Indian Non-Profit Wants To Break Cancer Patents
27 CommentsBy Ed Silverman // March 31st, 2008 // 7:06 am
In a move expected to be challenged by pharma, Cancer Patients Aids Association, a non-government organization is planning to seek compulsory licensing in India for about 20 cancer meds made by Roche, Pfizer, Astrazeneca, Glaxo and Novartis, among others, The Economic Times reports.
CPAA, which has received support from several Indian and global NGOs such as Oxfam and Médecins Sans Frontières, was one of the healthcare groups in the forefront of the successful legal battle against Novartis’ Gleevec last year. While the NGO plans to first approach the health ministry to trigger the CL provision, it is ready to go the Supreme Court if the government rejects to the demand.
“There is no point in fighting patent cases for individual drugs. How many patents will we fight against? It is just unaffordable for patients to pay lots of rupees for these drugs, in addition to paying for other treatment and medicines,” YK Sapru, CPAA’s president, tells the paper. “It’s an emergency situation when thousands of cancer patients are being denied their constitutional right to life. Hence, the government can invoke CL in the public interest.”
Product patent laws in India allow national governments to use compulsory licensing to enable non-patent holders to make and sell patented drugs, the paper writes. While drugmakers say compulsory licensing can be invoked only in the case of “national emergency,” healthcare NGOs say under the Indian patent law the government can use this provision liberally in the “public interest.” During the Gleevec case, health minister Anbumani Ramadoss had threatened invoking CL in public interest.
The government should allow generic companies to market the drug in the domestic market by making generic companies pay royalties to the patent holder, Sapru says. Generally, these royalties vary from 0.55 to 5 percent. Some of the drugs identified by CPPA for compulsory licensing include Genentech’s and Roche’s Herceptin; Roche’s Mabthera and Tarceva; Novartis’ Gleevec; Astrazeneca’s Arimidex and Zoladex; and Glaxo’s Hycamtin.
“Under the Indian Patent Act, all life-saving and essential drugs which are patented and expensive can be granted CL if it they are unavailable, unaffordable, for government’s use and for public non-commercial use. It is wrong to say that it can be granted only for extreme national urgency or in the case of emergency, “ MSF’s access campaigner in India, Leena Menghaney argues.
According to industry estimates, global drugmakers have filed over 350 patents for cancer drugs in India, where there are an estimated 2 million cancer patients. The CPAA also wants prices of expensive generic drugs marketed by Indian companies to come down.
AV Block
Intellectual property under attack outside the U.S. Wonder how future trade agreements incorporate this issue.
Kevin
I feel that once the R&D costs of these drugs have been recovered and some profit made, price controls should be in place. This goes for industrialized countries too. The drug companies spend more on marketing than on research. And who pays for it?
Bob Freeman
Kevin, all countries except the US regulate either reimbursement or pricing. Prices are higher in the US because of this but also because the US is willing and able to pay higher prices. Some managed care contracts and those buying on the Federal Supply Price will bring the transactional prices down to levels comparable to other industralized countries.
I would also add that recovering R & D costs is a myth: they are “sunk” cost, not amoritized, which means once spent they are not recoverable.
To AV Block’s thought, I don’t see the USTR giving a high priority to the pharmaceutical sector unless a country consistently and egregiously violates bi-lateral agreements. WTO seems to give pharma a low priority relative to that given other sectors.
Jack2
Yes, pharmaceutical companies, like any company, spend a lot of money selling and marketing their products. Why would they function differently?
Pharm companies also employ more doctorate level individuals than any other industry in the US other than the university system (if that’s an industry). Pharm companies spend a higher percentage of their revenue on R&D than any other industry - including other high-tech industries like aeronautics, electronics and computers.
AV Block
Kevin, price controls are a very bad idea. They didn’t work in the 70s or in theory (economics 101 says a shortage is created, contributing to deadweight loss to society), so why should they work now?
A biotech or pharmaceutical company reinvests its profits into R&D. If the return on the R&D shrinks due to compulsory licensing, what incentive would the company have to innovate? Surely there is one thing that would occur - increased restructuring that would inevitably involve outsourcing of intellectual capital and labor abroad.
Nathan
Jack2 says: “Pharm companies spend a higher percentage of their revenue on R&D than any other industry - including other high-tech industries like aeronautics, electronics and computers.”
Are you sure of this? I’ve looked for those kind of statistics before, but have been unable to find them. Do you have some for of a link or reference for that statement?
Other industries such as oil companies must spend a large amount of resources on “exploration”, which is essentially the same as R&D. Also, it’s a little unfair to say we spend such a large percentage of our profits on R&D because we also spend a quite small percentage of our revinue on cost-of-goods. That leads to a higher profit margin — which enables us to spend such large amounts on research.
