purpose of the product under consideration. Therefore, in the case of a medicine that claims to cure a disease, the test of efficacy can only be ‘therapeutic efficacy’.” For the modified form of imatinib to qualify for a patent, it had to do a better job of curing CML (and not just of being stored at room temperature) than the original compound had done.

Did the modified form pass this test? Most certainly not, the court said: although some level of bioavailability was necessary for a drug to have therapeutic effects, an increase in bioavailability was not sufficient to demonstrate improved therapeutic efficacy. In short, there was no proof that the modified form of imatinib met India’s stringent patent standards. Novartis’s application was rejected once and for all.

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IN THE DAYS AND WEEKS FOLLOWING the Supreme Court’s ruling, the case was endlessly analysed, its significance taking on ever-greater proportions. Headlines in domestic news outlets and newspapers around the world described the ruling as “landmark”. Although some observers said the decision would have little effect on the pharmaceutical industry’s status quo, others believed it was of global import.

Reactions to the judgement were highly polarised, but commentators on both sides of the issue tended to focus on how the ruling resolved (or exacerbated) a tension that seemed inherent in the prevailing patent system—between innovation on the one hand and public health on the other. Many thought that the court had successfully defended a critical balance, embodied in Indian law, between granting monopolies to incentivise genuine inventions, and promoting public health by allowing competition to drive down costs and increase access to affordable medicines. An opinion piece in The Hindu held out hope that the Indian example would shape the patent regimes in other countries. “The symbolic opportunity presented by the Supreme Court’s backing of Indian patent law,” the authors wrote, “is a real threat—and pharma CEOs in New York, London and Basel get it. In the long run, as more countries understand the Indian model, appreciate its legitimacy, and reflect on its benefits to both public health and innovation, they might want the same.”

The Nobel-Prize-winning international aid agency Médecins Sans Frontières (MSF), which waged a six-year international campaign urging Novartis to “Drop the Case”, had feared that the company’s success would unleash a pack of new lawsuits intent on killing the manufacture of generic versions of other lifesaving medicines, many of which were produced in India and sold at affordable prices in developing countries around the world. MSF believes that, if the ruling had favoured Novartis, “access to many key medicines that MSF needs everyday in its operations would be seriously affected,” Rohit Malpani, the agency’s director of policy and analysis, told me. An editorial in the New York Times took a similar position, stating that the decision “could help poor patients get drugs at prices they can afford while preserving an incentive for true innovation”.

Critics of the ruling responded with equal vigour. An editorial on the Forbes website suggested that, given India’s stance on commercial rights, the Times’ position was “galling”. Shahani, the Novartis India managing director, said that the ruling was not only bad for innovation, but bad for India, too. “The bulk of the innovation in the world is borne by big pharmaceutical corporations,” he told me. “If we aren’t going to be protected in India, we don’t see any reason to invest here. Without a patent system there is going to be no innovation.” The Obama administration, concerned about what it saw as India’s degradation of patent rights, put India on a trade blacklist.

In a press release following the judgement, Novartis stated that it was “committed to patients and access to medicine. Through its full donation programs, Novartis provides Glivec free of charge to 95% of patients prescribed the drug in India, currently more than 16,000 patients. The remaining 5% of patients are either reimbursed, insured, or participate in a very generous co-pay program.” Those 16,000 patients, however, are only the ones prescribed Novartis’s version of the drug—a fraction of the total number of people in India living with, and dying from, CML.

THE ANTINOMY BETWEEN innovation and public health highlighted by the Supreme Court’s ruling has many sources. In some respects, the tension is a product of an exceptional—some might say aberrant—patent regime that has developed in India since Independence. It’s also a product of the way that domestic patent laws have interacted, and conflicted, with multilateral trade agreements and international standards for intellectual property rights, which have been promulgated to protect and promote commercial interests. Some scholars and policy experts, however, believe that the conflict is inherent in the very structure of patents, and that the international system for incentivising innovations for public health must be radically reimagined.

