The tension between big pharma and developing nations over intellectual property and affordable meds is palpable, particularly in India, where Novartis is challenging the denial of a patent for its Gleevec cancer drug. India Knowledge@Wharton spoke with Ranjit Shahani, who heads the drugmaker’s operations in India about IP rights and access to meds. This is an excerpt…

IKW: The idea of there being a homogenous patent regime for all countries is like saying that the health care capabilities, priorities and infrastructure of the American people are on par with those of developing countries such as India. What are your views on this?

Shahani: You cannot compare a developing country to the US on any score, be it patents, growth or equity…Protecting innovation is the best protection for patients, laying the foundation for the massive R&D investments made by the pharmaceutical industry that are vital to medical progress. Tiered pricing, donation programs, public-private partnerships and differential pricing are some of the more innovative ways to meet the access challenge rather than diluting patents. These programs can work, provided the government ensures that discounted drugs are not re-exported to countries that can afford to pay.

Unfortunately, borders are porous, and often drugs are repackaged and sold at a fraction of the cost. This is the prime reason why MNCs (multinational corporations) were reluctant to introduce differential pricing in the past. Donation and differential pricing programs could work if a reliable public distribution framework existed to track the movement of drugs and safeguard against parallel import to other nations. We need to devise a pricing system that will work for all socio-economic classes, as a majority of India lives on $2 a day, and those at the bottom of the pyramid cannot afford even two square meals.

IKW: Using Glivec as an example, could you explain your thoughts on the generics business in India? What is the interplay between a fully functioning intellectual property rights regime and a country where most people survive on less than $2 a day?

Shahani: As the second-largest generic drugs company globally, we know the important role generics play. But here, generics alone do not solve the issue. Generic versions of Glivec are far too expensive for the poor in India. Furthermore, generic-makers in India have yet to come forward with an access program for generic imatinib mesylate (Gleevec’s generic name). For example, in India the cost of a one-year treatment with generic imatinib is $2,100, or 4.5 times the average annual income. Even our critics recognize that generic versions of Gleevec are not the solution for the poor in India. This is why approximately 99% of patients on Gleevec receive it free. There is no market for Gleevec in India…

This is about safeguarding our intellectual property in an increasingly important industrial country. It is about gaining clarity; will patents be granted in India? Will incremental — patentable — innovation be rewarded? Incremental is often regarded as being trivial, but that is not true. Incremental pharmaceutical innovations are sequential innovations with dramatically improved health outcomes. A large number of examples can be offered here in the pharmaceutical industry.

IKW: There is movement to introduce legislation in India similar to the Bayh-Dole Act, which allows universities to patent results of publicly funded research. Are big pharma companies justified in using taxpayer-funded research to make profits? Is there evidence of a problem now, that is, drugs that are developed by Indian universities or labs that are not being commercialized because of a lack of upstream patents?

Shahani: Treating a condition effectively requires collaboration among multiple stakeholders. Developing an understanding of the disease itself is often the domain of government and academia. Discovering and developing the medicine to treat the disease is almost always the domain of the pharmaceutical companies. Finally, testing new treatments in clinical trials requires collaboration among pharmaceutical companies, government, academia, health-care professionals and patients.

The process begins with lead identification in private labs and academic institutions. Most identified compounds are licensed to pharmaceutical companies that do not have the financial backing to undertake such expenses. If the results are promising, the compound is brought to human study in clinical trials, where the costs are significant. In India, research institutes often license the molecule to larger pharmaceutical companies for commercialization.

IKW: Most of the patent debate is centered on affordability of drugs. How will the government and MNCs define who can afford patented drugs?

Shahani: In India, Novartis is faced with a globalization dilemma that characterizes many emerging economic powers today: two markets within one country. India has a booming middle class on one hand and a vast number of extremely poor people on the other. We are aware of the many obstacles that poor patients face regarding access to medical care. For that reason, we are pursuing a dual patient-focused strategy; we give poor patients free access to Gleevec and we take the upper strata of India seriously as a formidable power with all rights and obligations brought with this status. Respect for intellectual property will strengthen, not weaken, the Indian economy, helping India reach its aspiration of becoming a pharmaceutical powerhouse.

To base the price of drugs on income levels is extremely difficult because reliable statistics on individual incomes are difficult to establish in India. In fact, only 3 percent of the population pays tax. The only way to optimize the system of differential pricing is to have an extremely reliable provider network. Government hospitals, NGOs and rural health centers would receive discounted drugs, while private clinics and hospitals would dispense drugs priced comparably to their US counterparts. Despite a significantly higher cost for the private sector, an analysis of the cost structure shows that the amount spent on medicine is a fraction of that spent on diagnosis and doctors’ fees. Additionally, government hospitals need to pay special attention to avoid the leakage and export of cheaper drugs through illegal channels.

To read the complete interview, please look here.