Transcript TRIPs and INDIA

Pharmaceutical TRIPS
and INDIA.
Prepared for AID
by Praphul C. Shivnani
IP Rights and the Pharmaceutical Industry.
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The argument for a stronger patent regime
for pharmaceutical companies is often made
on the basis of the heavy capital investment
costs (for R&D) that goes into the creation of
a new drug.
“Most of the value of new medicines and
other high technology products lies in the
amount of invention, innovation, research,
design and testing involved.” – WTO.
Myths & Facts: 1
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Myth: Drug companies
spend their maximum
resources on research
and development.
Fact: In 2002, the
pharma industry spent
only 14% of its revenue
on R&D.
Myths & Facts: 2
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Myth: The R&D spending is aimed at
developing new drugs.
Fact: In excess of 40 per cent of the
industry's R&D is aimed at producing minor
variations of existing drugs, not at turning out
new ones1.
Two-thirds of the drugs approved from 1989
to 2000 were modified versions of existing
drugs or even identical to those already on
the market, rather than truly new medicines2.
Myths & Facts: 3
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Myth: Pharma Companies are
the major source of innovative
research.
Fact: Taxpayers and Academic
institutions are by far the
largest funding sources to
research.
Fact: Public researches often
tackle the riskiest and most
costly research, which is basic
research, making it easier for
industry to profit. The NIH
report discovered that only
14% of the drug industry’s total
R&D spending went to basic
research, while 38% went to
applied research & 48% was
spent on product
development3.
This begs the question: Who
should really own the patent
rights for a drug?
Myths & Facts: 3 :: The HIV case study4.
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In 1984, an NIH lab discovered the HIV virus. The government lab
urgently asked drug-makers to send samples of every anti-retrovirus
drug on their shelves. NIH spent millions inventing a method to test
these compounds. When the tests showed AZT killed the virus, the
government asked Glaxo, as the compound's owner, to conduct lab
tests.
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Glaxo refused. You can't blame it. HIV could contaminate labs, even kill
researchers. So NIH's Dr Hiroaki Mitsuya, combining brilliance, bravery
and loads of public cash, performed the difficult proofs on live virus. In
February 1985, NIH told Glaxo the good news and asked the company
to conduct human trials.
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Glaxo refused again. Here's where Glaxo got inventive. Within days of
the notice, the company filed a patent in Britain for its 'discovery'. Glaxo
failed to mention the US government work.
Myths & Facts: 4
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Myth: Pharmaceutical sales are not sufficient
to cover R&D costs.
Fact: With normal profit margins ranging from
11% to 25% in 2002 for eight top companies,
the research based pharmaceutical sector is
amongst the most profitable of all industries
in spite of research spending1.
Since 1999, the rate of growth in research
investment is slower than the growth in net
income within the pharmaceutical industry1.
Myths & Facts: 5
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Myth: High R&D layouts entitle the
pharmaceutical industry to more IP-protection
than other industries.
Fact: The pharmaceutical industry enjoys the
highest Return On Capital of any industry1.
Myths & Facts: 5 (cont’d)
Myths & Facts: 6
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Myth: Generic Companies merely copy
brand-name products using originator
company data, with no R&D costs.
Fact: Generic Companies invest 6%-8% of
annual revenues into R&D and never see
originator data1.
Pharmaceutical Patents in the Global Scenario.
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The above data clearly shows that the very premise that drug
companies are seriously handicapped in their R&D by the lack of
IP protection in the poor countries is flawed.
Poor countries have “need” but no effective demand for drugs
like antiretrovirals. The drug companies want to maximize
whatever profit they can make in these poor countries by
increasing effective demand through the use of aid moneys
addressed to health programs5.
In other words, the preferred solution is to get the global aid
agencies to give money to the poor countries to buy the drugs at
higher prices5.
Not content with having IP rights over important drugs in their
own countries, big pharmaceutical companies muscled their way
into the WTO in 1994 to pass the TRIPS agreement.
TRIPS (Trade Related Intellectual Property Rights)
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negotiated in the 1986-94 Uruguay Round under
strong pressure from major industrialized countries.
“aims to protect the IP rights of the creator.” - WTO
“IP rights are the rights given to people over the
creations of their minds.” –WTO.
“Creators can be given the right to prevent others
from using their inventions, designs or other
creations — and to use that right to negotiate
payment in return for others using them.” – WTO.
