Source: Financial Times
1 Oct 2012
By Andrew Jack and Amy Kazmin
Chennai may be a long way from the Leverkusen headquarters of Bayer, but the German pharmaceutical group is involved in a legal dispute in the southern Indian city that is being watched by its peers around the world.
Bayer is appealing against the Indian patent controller’s decision in March to override the company’s monopoly on its cancer drug Nexavar, and to allow an Indian company to produce and sell the life-extending drug for just $173 a month – one-sixth of the $5,500 a month price charged by Bayer.
If Bayer loses the appeal, and the court upholds the compulsory licence issued to Natco, a generics producer based in the central Indian city of Hyderabad, the precedent could encourage other Indian manufacturers to follow its lead by producing cheap generic versions of high-priced, patented drugs that are out of the reach of all but the wealthiest Indians.
“Everybody is looking at this case,” says an executive at one Indian generics company, who asked not to be named. “As a multinational, if you are going to be on your high horse and say, ‘I want to charge $5,500 per month for a drug in India’, you are asking for these challenges.”
India’s historically weak patent law, coupled with its feisty generics industry, has long made the country the bête noire of multinational drug companies. Most such companies had hoped the adoption in 2005 of new, stronger intellectual property rules would grant them greater protection and help curb the generics industry.
But the country’s longstanding emphasis on making medicines affordable remains, and the wording of legislation offers an unusual amount of flexibility. Drugs companies must clear high barriers to receive patents; even then, generics companies can seek a compulsory licence to override them.
Indian generics producers are busy testing the limits of the law, cheered on by Indian social activists who are campaigning for cheaper medicines.
“It’s turning into big pharma versus India; whether it’s Indian companies, the Indian government or Indian patients,” says Leena Menghaney, a lawyer who manages Médecins Sans Frontières’ campaign on access to medicines nationally.
In another important case, India’s Supreme Court this month began to hear final arguments in an appeal from Novartis of Switzerland, which has fought unsuccessfully since 2006 for a patent for its cancer treatment Glivec.
Separately, Roche has failed in its efforts to prevent Cipla, an Indian generic drugmaker, from producing a lower-cost version of its patented treatment Tarceva, though the case is still under appeal.
But the Bayer case is causing the greatest concern, because it could encourage other generic producers to offer cut-price versions of drugs to overturn patents. “At last the government is looking positively at the issue of compulsory licences,” says Yusuf Hamied, head of Cipla, which has launched its own generic version of Nexavar while fighting Bayer in the courts to argue the patent should never have been granted in the first place.
India’s market for Nexavar and its generic equivalents is estimated at only about $6m, which is shared between Bayer, Natco and Cipla. But generics executives say the case should serve as a warning to companies to consider pricing carefully in a country where the public health system is in tatters, few people have health insurance and 70 per cent of healthcare costs are borne by the patient.
With sales slowing in the industrialised world, multinational groups are increasingly interested in tapping into faster growing emerging countries, including India, which some forecasts suggest could be the 10th largest market, at more than $50bn, by 2020.
Several big pharma companies are adapting to the pressures of operating in India by offering discounts on western prices, seeking to compensate for lower prices by selling higher volumes. GlaxoSmithKline, which sells a quarter of all its products by quantity in India, has used tiered or “differential pricing”.
Merck offers its diabetes drug Januvia in India, which has the world’s biggest diabetes caseload, at just Rs40 a pill, less than a quarter of the $4 price it charges in the US.
Others have begun to follow suit, including most recently Roche, which traditionally sought a single high global price for its medicines. Gilead has taken a different tack, licensing its antiretroviral drugs for HIV to several generic companies and allowing them to compete to lower prices while taking a royalty.
In efforts to reduce costs, the large companies have also forged links with Indian generic producers that were previously their rivals, buying them or agreeing partnerships in order to boost local sales or to manufacture drugs at a lower cost.
That message seems to have reached Bayer, which has told the courts it would now sell the drug at Rs30,000 ($572) a month. But the offer to cut the price of Nexavar may prove too little, too late.