Jack2
It’s from a PhRMA report I read about 3 years ago. I will try to find it. I agree manufacturing doesn’t cost as much for a pharm company compared to, say, Boeing. But, does a company like Microsoft, which makes software, encounter huge manufacturing costs?
I don’t know, but I suspect Microsoft spends a lower percentage of its revenue on manufacturing than huge pharm companies like Pfizer/JNJ/Sanofi-Aventis.
I don’t know if oil companies were considered in the report I read.
HorusCat
You guys are doing a great job discussing this…I just have one piece to add.
Marketing drives sales, and without sales and the resultant profits, there would be no R&D, obviously. What is less obvious to people, but apparent to drug reps, is that most doctors are reluctant to try new meds, especially if it is a new class of meds. The docs just don’t do everything they need to do to familiarize themselves with new medications; and a service reps provide is getting docs face-to-face with physicians who have used the new meds, which seems to increase their comfort level more than just reading about a product.
The SSRIs are a great example of the need to market. Very few docs just jumped on Prozac; Lilly had to sell it. The same is true of the newer anti-convulsants…
Docs also get misimpressions from the media and only get those corrected by reps. An example of this is the number of doctors who think celecoxib was pulled from the market. Not true… And they are unaware of the cardiac safety data.
All in all, while marketing/sales costs are high, I think they are unavoidable in this, or any, business.
Bob Freeman
HC, you are correct that marketing drives sales and there is indeed a lot of noise/myths in the space. This is especially true in the US and Japan (where a sales rep may make multiple calls on the same doctor every day), but not so much in the EU. In fact, most pharma companies are highly profitable in the EU without intense direct selling and marketing–one of the untoward effects of price controls is that Rx products can have 40-50 years of market life because there’s no incentive for generic drug use and price competition is non-existent following patent expiry. (parallel trade is an entirely separate issue; however)
The problem of course for sustaining R & D is that you need both high profits and large free cash flow streams to underwrite current and future research.
Nathan
Bob,
I’m confused — why aren’t generics usually prescribed in the EU? What does that have to do with price controls? Does that mean that these generic companies are generating their entire revenue from the US and Canadian market?
Bob Freeman
It does seem counter-intuitive but price controls generally mean that generics will not be used because they can’t come in at a lower price than that set by the government. (This is true for the few countries that actually set prices but not reimbursement). Regardless there is a cultural bias among physicians and patients against generics. It is only in the very recent past that governments like in France and Germany have begun to encourage generics’ use. I haven’t checked recently but Xanax (to pick just one), which has been off-patent for at least a decade, still generates several hundred million in sales. Compare that to the US, where I expect sales would be very low.
So what happens is this: you get a relatively low price/reimbursement level in the EU but have little competition throughout its life-cycle. In the US you get a free price but lose 90% of sales within a few months of patent expiry.
Canadian generic prices are actually higher than the generic prices in the US. We are about the only market where price competition exists.
AV Block
I agree that price controls lower incentives to adopt generics. But I disagree that price controls could be at all beneficial to branded drug company profits, by looking at the extreme case, at which governments set prices equal to marginal costs. Presumably, profit-maximizing pharmaceutical firms (under the simple case of a legally allowed monopoly) set prices that maximize profits.
Regardless of the theoretical possibilities of a profit-maximizing price set by the government (which we have said is unlikely, given the above explanations), price controls impose a deadweight loss to society, as witnessed by oil price controls in the 1970s.
HorusCat
Bob,
Calling on the same doc multiple times in one day? Leave it to the Japanese to be over-achievers yet again! Wow. I feel funny seeing the same doc every week.
Cat
Bob Freeman
My point, AV Block, was not that price controls are beneficial;rather, that they have untoward effects, one of which is a long market life. Affliates, or subsidiaries if you prefer, in the EU have far different marketing/sales organizations than we in the US do, and that is one reason that they can be profitable.
Bob Freeman
HC, not only do they see their physicians more than once daily, the regs on promotion don’t permit negative comparisons with competitors’ products. They talk about how great the competition is and how great their product is.
AV Block
Bob - Got it now. Sounds good…
Former pharma Marketing Exec
Just a couple of interesting points here:
Bob Freeman - “I would also add that recovering R & D costs is a myth: they are “sunk” cost, not amoritized, which means once spent they are not recoverable”. This is quite refreshing as it seems we’ve done a wonderful job in perpetuating the myth that the cost of the drug is so high to recoup investment and so that we can finance new research. Oh, and lets not forget that we need to charge high prices so that we can fund the cost of “free” drugs for the millions of patients who cannot buy it!!!
