Health for All: Resist Pressure at Any Price

ABOUT: Despite stiff opposition from developed countries, India's four-decade old regulation allowing process patents ensured affordable drugs for the masses and created an indigenous pharmaceutical industry.
By David Singh Grewal and Amy Kapczynski    Delhi     Print Edition: January 17, 2016
(Photo: Ajay Thakuri)

Yale Law School's associate professor David Singh Grewal (right), a specialist in IP law and biotechnology and Professor Amy Kapczynski


ABOUT: Despite stiff opposition from developed countries, India's four-decade old regulation allowing process patents ensured affordable drugs for the masses and created an indigenous pharmaceutical industry. But with the country's 2005 compliance with WTO to move to a product patent regime, drugs are beginning to get out of reach of the common man. Yale Law School's associate professor David Singh Grewal (right), a specialist in IP law and biotechnology and Professor Amy Kapczynski explain how to make drugs-for-all a national priority.


Semiconductors and software, infrastructure and education all surely matter, and get the lion's share of public discussion and policy attention in India. But if there's a single issue on which India's future development and its international standing both depend, it could well be its approach to the price of medicines.

Many may wonder why this matters so much. Indian adults grew up taking for granted a local pharmaceutical industry that is the most competitive in the world. This reality, though, was the product of deliberate policymaking. The 1970 Patent Act played a key role: it precluded patents (government-granted monopolies) on medicine products and permitted them only on pharmaceutical processes. In a few decades, India's drug prices went from being among the highest in the world to among the lowest. And India's industry became a crucial global player, providing many in the developing world - and even the developed world - with high quality, affordable medicines.

Keeping medicines affordable in India and around the world matters not only for public health but also for social justice. Affordable medicines are a boon to development in general and poverty alleviation in particular. Giving up on India's regime of affordable medicines would push many families over the edge into poverty, indebtedness, and social dislocation.

According to the Draft National Health Care Policy 2015, in 2011/12, rural households spent almost seven per cent and urban households around 5.5 per cent of their monthly income on health care. When these already significant expenses go up - as during a serious illness or an accident - the result can overwhelm families, especially the poorer ones. The policy document says that 18 per cent of households faced catastrophic medical expenditure in 2011/12, an increase over 15 per cent in 2004/05. These outsized medical costs can lead to indebtedness, with health emergencies driving a cycle of debt and further consequences, including pulling children out of school in to low-skilled jobs or, in the case of girls, early marriages. The World Bank estimates that about a fifth of the population in India lives in extreme poverty - and increasing pharmaceutical costs would hit these families most directly.

The draft National Health Care Policy 2015 says that in 2011/12, rural homes in India spent almost seven per cent and urban households around 5.5 per cent of their monthly income on health care. When these already signifi cant expenses go up - as during a serious illness or an accident - the result can overwhelm families, especially poorer ones.

The affordability of medicines matters for another, more general reason. High drug prices mean that poor people in bad health may hold back from paying for - and taking - the full course of recommended medicines, such as antiviral medicines or antibiotics. This false economy puts the entire public health system in jeopardy by facilitating the growth of drug-resistant strains of disease. High prices for medicines can result in fewer effective medicines being available, not only in India, but worldwide.

Under Pressure

India's regime of affordable medicine makes eminent sense on a number of independent grounds. However, this regime is under enormous pressure today, largely because of the lobbying of multinational corporations and foreign governments, which together have worked for decades to construct a global trading order intended to make medicines more expensive and to shift industry, and profits, to the developed world.

One key source of pressure on India's affordable medicines comes from the World Trade Organization (WTO). A condition for membership of the WTO, created in 1995, was adherence to its intellectual property treaty, TRIPS. That treaty requires most countries in the world - many for the first time - to grant product patents on medicines. The WTO inaugurated the linkage between trade and intellectual property rights (IPR), but the two agendas have never fitted neatly. While the trade agenda is about liberalisation of the flow of goods and services across borders, the TRIPS treaty imposes trade-restrictive policies to uphold monopoly profits. This linkage between trade and intellectual property was pushed by the largest pharmaceutical companies in the world, though India's intervention in the early negotiations of the WTO helped keep the linkage from being even tighter - more restrictive and more inequitable - than it currently is.

The justification offered for this linkage was that more protection for IPR would lead to more innovation. The evidence for this connection, as a matter of global welfare, was never strong, because innovation gains must be traded off against the health and lives lost from increased prices. The TRIPS treaty mandated patents in developing countries, which are a tiny portion of the global market overall, but where patients are particularly vulnerable to price increases. This move has almost certainly generated net social losses, because more people are priced out than saved by medicines that have been developed because of additional patent protection. Newer trade agreements - among them the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) - double down on this 20th century logic, giving the patent-based industry still more control, and more pricing power, with ever smaller potential gains to innovation.