A patent is essentially a temporary monopoly granted to an inventor to manufacture, market, and sell inventive products or processes. Historically, the existence of such monopolies has been justified on three broad grounds. First, on moral grounds: that an individual has a natural property right to his ideas, and that society is obligated to enforce that right. Second, on economic grounds: that property rights are the most efficient way of producing wealth, and that innovators deserve a reward for the services they render to society. Third, on consequentialist grounds: that the patent system encourages inventions, and that society is therefore better off because of it.

India’s patent laws have their roots in a 19th-century British system founded on these principles. In the first half of the 20th century, however, it became clear that the system favoured inventors abroad, who generally enjoyed greater access to infrastructure, resources, and technologies that facilitated their ingenuity. This proved especially true in the case of pharmaceuticals, and, by the end of World War II, India was reliant on foreign manufacturers for its supply of essential drugs, which were priced at constantly soaring rates.

In the 1950s, in an attempt to invigorate local manufacturing and create greater balance between domestic and foreign industries, the government appointed N Rajagopala Ayyangar, a justice of the Madras High Court who would later serve on the Supreme Court, to chair a review of the existing patent regime. His report, submitted in 1959, included some startling discoveries. Foreign companies held between 80 and 90 percent of the patents granted in India, and more than 90 percent of patented products (including drugs) weren’t even manufactured and sold in the country. Instead, these patents were obtained simply to block their exploitation in India, or, in some cases, as a basis for bankable lawsuits against potential infringers.

The report concluded that foreign companies’ use of patents was inimical to the commonweal. “Justice Ayyangar recognised that we couldn’t continue to give out patents on products, especially pharmaceutical products, which were essential to the wellbeing of the public,” Basheer, the professor at the National University of Juridical Sciences, told me. “The report laid bare the inherent divide between a need to incentivise innovation and a need to ensure medicines are affordable and freely available.”

Ayyangar’s solution was elegant and powerful. He noted that a number of countries, chief among them Germany, barred patents for drug or food products. “I have considered the matter with the utmost care,” he wrote, “and have reached the conclusion that the chemical and pharmaceutical industry of this country would be advanced and the tempo of research in that field would be promoted if the German system of permitting only process claims were adopted.” Refusing product claims, Ayyangar believed, would boost the production of foods and medicines, making them available in sufficient quantities and at the lowest possible cost to the public.

A decade after Ayyangar’s report, parliament enacted the Indian Patents Act of 1970, which took up the justice’s recommendations and restricted patents for food or medicine to their manufacturing processes. The new law had profound effects. Up until the early 1970s, the Indian pharmaceutical industry was dominated by multinational corporations, which held 68 percent of the market share, according to studies conducted by Sudip Chaudhuri, a professor of economics at the Indian Institute of Management Calcutta. The 1970 act was “instrumental in the development of our generic companies,” Chaudhuri told me, “and it helped establish a market where important drugs were being produced in the country.”

The reformed patent regime also led to steep drops in the prices of important and lifesaving medications. In 2001, for example, Ciprofloxacin (a popular wide-spectrum antibiotic used to treat a range of common and potentially deadly infections, such as E. coli and certain strains of Staphylococcus) was being sold in the US exclusively by multinational pharmaceutical corporation Bayer at $0.95 per tablet. In India, 78 generic manufacturers were producing Cipro; the competition drove the price of a tablet in India down to just $0.04.

