[Ip-health] Novartis's Ranjit Shahani: Patenting Innovation 'Is the Best Protection for Patients'

[Matt Price]

http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4286

Novartis's Ranjit Shahani: Patenting Innovation 'Is the Best
Protection for Patients'
Published: May 15, 2008 in India Knowledge@Wharton

Concern is growing that patents hinder access to life-saving drugs in
developing countries. While India clearly has made progress in
advancing intellectual property rights, more needs to be done to align
the country's approach with international obligations and standards.
In an interview with India Knowledge@Wharton, Ranjit Shahani, country
president of the Novartis Group in India, spoke about the importance
of safeguarding intellectual property and its impact on affordability
and access to medicine. Novartis is challenging the denial of a patent
for its cancer drug Glivec, as it is known in India. (In the U.S., the
drug is called Gleevec.)

Shahani was president of the Organization of Pharmaceutical Producers
of India (OPPI) from 2001 to 2007, is president of the Bombay Chamber
of Commerce and Industry and chairman of INTERPAT in India, and was on
the council of the International Federation of Pharmaceutical
Manufacturers & Associations. He has lobbied for strong product patent
law, data protection, liberalization of the price control mechanism,
and legislation against counterfeit drugs.

An edited version of the conversation appears below:

India Knowledge@Wharton: 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 U.S. on any
score, be it patents, growth or equity. A patent is a license to
operate and a basic premise for innovation to flourish. 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.

India Knowledge@Wharton: In a context where firms can earn significant
profits in developed countries on drugs for ailments such as
cardiovascular disease, cancer and diabetes, why do multinational
corporations -- and also the Indian government -- argue that a lack of
strong patents in India would hinder innovation?

Shahani: With effective patent laws, companies continue to bring
improvements and innovations to patients and societies. For a
research-based company such as Novartis, patents are non-negotiable.
We do not challenge provisions that provide for access under
international trade agreements, specifically the WTO's Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the
Doha Declaration. In fact, Novartis supports TRIPS conditions that
promote access for developing countries. We are challenging the
establishment of additional hurdles to patentability in India that
discourage both breakthrough and incremental innovation. With regard
to India, reimportation and parallel trade are issues. Distributors
use India as a platform to export drugs at a fraction of the cost to
the U.S. and developed markets.

India Knowledge@Wharton: 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
[Glivec'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
Glivec are not the solution for the poor in India. This is why
approximately 99% of patients on Glivec receive it free. There is no
market for Glivec 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.

India Knowledge@Wharton: There is movement to introduce legislation in
India similar to the U.S. 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. The Central
Drug Research Institute in Lucknow discovered the antimalarial drug
Aablaquin, which it licensed to Nicholas Piramal [India's second
largest pharma health care firm] for development and
commercialization.

India Knowledge@Wharton: A section of Indian patent law has
introduced, among other things, a new "improved efficacy" hurdle for
patentability for new forms of known compounds. Does there seem to be
ambiguity around the term "substantial" and what constitutes an
incremental improvement?

Shahani: The term "incremental innovation" is a misnomer. It should be
termed "patentable innovation," because it has significant health
outcomes. The Indian patent law creates new hurdles for pharmaceutical
innovation, unjustifiably and illegally narrowing what is patentable.
The list of exclusions under challenge in our legal case includes new
chemical compounds -- defined as "derivatives of new compounds" --
combinations, salts, esters of known compounds. [Editor's note: Esters
are a class of chemical compounds.] These exclusions, among other
therapeutic areas, could impact innovation in AIDS treatments by
denying patents for combination therapies. They could also impact
infectious diseases where new antibiotics result from introducing new
salts and esters of the known compound penicillin. That said, the
judiciary is getting more and more knowledgeable, which should, in
time, put this seemingly complex issue to rest.

India Knowledge@Wharton: The government recently stated that it would
not invoke compulsory licensing unless the country is faced with an
epidemic-like situation. Since AIDS is more of a permanent crisis than
an emergency, where do you see the production and distribution of AIDS
drugs over the next decade?

Shahani: There continues to be some ambiguity around what constitutes
an epidemic situation. In 2007, India reported 2.5 million HIV
infections, a prevalence rate of 0.36%, with less than 15% of
HIV-positive people receiving [antiretroviral] treatment. That said,
India has about 60 million diabetic patients [30 million diagnosed and
another 30 million undiagnosed]. By sheer volume, wouldn't that
constitute an emergency? If examined carefully, limited cases would
qualify as a national emergency, an epidemic, for example. HIV and
cancer by the very nature of these illnesses are an emotive issue,
which is why they get the volume of publicity.

India Knowledge@Wharton: 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 Glivec 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% 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
U.S. 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.

India Knowledge@Wharton: Would patent legislation block exports of
Indian-produced generics to poor countries?

Shahani: No. There are in-built safeguards in international trade
agreements that allow for export of medicines produced under
compulsory licenses that are issued for public health reasons. These
provisions have been put in place to safeguard access to medicines to
poor countries that do not have sufficient local production capacity.

India Knowledge@Wharton: What is the government's role in granting
patients access to medicines? There was some criticism of the
government's priorities -- its focus on the patent challenge instead
of health infrastructure, diagnostics and access to basic needs.

Shahani: We need all stakeholders to come together to solve the
complex problem of access where medicine prices and intellectual
property are only two pieces of the puzzle. A range of underlying and
related issues with respect to health infrastructure, inequitable or
otherwise, are inefficient health systems, underfunding on health
care, poverty, etc. Governments have a principal role to play in this,
as do public-private partnerships. Tiered pricing, donation programs
and corporate social responsibility activities can alleviate the
problem to some extent, but they are not sustainable solutions.