The problem runs deeper still. TRIPS and these newer agreements seek to impose on the world one particular approach to the development and distribution of medicines, an approach that is increasingly revealed to have enormous costs for all countries. Patents generate incentives by imposing high prices on those who need medicine. So it is no surprise that developed countries no less than developing ones are struggling with skyrocketing drug prices. In the US, for example, new medicines to treat Hepatitis C - a sometimes deadly liver disease - debuted last year at more than $84,000 for a 12-week course of treatment. (The same drugs are sold in India by generic firms for less than $1,000). In the US, the drug has been sharply rationed in response. In just one year, federal government programmes in the US spent nearly $5 billion on these medicines - and treated very few of those in need. The US Senate recently conducted an investigation into the pricing of these new drugs, and estimated their cost of development at just a few hundred million dollars. The main provider of these new medicines, Gilead, has already earned more than $26 billion in returns, recouping many times over its initial investment in the drug. But millions of sick people are still left untreated. The prices generated by this aggressive patent-based model are unsustainable and inefficient.

The problem is nearly as bad in Europe, despite the price control systems in place there that serve partly to moderate outsized monopoly profits. Even at discounts of about 50 per cent, the new Hepatitis C medicines still impose massive budgetary burdens on governments, restricting access to the drugs and undermining public health. (Hepatitis C is infectious, so treatment is also a kind of prevention, as with diseases such as HIV/AIDS. Serious price controls are hard to enforce against the background of patents, which give companies ultimate say over the price and availability of their medicines. Additionally, pharmaceutical companies have used trade agreements to attack national price control systems directly. The TPP, for example, has a "health care transparency annex" that is intended to make price controls more onerous for governments and to give multinational companies more power to challenge national programmes that curb prices.

Domestically, policymakers in the US and Europe are starting to reach for solutions akin to those that India has used - even while, ironically, their trade ministries are attempting to block these same moves in India and elsewhere. US presidential hopeful Bernie Sanders, for example, has proposed that the US government override the patent on the new Hepatitis C medicines, and pay the company a reasonable royalty, to prevent the kind of extortion now taking place.

Leading the Way

India has quietly led the way here; for example, by exerting its authority to issue compulsory licences for medicines, including on the grounds that medicines are unaffordable. The licence issued to Natco in 2014 to produce an important cancer drug, Sorafenib (brand name, Nexevar), is a case in point, and shows the potential impact of Indian government pressure on drug prices. In that case, the branded cost was `2,84,000 per patient per year, while the generic price was Rs 8,800.

Even at discounts of about 50%, the new Hepatitis C medicines still impose massive budgetary burdens on governments, restricting access to the drugs and undermining public health. Serious price controls are hard to enforce against the background of patents, which give companies ultimate say over the price and availability of their medicines.

Though such compulsory licences are fully compliant with WTO rules - thanks in part to India's early intervention in the negotiations - invoking them requires strong political backbone. The US has responded by upping the diplomatic pressure on India and lobbying for changes to India's patent law that would reduce the availability of affordable generic medicines.The US, and increasingly the EU, are attempting to hobble India's generics industry. The effort is to weaken aspects of India's law that set a high standard for innovation (for example, Section 3[d] of the Act), and lobbying for new forms of patent-like protection, including data exclusivity. Whether India is able to resist such pressure or not will make a big difference to its development over the next 25 years.

India's actions are closely watched around the world. Its innovative patent law both meets international obligations and provides flexibility to promote access to medicines, and has been emulated by other countries. India should continue to lead both by defending its laws and by resisting pressure to join or align its policies with the new trade agreements such as the TPP and TTIP, which would undermine its ability to make affordable medicines for its own citizens and for export abroad.

New Approach Needed

It can further lead by consolidating a new approach to pharmaceutical access and innovation, and codifying this approach in its own agreements with other countries. For example, India can actively cultivate and support allies in the developing world which have sought to make use of patent flexibilities, including Brazil and South Africa. Together, these countries should work to negotiate agreements that mutually commit to retaining the freedom to craft national patent law, to issue compulsory drug licences, and to promote affordable access to medicines.

India can also lead in another way: by developing new models to support pharmaceutical research and development (R&D). India has the technical infrastructure and the financial power to commit more resources to health research, and to use those resources to promote strategies that improve public health without compromising access, such as direct government funding of science. With grants and prize funds, for example, India could prioritise research in areas of special public health importance, while insisting that recipients of grants or prizes commit to pricing new medicines affordably. India is also in an excellent position to promote more open models of innovation, by insisting that patent barriers to research are kept low, and by strategically funding open science networks, both within India and globally. India can also leverage its power to bring other countries into the fold, working at the World Health Organization and through its multinational agreements to promote a new, more equitable and health-driven approach to R&D around the world.

India's patent law meets both international obligations and provides fl exibility to promote access to medicines. It has been emulated by other countries. It should continue to lead by defending its laws and resisting pressure to join or align its policies with new trade arrangements such as the TPP and TTIP, which would undermine its ability to make affordable medicines for its own citizens and for export.

India's leadership matters for more than India alone and for more than just medicines. In fact, taking the lead on medicines could become part of a more general India-led push to transform the international economic order into one concerned with poverty alleviation and development.

Twenty-five years from now, the question will not be whether India is a major world power. That can be taken for granted. The question will be whether, during its rise, it used its growing power to lead the world to a position of sanity and humanity on patents, R&D, and public health-or whether it yielded to the pressure of foreign lobbies at the moment of its ascent. If the Indian government can maintain its development-friendly stance on patents and public health, and help create alternative mechanisms to support scientific research, it will be doing the right thing-and not just for its own citizens. It will prove an inspiration to other developing countries- and indeed a model for the whole world.

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