The Indian pharmaceutical industry is worth Rs 70,000 crore (Rs 700 billion), and Indian manufacturers export about $10 billion of generic medicine every year. On average, however they invest only 4.5 percent of their revenues into R&D. MANJUNATH KIRAN / AFP / GETTY IMAGES

Because of their affordability, India’s drugs became highly sought after by other developing nations with relatively low purchasing power but significant health needs. A lucrative export market blossomed. Once Indian companies were able to produce and export drugs in bulk, they began to burgeon and grow in influence. By 2003, generic companies controlled up to 73 percent of the country’s pharmaceutical market, which is today valued at Rs 70,000 crore (Rs 700 billion). “This growth has not only contributed to a greater number of important drugs being introduced in the Indian market at lower prices,” Chaudhuri said, “but also equally towards the export to less developed countries of drugs at a far cheaper price than those sought by the big pharmaceutical corporations.” But, because they could rely on innovations from the West, domestic manufacturers were investing almost nothing in the research and development of new drugs.

DURING THE SAME PERIOD that India was working to reform its patent regime in order to boost domestic industry and improve access to affordable medicines, developed nations were pushing to create uniform international copyright and patent regulations that would accord with those already entrenched in the West. Before World War II, intellectual property rights had rarely been a part of multilateral trade negotiations. With the advent, in 1947, of the General Agreement on Tariffs and Trade (of which India was a charter member), developed nations began trying to enforce their patent standards around the globe.

These attempts reached their peak in the course of the Uruguay Round of international trade negotiations, conducted between 1986 and 1994. During the talks, the US in particular exerted substantial pressure on developing countries to agree to intellectual property law guidelines as a mandatory condition of their membership in the soon-to-be-formed WTO. In return for cleaving to these regulations, countries would be bestowed with “most-favoured nation” status, which would entitle them to a host of trade advantages, including access to wealthy consumers in the West. “Essentially, rich countries told the poorer countries, ‘If you want us to open up our markets, you have to provide strong intellectual property protection’,” Thomas Pogge, an ethics professor at Yale University who works on patent issues, told me.

The protections demanded by the West ran directly counter to the patent regime conceived by Ayyangar and initiated by India in 1970. In particular, patents had to be made available for both processes and products, including foods and medicines. These conditions formed part of the Agreement on Trade Related Aspects of Intellectual Property Rights (commonly called the TRIPS agreement), which all WTO members were required to sign.

TRIPS was a major imposition on countries such as India, which already had a functioning patent system designed to benefit domestic industries and consumers. “There was no real need for a TRIPS regime,” Pogge said. “But this demand was a product of fantastic lobbying by the software, entertainment, and, of course, the pharmaceutical industry. They chiefly made the demand on Bill Clinton, who was then US president. Even Bill Gates, who is now a hero in the healthcare battle, was involved in the lobbying as chairman of Microsoft.”

TRIPS took effect on 1 January 1995, three-and-a-half years before Novartis filed its patent application for the modified version of imatinib. But India and other developing countries had until 1 January 2005 to implement the agreement, and it was only then that Novartis’s application would be taken out of the mailbox. In the course of that decade, domestic dissension over the patent regime change became increasingly bitter. “India had always followed a different path, right from the 1970s,” Anand Grover, a senior advocate who represented the Cancer Patients’ Aid Association in the Novartis case, told me—and many within the country wanted to stay on that path, maintaining the Indian Patent Act’s relatively strict standards. The activist BK Keayla and a handful of NGOs led a movement against the TRIPS agreement, and there was aggressive opposition from the Communist Party of India (Marxist), Chaudhuri told me. Nevertheless, in 2002, lobbying by the pharmaceutical companies helped push through a raft of amendments to the 1970 act, including one that allowed for the sort of exclusive marketing rights that Novartis soon sought over Gleevec.

In the midst of this policy upheaval, Indian generic manufacturers were thrown into a panic over the uncertain fate of the industry, and began to realign their operations with a regulatory future that they could but dimly foresee. Of the largest manufacturers, only Cipla continued to focus a significant proportion of its energies on serving the domestic market. Most other major Indian drug producers, such as Ranbaxy—which recently pleaded guilty in US federal court to seven criminal counts after being accused of a host of illegal activities and gross malpractices, such as selling ineffective drugs, sometimes mixed with tiny particles of glass, to consumers around the world—geared up to become outsourced manufacturing hubs for multinational pharmaceutical corporations.