From Studying the Canadian market, I can say that Canada has different generic pricing because of the deal that was “cut” between the Canadian government and Industry in the 90’s - Canada would stop mandatory licensing and implement pricing controls (parity with other similar countries) if the Pharma would re-invest 10% of profits into innovative research. Well this isn’t happening. Pharma is not honoring their part. So, keep an eye north folks…
The big factor adding to drug costs here in the US is the high markup from drug distributors. This is especially difficult when you are dealing with already high prices with the cancer drugs.
As for India in general, the patent case last year with Novartis and their cancer drug Gleevec was a bit of a test and it looks like India won…Novartis was challenging the constitutionality of Section 3(d)of Indian Patent Act - the case was deferred to the WTO and this conforms with the TRIPS agreement.
What does all this mean? To me it means that we really cannot stand in the way of the government of these countries to do whatever is necessary to access these drugs for their citizens.
As for the importance of marketing and sales in the scenario. Wen it comes to these debilitating diseases, doctor up take is very quick. This is a lesson for all of us, as I have stated on many occasions - if the drug works you do not need to put a lot of effort into marketing and sales. However, if you need to play smoke and mirrors, then you need to invest heavily in this area.
Before all the sales reps on this site pull out the guns and come shooting, I ask you to think about what I am saying. Things have got to change.
Money spent in marketing should go to R&D to ensure that the right targets are hit and the drugs do what they promise. If we do not have the time to do it right in the first place, when will we have the time to correct it? Haven’t we all been through this enough lately? Sales reps roles need to change. In my opinion, we are in a paradigm shift that is happening because of the new technology allowing us to create more specifically targeted drugs. We haven’t caught up to it yet, but we need to re-think and re-tool our approach to marketing and international marketing as well. These new drugs are so innovative and life saving that we must remember they are not just for us, but they are for the world. In my opinion to deny these drugs to these countries is tantamount to genocide.
I have and I have earned my life’s living in it - change it!
The India case and the situation in Thailand are both quite interesting….
Nathan
FPME says: “In my opinion, we are in a paradigm shift that is happening because of the new technology allowing us to create more specifically targeted drugs…These new drugs are so innovative and life saving that we must remember they are not just for us…”
It’s nice to see you singing the praises of pharma for once. Just a few weeks ago weren’t you critisizing phara for lack lack of innovation? What changed your tune?
Also your statement above does not seem to fit with what you say about the Canadian requirement for innovative research. You say:
“Canada would stop mandatory licensing and implement pricing controls… if the Pharma would re-invest 10% of profits into innovative research. Well this isn’t happening.”
If pharma isn’t doing the “innovative research” that you refer to, then who is doing this exciting and groundbreaking research that you refer to? In regards to the Canadian price control statement, I have two questions:
1) Are you sure this is true?
2) If so, who decides what “innovative” means? How often do they re-evaluate? As an industry we re-invest ~30% of profits into R&D. Are you saying that the vast majority of this money is being invested into non-innovative research? What evidence to you have to back that up?
Former pharma Marketing Exec
Nathan,
Thanks for the opportunity to clarify my view. When we were having the discussion it was with regards to recent innovations. These cancer drugs I am referring to go back between 5 - 7 years.
To your points:
The patented medicine pricing review board (PMPRB)was developed as an amendment to the patent act. I beleive it came into affect in 1987. Pharma must submit prices for drugs it sells in Canada, along with information on the prices for these same drugs in other countries with the appropriate verifications. Pharma must also report total sales in Canada.
Likewise pharma most also report R&D and state the purpose of the R&D. While it would appear that R&D would have gone up significantly, if you tease through the data, which I do not have, not privy to it… Various reports indicate that R&D deemed truly innovative (i.e. not me too and offers significant value to the disease segment) is far below the 10% increase the government was hoping for. Phase IV is not deemed as part of this 10% R&D, the same goes for basic research.
So, who decides what is innovative? Well essentially Pharma has to report on themselves, so they do…
This is my understanding of the matter, and I am not an expert. As I have said before, I am quite interested in what they do in Canada. They seem to get some things right (maybe more than us at times).
Former pharma Marketing Exec
Nathan,
Here is a clip from an article from McGill:
The industry has not met its promise to sustain a 10 percent investment in research and development. While investment increased in the 1990s, the most recent statistics that the PMPRB has collected indicates a dip in the 2000s to the point that investment today is at the same level as in 1989 when the new regime was just put in place. To make matters worse, most of the investment made is in clinical trials rather than original research. The problem with this is that clinical research does develop local research capacity as does research on finding new drugs.
