In the pharma industry, to bring a product to market is no easy task. There is a huge stage-gate process during drug development and a lengthy clinical trial for the FDA approval. A high investment in R&D is required and the failure rate of products is very high. So to protect the industry, U.S. grants patents on drugs that offer exclusive right for the pharma company to make, sell and reap the rewards of the innovation for a 20 year period. So it only takes one or two succesful drugs for pharma companies to sustain and generate a rate of return that is acceptable to the investors. Having said that, Pharma industry makes above average return in general and considered as one of the attractive investment opportunities.
In 1970, India put into place a series of policies aimed at moving the country towards self sufficiency in medicines. At this time, the national sector was less than 25% of the domestic pharmaceutical market. Of the top ten firms by retail sales, only two where Indian firms and the rest were subsidiaries of multinationals. Much of the country's pharmaceutical consumption was met by imports. Most of the Indian population could not afford the imported medicine and millions of people were dying because medicines were not affordable. The national sentiment on this issue is well captured by the Indira Gandhi's statement at the world health assembly in 1982, "
The idea of a better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death"
India passed the Patents Act 1970 that greatly weakened intellectual property protection in India, particularly for pharmaceutial products. Pharmaceutical innovations as well as those of food and agro-chemicals become un-patentable, allowing innovations patented elsewhere to be freely copied and marketed in India. Supported by this regulatory environment, by 1991, Indian firms accounted for 70% of the bulk drugs sold in India.
Of course, this issue which is identified as TRIPs (Trade Related aspects of Intellectual property rights) has been one of the main issues of contention at GATT summits for a long time.
Fast forward to the present day. The one company (Roche) that manufactures Tamiflu could not manufacture and supply enough quantity for this U.S. national H1N1 flu emergency. Tamiflu patent is valid until 2016. Indian pharma company Cipla has a generic drug that it reverse engineered from Tamiflu, called Antiflu, and Cipla is ready to step in to meet the demand. Center for disease control (CDC) and Food and Drug Administration (FDA) are considering bringing in Antiflu into the U.S market.
For a long time, the developed nations condemned India as a pirate. Indian government acted to make life saving medicines affordable to its millions. Weighing the Return on Investment of Pharma companies on one hand and the life of millions of people on the other, the choice of Indian government is not surprising. Now U.S is made to choose between those same two choices. Should be interesting to see the U.S. decision.
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