A technician works in a lab on the outskirts of Mumbai, producing drugs for Indian generic medicine giant Cipla. RAFIQ MAQBOL / AP PHOTO

As India approached the New Year’s Day 2005 deadline, it was still not yet fully compliant with the TRIPS agreement. Fearing legal, political and economic blowback from the international community if it did not close the gap between national and international standards, a newly formed United Progressive Alliance government implemented a Presidential Ordinance, on 26 December 2004, that temporarily made India’s patent regime consonant with TRIPS.

This bought the country some time to devise a more permanent solution, but the ordinance was due to expire at the end of the following March. Before that point, the government needed once and for all to pass a bill amending the 1970 Patents Act so that it squared with the international regime. Opposition to TRIPS, especially from the Left, which constituted the second-largest bloc in the ruling alliance, remained fierce, and, eventually, the government was forced to concede to several of the Left’s demands. These included a provision that, in certain circumstances, would force companies to license manufacturing and marketing rights over essential patented products, such as foods and medicines, to domestic manufacturers. They also included the insertion into the Patents Act of section 3(d), the clause that set the standard of enhanced efficacy that Novartis, eight years later, would fail to meet.


THE SIGNIFICANCE OF SECTION 3(D) of the Indian Patents Act is hard to overstate. The parliamentary debates that led to the insertion of the clause make clear that it was specifically designed to combat evergreening, of which Novartis’s attempts to patent Gleevec were cited in the Lok Sabha as a primary example. Efforts to prevent evergreening, or what the industry calls “incremental innovation”, were not likely to be popular with multinational pharmaceutical corporations: in a forthcoming paper, health researchers Chan Park, Arjun Jayadev and Achal Prabhala estimate that seven out of every 10 drugs patented in the US and approved by the Food and Drug Administration between 2005 and 2007, which are considered innovative in most developed countries, would fail to meet the standards of Indian patent law, including the therapeutic efficacy criterion articulated in April by the Supreme Court.* This suggests that 70 percent of new patented drugs approved for use in the West could be legally manufactured by Indian generic pharmaceutical companies.

At the same time, if 3(d) could be shown to protect the interests of Indian generic manufacturers, and secure the supply of important drugs at radically reduced prices, multinational pharmaceutical companies would likely have a much harder time justifying their drugs’ costs to consumers in other markets. India’s stringent patent requirements might be seen by other countries—including some in the West—as a worthy precedent. “Novartis or any of the other big pharma companies—none of them are looking to make money directly out of India,” Rohit Pradhan of the Takshashila Institution, an Indian think tank, told me. “Their prices are well beyond what most Indians can afford. But they’re afraid that the Indian patent regime will give the US policy makers the idea, ‘Why are we paying so much for drugs when countries like India are paying one-twentieth of it?’ They fear that this contagion can kind of spread and that other countries will look to India’s example.” According to Grover, the Gleevec case wasn’t so much about the drug itself as it was about the interpretation of 3(d), which could prove crucial to the determination of a number of other patent applications in the forthcoming years. “Novartis never in their wildest dreams thought that they’d get a patent for Gleevec,” he told me. “Their whole strategy was to have 3(d) watered down.”

Ranjit Shahani, the managing director of Novartis India. The company has threatened to pull research and development funding out of India in response to April’s unfavourable Supreme Court ruling. RAFIQ MAQBOL / AP PHOTO

Ranjit Shahani, however, claimed that Novartis’s decision to do battle over the Gleevec patent was simply standard operating procedure, designed to protect the company’s intellectual property rights and adequately reward its investment in innovation. “The whole issue has been obfuscated by the press,” he told me. “We try and get every one of our inventions patented as a matter of course. At the end of the day, we need to protect our interests.”

Shahani’s argument is a common one in the pharmaceutical industry, which claims that hundreds of millions, if not billions, of dollars need to be spent on research and development in order to discover even a single successful drug—costs which generic manufacturers never have to bear. The high price of drugs, the reasoning goes, is the only way to recoup such investments, and patents are the best way to secure those prices and to incentivise the industry to continue its quest for innovation.