Failure to meet a TRIPS standard could result in a
reduction of the export quota of the non-complying
country.
What’s wrong with TRIPS?
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The IP issue relates to the collection of royalties on patents and
does not belong to the WTO in the first place.
Big Pharmaceutical companies have muscled their way into the
WTO and turned it into a royalty collection agency simply
because the WTO has the authority to apply trade sanctions.
The optimal patent period must reflect a balance of two forces:
on one hand the protection provided by IPP provides an incentive
to innovate; on the other hand, it slows down the diffusion of
benefits to potential users. …The patent period under TRIPS is
uniformly extended to 20 years – a period so long that few
economists of repute can be found who would call it efficient in
terms of balancing the two opposing forces5.
Compulsory licensing in TRIPS
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Provision: Compulsory licensing is when a government allows
someone else to produce the patented product or process
without the consent of the patent owner. – WTO.
Caveat: Compulsory licensing and government use of a patent
without the authorization of its owner can only be done under a
number of conditions aimed at protecting the legitimate interests
of the patent holder. - WTO.
Caveat: “For example: Normally, the person or company applying
for a licence must have first attempted, unsuccessfully, to obtain
a voluntary licence from the right holder on reasonable
commercial terms.” – WTO.
Caveat: If a compulsory licence is issued, adequate
remuneration must still be paid to the patent holder. – WTO.
Compulsory licensing … must usually be granted mainly to
supply the domestic market. – WTO.
The Doha Declaration
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At the Doha Ministerial Conference in November 2001, WTO
member states agreed that the TRIPS agreement does not and
should not prevent members from taking measures to protect
public health.
They underscored countries ability to use the flexibilities that are
built into the TRIPS Agreement, including compulsory licensing
and parallel importing.
And they agreed to extend exemptions on pharmaceutical patent
protection for least-developed countries until 2016.
This declaration makes it clear that each member is free to
determine the grounds upon which the licences are granted.
This, for example, is a useful corrective to the view sometimes
expressed that some form of emergency is a pre condition for
compulsory licensing.
“Paragraph 6”: Importing Under Compulsory Licensing.
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TRIPS Agreement says products made under compulsory licensing
must be predominantly for the supply of the domestic market.
This applies to countries (like India) that can manufacture drugs. It limits
the amount they can export when the drug is made under compulsory
licence.
This has an impact on countries unable to make medicines and
therefore wanting to import generics. They would find it difficult to find
countries that can supply them with drugs made under compulsory
licensing.
On 30 August 2003, WTO members agreed on legal changes to make it
easier for countries to import cheaper generics made under compulsory
licensing if they are unable to manufacture the medicines themselves.
The decision waives exporting countries obligations
Any member country can export generic pharmaceutical products made
under compulsory licences to meet the needs of importing countries,
provided certain conditions are met.
The Indian Pharmaceutical Industry.
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India is the world's fourth-largest drug market in volume6.
Yet within the worldwide pharmaceutical market, with its turnover
of US$350 billion, India's US$3 billion constitutes barely 1%6.
This is an indicator of the cost and the market of Indian drugs.
Indian drugs often cost seven to ten percent of what they do in
the USA or Europe.
Indian manufacturers currently export generics to 200 poor
countries.
Access to antiretroviral treatment in these poor countries has
been greatly facilitated by Indian generic competition decreasing
the costs of medicines as much as 98%7.
The Indian Pharmaceutical Industry (cont’d)
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Four years ago, millions of people living with HIV/AIDS could not
afford the price of antiretroviral (ARV) drugs. The price was
between US$10,000 –12,000 (Approx.Rs.4,50,000 – 5,40,000)
per annum. By 2003 the prices had come down to US$ 140
(Rs.6300) per annum. How did this miracle happen? The answer
lies in the Indian Patents Act, which provides only process patent
protection to pharmaceutical inventions8.
For people with HIV whose current treatment regimen is failing,
access to newer, more expensive "second-line" AIDS drugs will
be critical. These combinations cost as much as 20 times more
than initial combinations. Generic production of many of these
medicines will be blocked by India's new patent law7.
In order to meet the 1 January 2005 deadline to make its
intellectual property regime WTO-compliant, on 26 December
2004 the Indian government issued an ordinance -- an executive
decree not debated in Parliament.
HIV / AIDS in
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India
Official estimate of people that are estimated to be
HIV-positive is 3.5 million.