If you feel like googling, there is much out there…
HorusCat
Nathan and all:
This from a press release put out by PhARMA (on the occasion of its 50th birthday):
“Investment in research and development by America’s pharmaceutical research companies grew modestly last year, despite a challenging economic environment and a continuing sharp deceleration in drug spending growth. Although the rate of R&D growth was slower than in prior years, research spending as a percentage of sales remained high. Over the past seven years, America’s pharmaceutical research companies have consistently invested around 18 percent of sales on R&D activities.”
Crud, I have another cut and paste, but now I can’t find it. It was to the effect that Pharma spends much more on R&D than does the average American manufacturing company.
Former,
I won’t argue with you that the paradigm needs to change. I think I have made that argument several times on this board. We don’t need a marine corps of primary care reps (who really don’t spend but 15 seconds with the doctor except for that once-a-quarter lunch they score)…
We do need to be spending our money on biologics and genetically-targeted technologies. This means a sales force that is extremely well-trained…not a sales force culled directly from Kinder-Care, the way it seems happens now. It would be nice, too, if we were allowed some leeway in our conversations with our doctors–there is no reason why a seasoned, well-trained rep couldn’t discuss some technically “off-label” information with a specialist (such as a more effective way to dose a med than what is put in the PI).
Bob,
I would say that a smart rep soon learns not to bash the competition, because the docs don’t like it, but having seen the hatchet job Lilly did on Geodon, it looks like bashing works!
I don’t do it because I think it sounds like you are calling the doctor an idiot for even thinking of prescribing an obviously “inferior” drug. At least in the CNS area, there are no atorvastatins…we need every weapon we can get in the armamentarium.
Former pharma Marketing Exec
HC,
Thanks for the information from PhaRMA, but we need to dig a bit deeper and find out the specifics on what they are labeling R&D activities…
Right, a more specialized sales force that doesn’t actually sell. I was thinking more along the lines of medical affairs sort of reps. No selling at all, no freebies, just information
Bob Freeman
To all of you, thanks for the update on R & D spend in Canada. I also recall (but don’t have a link/source) that pharma prices can be adjusted for CPI but neither the federal government nor provencial ones grant these increases.
Oddly enough, Canada is one of the main host countries for the generic industry and the government has enacted numerous laws to grow the sector. While CL has not been used domestically the Canadian industry has pressured the government to issue CLs for drugs intended for export to the developing world. My information is 2 years’ old but I don’t believe a domestic company has successfully manufactured a patented drug for export.
Justice in Michigan
Pedantic point. It’s PhRMA. For years, I thought it stood for the Pharmaceutical Research and Manufacturers Association. But the last part is…”of America.” So really it should be PRAMOA.
But that sounds like a Pacific island.
Nathan
FPME:
Your quote says: “To make matters worse, most of the investment made is in clinical trials rather than original research.”
This statement is absurd for the following reasons:
1) Research in the lab (”original research”) is useless unless it is translated into the clinic.
2) Clinical trial costs are exponentially higher than the preclinical studies.
3) If we are successful in this “orginal research” (ie lab research) then clinical costs WILL go up very significantly due to our own successes. It’s counterproductive to penalize clinical research — clinical research is the most realistic and benificial research we do.
4) LOTS of internal R&D is going into improving the “success rate” of clinical trials. As we succeed in this endevor, our clinical trials budget is going to become a bigger and bigger piece of the R&D pie simply because we’ll have more things moving through the various stages of clinical trials.
I still don’t understand this 10% buisness. Currently we invest far more than 10% of our sales into R&D. Maybe they meant we needed a 10% “increase” in our R&D expenditures. R&D budgets have gone up and up, but so have sales. As a percentage of sales, my guess is that R&D budgets have remained about constant. Does anyone have any hard numbers for this?
Bob Freeman
here is the link to Rx & D (the Canadian equivalent to PhRMA) fact sheet. http://www.canadapharma.org/Pubs/Fact_Sheets/2007e/1-Canada%20EN%20September%202007.pdf
The 10% R & D spend in Canada is based on the sales volume in Canada only.
Former pharma Marketing Exec
Nathan,
Bear in mind, I am not an expert on this specific topic. I am fascinated with it and want to see what we can learn from this.
I believe the author was talking about clinical trials of “me-too” trials.. I think this helps you with the rest of the questions. Once we understand the definition of clinical trials.
We have to understand the 10% R&D activities. It is complicated in the way it is segmented, but that is because the R&D we are talking about is only as it relates to industry that holds patents and sells the drug in Canada. As well some forms of R&D claim back tax rebates.
The government has quite a few incentives to push for more R&D.
The bottom line is that we do have money in the system, we (phamra)are not going broke. We need to look at our resources and realign them.