Sceptics, however, contest these figures, and estimate that big pharmaceutical companies spend only $50 million to $250 million researching and developing each drug. “The claim of the MNCs that they spend up to $2 billion on research and development is baloney,” Grover told me. “Within R&D or what they call ‘drug discovery and drug development’, about 20 percent to 30 percent is all that they spend on actual development of a drug. The rest goes into marketing costs, legal fees—which are exorbitant—advertisements, payment of salaries, et cetera. They hike up prices to phenomenal extents and recover their costs within six months.” Gleevec is regarded in some quarters as a prime example of this disjuncture between innovation costs and drug prices. James Love, the director of Knowledge Ecology International, has estimated that Novartis, after adjusting for the risk of failure and the opportunity costs of capital, spent under $100 million to develop the drug. That’s less than what Novartis makes from worldwide Gleevec sales every 13 days.

A lack of transparency in the pharmaceutical industry, which guards its accounting books as jealously as it does its proprietary research, makes claims on both sides of the argument difficult to corroborate. But one thing that is clear is that pharmaceutical companies, though they contribute significantly to the development of new drugs, neglect to acknowledge the vast amounts of direct and indirect public funding that make the discovery of any new treatment possible. Almost all of the basic science that underlies pharmaceutical innovation has been funded by a combination of public universities and government grants in the US and, to a lesser extent, Europe and Japan. Secondary research critical to drug development is also largely funded by the public. Love has written that only 10 percent of the money that went into the identification of imatinib as a potential cancer-fighting agent, and into the first clinical trials, came from Novartis; 50 percent came from taxpayers via the US government, 30 percent came from an NGO, and 10 percent came from a public university. As Arnold Relman, an oncologist at Harvard Medical School, wrote in the Journal of the American Medical Association, in the case of Gleevec, “Novartis was not the ‘innovative force’.”

ALTHOUGH MUCH OF THE BLAME for high drug prices has been laid at the feet of multinational pharmaceutical companies, many critics of big pharma say the fault lies with the patent system itself. “Patent monopolies are an antiquated and incredibly inefficient way to finance drug research,” Dean Baker, the co-director of the Center for Economic and Policy Research, a progressive think tank in Washington, DC, told me. Malpani, the policy director at MSF, agreed. The fundamental issue, he said, is that “the patent system does not meet the public health needs or the economic realities of poor countries.”

In 2001, the first drug that entered the market to help manage the early stages of HIV cost $741 per patient per year. In most countries, prevailing patent regimes barred generic manufacturers from reproducing these drugs and selling them at more affordable rates. At that time, however, Indian generic companies had the benefit of the country’s pre-TRIPS regime. They were able to legally manufacture HIV drugs, and begin exporting them to other developing nations. “It was only when Indian companies … entered the market that prices began to drop dramatically as a result of competition,” the World Health Organization (WHO) wrote in an April 2012 report. Within a decade, the price of first-line HIV drugs fell more than 90 percent to $61 per patient per year for the lowest-cost generic. Today, a majority of the 8 million people worldwide who receive anti-retroviral drugs from generic companies rely upon Indian manufacturers, and India exports about $10 billion worth of generic medicine every year. As Malpani put it, “The role of Indian companies in providing affordable medicines to developing countries around the world is immense.”

Under the current patent regime, profits on drug sales, guaranteed by monopolies, are the only major incentives for innovation. As a result, research is directed toward conditions that are of most concern to individuals in wealthy markets, where the greatest profits can be reaped. Conversely, diseases that are concentrated among the poor are almost never an attractive target for pharmaceutical research and development, since the poor have very little money to spend on drugs. (Research into HIV/AIDS treatments, which is relatively advanced, has been heavily funded and otherwise incentivised by the public, particularly through the US government.) The patent system does little to foster inventions aimed at fighting diseases that most urgently afflict the majority of the world’s population.