Unofficial estimates are as high as eight million.
Eight hundred thousand of these people have
already developed AIDS.
No compulsory medical insurance schemes in India.
Cost of individual AIDS-combination therapy > $300
p.m./AIDS is particularly common in the lower-income
groups with a monthly income of less than US$100.
Indian Patent Ordinance8: Whats wrong?
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Requires patents to be granted to products, while
India's previous patent regime established by the
Indian Patents Act 1970 only required patents to be
granted to the chemical processes that resulted in
the production of a particular drug.
This distinction between "process patents" and
"product patents" -- in line with international patent
practice before the 1995 TRIPS Agreement -allowed for the development of a huge generic drug
industry built on reverse-engineering brand-name
drugs through slightly modified processes.
Indian Patent Ordinance: What’s wrong?
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Modifies the procedure through which patents
can be challenged before they are granted. It
limits the grounds on which objections to a
patent application may be made.
Furthermore, though contestants can be
heard and submit a written argument, they
are prohibited from participation in all of the
patent proceedings, unlike under the previous
system.
Indian Patent Ordinance: What’s wrong?
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The Bill proposes to do away with the pre-grant opposition
procedure.
Currently, there are approximately 6000 applications pending in
the mailbox protection. In the absence of pre-grant opposition,
these 6000 applications would escape public scrutiny.
Public scrutiny is crucial in light of the fact that less than 500
drugs have been granted marketing approvals in India between
1995-2004. Hence, pre-grant opposition is absolutely essential
for blocking trivial patents.
It is also part of natural justice to give an opportunity to interested
parties, including civil society, to be heard before granting a
monopoly
Indian Patent Ordinance: What’s wrong?
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The Bill proposes to extend the scope of
patentability beyond the TRIPS requirements by
amending Section 3(d) of the Patents Act to provide
patents to new use of known medicines.
There is no obligation under TRIPS to provide a
patent to either new use or new dosage of known
medicines.
The product patent should be given only to new
chemical entities and not to either new use or
dosage forms or any other forms of known
molecules. This will limit the number of patent
protected drugs.
Indian Patent Ordinance: What’s wrong?
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The Bill has not properly incorporated the August 30th Decision
of the TRIPS General Council, which permits the grant of
compulsory licenses for export purpose to countries with no or
insufficient manufacturing capacity in the pharmaceutical sector.
The Bill proposes to permit compulsory licensing to a country
with no or insufficient manufacturing capacity in the
pharmaceutical sector if there is a corresponding patent in the
importing country.
This ignores the fact that in many instances, there may not be
any patent protection in the importing country because the
deadline for Least Developing Countries (LDCs) to comply with
TRIPS is 2016. In this case, the Indian drug companies would
not be able to export to LDCs in the absence of a compulsory
license granted by the LDC.
This will have serious repercussions on the prices of medicines
in LDCs which are most effected by HIV / AIDS.
Indian Patent Ordinance: Whats wrong?
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The compulsory license regime within the present
Patents Act contains cumbersome procedures
without any time line for the final disposal of the
application.
This renders the compulsory license system
ineffective to curb abuse of patents because
procedural requirements take away the deterrent
element of the compulsory license mechanism.
The other safeguards in the present Patent Act, e.g.
parallel importation, Bolar provision, and
experimental exception, should be amended to
make use of the TRIPS flexibility in its full extent.
Referrences
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“A Bitter Pill to Swallow: Myths and Realities of the Pharmaceutical
Industry” - European Generic medicines association in collaboration
with Dr Dorette Corbey.
"New Medicines Seldom Contain Anything New” - New York Times –
29 May 2002 – reporting on a study by the National Institute for Health
Care Management Foundation
“NIH Contributions to Pharmaceutical development” , Administrative
Document - National Institute of Health February 2000.
Keep taking our tablets (no one else's) - Gregory Palast
“In Defense of Globalization” – Prof. Jagdish Bhagwati.
“Facing WTO Deadline, India Struggles With Patent Reform” - Rajesh
Mahapatra, The Associated Press, 12-29-2004.
http://www.healthgap.org/press_releases/05/011305_HGAP_AMTC_P
R_India_patent.html
http://www.altlawforum.org/ADVOCACY_CAMPAIGNS/AMTC
“How WTO/TRIPS threatens the Indian pharmaceutical industry” – Dr.
Richard Gerster. - http://www.twnside.org.sg/title/twr120h.htm