In my interview with Pogge, the Yale ethics professor, he referred to this as the “10/90 problem”: only 10 percent of all pharmaceutical research is focused on diseases that account for 90 percent of the global burden of disease (a measure that combines years of life lost due to premature mortality and years of life lost due to time lived in states of less than full health). Malaria, pneumonia, diarrhoea (from which more than 100,000 children in India die annually, according to a recent Lancet study), and tuberculosis, which together account for 21 percent of the global disease burden, receive only 0.31 percent of all public and private funds devoted to health research. “This gap is a direct product of the existing patent regime,” Pogge told me. “When you have such a system, pharma companies often prefer to invest in ailments most affecting the rich, including trivial things such as hair loss and acne.” At the same time, however, affordability is only one part of access to medicines; a robust public health system is also essential if drugs and other necessary treatments are to reach the majority of people who need them most.

When it comes to diseases that are spread relatively evenly across the world—especially non-communicable diseases such as cancer, cardiovascular disease, and diabetes—people in poor countries often have to pay the same prices for medication that people in wealthy nations pay: like Hermès handbags and Prada pumps, you have to charge for pharmaceuticals at least as much in Delhi as you do in New York. (Otherwise, you would upset the people who pay more, and they would find ways to lower—or circumvent—your prices.) Because individuals are generally willing to shell out large amounts of money on their health, and the people in wealthy markets have, relatively speaking, a lot of money, prices for essential drugs go through the roof. “A pharmaceutical company that is helping poor patients benefit from a patented medicine would be undermining its own profitability,” Pogge explained. “It would be paying out of its own pockets to make the drug available to them, it would be curtailing a disease on which its profits depend, and it would be losing affluent customers, who find ways of buying, on the cheap, medicines meant for the poor.”

(Indeed, it isn’t only in developing nations that anger over the price of essential medicines has come to a head. At the end of April, more than 100 experts in CML—oncologists and researchers from around the world, many of them recipients of funding from pharmaceutical companies—signed an editorial, in the influential haematology journal Blood, decrying the astronomical prices of drugs, including Gleevec, which had climbed to over $100,000 per year in some cases. “As physicians, we follow the Hippocratic Oath of ‘Primum non nocere,’ first—or above all—do no harm,” they wrote. “We believe the unsustainable drug prices in CML and cancer may be causing harm to patients. Advocating for lower drug prices is a necessity to save the lives of patients” who cannot currently afford such drugs.)

The big multinational pharmaceutical manufacturers counter that there would be no generic market without the innovations that they fund and that patents incentivise, protect, and perpetuate. “Without patents there is no generic product,” Shahani told me. Only a handful of patented drugs—0.9 percent of the total drugs in the market, according to studies conducted by the research firm IMS Health—are marketed and sold, under their patents, in India. This is a sign, Shahani said, that the nation is not fostering pharmaceutical innovation.

But it could also be a sign that no one sees a financial upside in creating innovations for, or marketing drugs in, India. Critics to whom I spoke said that the lack of patented drugs in the domestic marketplace is an indication that big pharmaceutical companies aren’t even trying to make their products available in the country. Investment in domestic research is also sliver-thin. Last year, Novartis, which threatened to kill off its Indian research and development funding in the wake of the April Supreme Court ruling, spent a meagre 0.03 percent of its annual Indian revenues on R&D; that’s only Rs 29 lakh (Rs 2.9 million)—the price of two fully equipped Honda Civics. That said, local manufacturers aren’t innovating either. As of March 2010, Indian pharmaceutical companies invested, on average, only 4.5 percent of their total revenues on research and development—a figure that includes the money spent on researching ways to produce generic medicines. A patent regime that includes robust standards such as 3(d) may therefore force Indian generic companies to focus further on developing generic medicines, at the cost, perhaps, of new inventions.

The inability to reconcile supposed expenditure on research and development with the price of drugs, or to align pharmaceutical innovations with public health needs, is now leading to calls for new approaches to international pharmaceutical innovation, and for an overhaul of the global patent regime. “Alternative approaches, instead of more of the same, are clearly needed,” Malpani said. “We need to create a system of R&D that generates incentives for the public health needs of low income countries. Governments must recognise that continuing to bet on the patent system will not solve their problems.”

| FOUR |

IN THE US IN THE MID 1800S, a popular campaign to revamp the patent regime received substantial support. Its goal was to scrap monopolies in favour of a system that would reward innovators with a prize. “If there is to be legislation, it should be directed to the protection of the inventor against the monopolizing tendencies of the capitalist,” wrote the New York Times on 16 October 1851, in one of several editorials endorsing a law that would replace the patent system. But by the late 1800s, prizes began to lose popularity, and the patent system entrenched itself as the sole mechanism for sparking innovations.

Today, the global patent regime appears to be broken, and important people are starting to take note. There is growing recognition of the need to reconceive—and even replace—the current system. Such alternatives, devised by health activists, economists and philosophers, have recently been floated in the US Senate and debated at the WHO. “We need to really think more about how we can solve the great innovation problem,” Love said. “The best way to do it, I believe, is to delink research and development costs from the price of a drug. And for that we need to think beyond the present regime.”

In April 2012, the WHO recommended a global binding treaty to support innovation through a mechanism other than patents and pricing. Under the treaty, countries would be obligated to spend 0.01 percent of their GDP on government-funded research devoted to developing drugs for neglected diseases. The WHO proposal, however, had trouble getting off the ground. “At the moment, there’s no global consensus on the WHO sponsored treaty,” Dr Krishna Ravi Srinivas, an associate fellow at Research and Information Systems, a New Delhi think tank, told me. “Different countries face problems with different diseases. India may be concerned with tuberculosis and malaria, but not so much with sleeping sickness, which is a problem in Africa. So it’s very hard to arrive at priorities.” Now, the plan seems to have had its wings completely clipped by the US, who strongly objected to it.

Incentives for Global Health, a not-for-profit organisation led by the Yale ethicist Pogge and his collaborator, Aidan Hollis, an economist at the University of Calgary, has a more ambitious idea. The organisation is advocating the establishment of a “Health Impact Fund” that would incentivise innovative drugs according to their health impact, measured by both the quantity and quality of life that each drug generated. Awards would be handed out only upon a medicine being priced no higher than the lowest feasible cost of production and distribution, and governments would contribute to the fund as a public good, so that its cost would be spread across a pool of benefactors.

“When you have such a system in place, it would be natural that the most important targets would be diseases that afflict the poor, as that is where a drug can make the most health impact,” Pogge told me. “It would also incentivise companies to produce and distribute drugs at their lowest possible price, as this would ensure wider access, and with access comes greater impact.” Hollis stressed that the proposal requires the cooperation not only of governments but also of big pharmaceutical corporations. “It’s key that this scheme is shown to not replace the existing patent laws, but that it offers a healthy complementary alternative,” he told me. Pogge and Hollis estimate that they would need about $6 billion per annum to sponsor the Health Impact Fund at its nascent stage; if every country contributed 0.03 percent of its gross domestic product each year, the figure could easily be reached.

For his part, Love argues that creating a fund that is merely complementary to the existing regime, and works on a voluntary basis, is an exercise in futility. “Things such as the Health Impact Fund simply do not address the numerous problems inherent in the patent system,” Love told me. “What kind of impact are you going to have by making the scheme voluntary? It merely benefits the pharmaceutical companies. In a country, say India, if you want to create a big fund, and you ask, who wants to register and give up their rights to a patent, no one would say yes. Then what? Our suggestions are more nuanced. We’re not looking at what’s good for pharmaceutical companies, but what’s good for the patients.”

Love and Dr Tim Hubbard, who leads the Vertebrate Genome Analysis Project at The Wellcome Trust Sanger Institute, have proposed that medicines be brought outside the scope of the TRIPS agreement. Their model seeks to replace the existing patent regime with a system under which innovation would be rewarded through prizes. Their suggestions have broadly been captured in a series of bills introduced in the US Senate by Bernie Sanders, an Independent from Vermont. In the most imaginative of his bills, Sanders proposed that exclusive rights to market drugs and biological products be completely eliminated. Instead, pharmaceutical corporations would be rewarded with prize payments to be made out of an $80 billion fund (about 0.55 percent of the country’s GDP), in accordance with judgements made by a “Board of Trustees for the Fund for Medical Innovation Prizes”. The board would consider drugs produced by the first person to receive market clearance for a given substance, and would take into account a variety of criteria, including the number of patients who would benefit from the drug, its therapeutic impact, and the degree to which it addresses priority healthcare needs. In addition, at least 5 percent of the prize money would go to companies that put knowledge, data, materials, or technology into the public domain.

There are serious hurdles to overcome for both these proposals. “The Pogge-Hollis model is closer to reality than many other measures,” Richard Gold, a professor of law at the Department of Genetics in the McGill School of Environment, told me. “I think it’s good that we are thinking of these alternatives. But the model is not without its misgivings.” For one thing, health benefit will be measured in terms of the quantity and quality of life generated by a healthcare invention. “This isn’t a minor problem, but a huge glitch,” Gold said. “Just trying to figure out how to collect the data to measure the health impact of a drug might prove more expensive than actually making it.” The Love-Sanders model, by seeking completely to replace the current patent regime, will also be difficult to realise. “The probability of the Senate passing Sanders’s bills is zero,” Pogge told me. “I completely share with Knowledge Ecology International their concerns about the patent system and its inefficiencies, but you need to be practical. You’ve got to think about ways of bringing about a gradual change.”

ALTHOUGH THE OBSTACLES to reforming the global patent regime are significant, many of the individuals fighting to improve access to affordable medicines feel there is cause for hope. “TRIPS is well entrenched,” Malpani, the MSF policy director, told me. “But that doesn’t mean the patent system cannot be replaced, or at a minimum, supplemented by new approaches to innovation for a range of diseases that have been ignored for far too long.” Grover, the advocate for the Cancer Patients’ Aid Association, is also cautiously optimistic. “The good thing now is that even civil society in the US and the EU has woken up to this,” Grover said. “They are pushing for norms that are more beneficial to innovation, as opposed to the present patent regime.”

But the patent system alone does not determine a country’s access to medicines. The impact that a drug can have depends primarily on the ability to get drugs to the people who need them. “It’s clear that for the very, very poor, for people in intensely rural settings, there is great difficulty in reaching them,” Hollis told me. “So having good drugs can only make so much impact. You really do need a good public healthcare system.”

Only a handful of drugs are sold under patents in India; critics say this is a sign that innovation is not encouraged here. RAFIQ MAQBOL / AP PHOTO

Love counters that although issues of wealth and public healthcare are areas of stark concern, linking the pricing of pharmaceutical products with a perceived expenditure on research and development remains a separate and equally important problem. Malpani agreed. “We need both affordable medicines and a commitment from the government to ensure greater access to medicines,” he said. “The high costs of medicines are an absolute barrier. Lower costs for medicines, which can provide the possibility of expanding access, can provide an incentive for greater spending by the government to expand access to health care.

“There is a broader problem of poverty and health, but concerns about poverty do not excuse inaction on our broken system of medical innovation,” Malpani reflected. “For far too many diseases that predominantly affect the poor, there are no drugs, diagnostics or vaccines. We cannot merely wait till poverty no longer exists. We must recognise that we can take steps now to start to repair our broken system, and to realise that our broken system of medical innovation is a critical cause of poverty.”

* This sentence has been modified since the story was first published in print.