A spate of actions of Indian stakeholders viz., industry, Government and the judiciary in the pharmaceutical space during the last five years or so, smack of a sense of fear bordering on possibility of Indian Industry being swallowed by MNCs.
The trigger for inculcation of fear especially in the mind of Commerce Ministry [the nodal point for formulation of policy in regard to foreign direct investment and protection of intellectual property (IPR)] is a number of acquisitions of Indian pharmacy companies by MNCs in last few years.
The Ministry is obsessed with a flawed notion that large-scale investment and acquisition of controlling stake by MNCs in existing companies would lead to their ‘dropping’ from their portfolio of production essential medicines thus jeopardizing public interest.
Accordingly, it sought an amendment in the extant policy to prohibit 100% foreign direct investment (FDI) in ‘brown-field’ space. Instead, it proposed FDI up to 49% in this category primarily to ensure that majority equity participation remains with Indian company.
Ministry’s apprehension regarding ‘alleged’ adverse effect on production and supply of essential medicines is not corroborated by facts on the ground. Indian companies that have been completely or substantially taken over e.g., Ranbaxy continue to produce these.
It also ignores structure of Indian industry whereby there are umpteen number of manufacturers producing same medicine. No one company has a share of more than 1-2% of market. In this backdrop, there won’t be any impact on overall supply even if an acquired company were to stop production.
In view of this and differing views from some other ministries, Commerce department could not push its proposal. Though, Cabinet approved 100% FDI in brown-field but, put a caveat that this will be subject to approval by Foreign Investment Promotion Board (FIPB). This tantamount to putting a tight leash on entry of MNCs.
Indian pharmaceutical companies are mostly focused on manufacture of the ‘generic’ equivalents of innovator drugs (made through reverse engineering) and are substantially cheaper than the latter as these are not burdened with R&D expenses.
Government too has a vested interest ensuring that market is dominated by supplies from generic manufacturers (read Indian companies) as this helps in making ‘cheap’ & ‘affordable’ medicines to millions of patients and thus, bolster its credentials of protecting public interest.
Apart from large-scale manufacturing of medicines whose patents have expired and hence, already in public domain, Indian companies also keep a constant vigil on new innovation drugs brought in by MNCs to the Indian market.
Since, these new drugs provide more efficacious solutions to the diseases and ailments, unambiguously manufacturers enjoy enhanced pricing power. Besides, in initial stages there are few suppliers resulting in very limited competition if any.
Prompted by distinctly better business opportunities, Indian manufacturers have in recent times gone hammer and tongs to challenge grant of patent to MNCs for their innovation drugs with the Indian patent authorities.
Thus, during the past 18 months or so, as many as 15 medicine patents have been challenged. In several cases, the office of Patent Controller has moved with alacrity in either denying grant of patent or even revoking a patent already granted.
Invariably, Indian courts have also demonstrated equal alacrity in upholding the decisions of the Patent Controller. The verdict of Supreme Court in case of Novartis’s anti-cancer drug ‘Glivec’ (this has a patent recognized in 40 countries) set a precedent. This emboldened patent offices to deny patents in other cases as well wherein the decisions have been upheld by high courts.
One can see perfect symphony indeed convergence of actions by Indian generic companies, patent office and the judicial authorities at different levels in ensuring that the innovator drug companies viz., MNCs do not enjoy patent rights over their innovations.
This suits Government of India (GOI) who somehow believes that denial of patent or to put in simple terms, absence of exclusive manufacture/import and marketing rights would best serve the paramount health interest of Indian public.
The unfolding environment is far from conducive to MNCs bringing in new medicines to India as they run the risk of product being copied in no time thereby hampering their ability to recuperate huge investment made in developing them (it typically takes a decade and over US$ 1 billion to develop a successful new drug).
There is a sense of disgruntlement among MNCs over poor enforcement of intellectual property rights (IPR) in India despite Government’s claim that following amendment to Indian Patent Act (2005), our law are fully compliant with obligations under TRIPs agreement of WTO.
Adding salt to the injury is an atmosphere of jubilation and celebrations that builds in the aftermath of each court judgment upholding denial or revocation of a patent which is often bandied as triumph of poor patients over what activists allege as exploitative actions of MNCs!
Ironically, even in areas where an MNC is able to thwart patent challenges and thus sustain market exclusivity, Government takes recourse to other means such as grant of compulsory license to Indian companies or exercise direct control on price of patented products.
Indian industry and Government also tend to forget a fundamental fact that innovations are needed to bring medicines to cure diseases for which solution do not exist and new medicines that are better and more efficacious than those already available.
Thanks to poor IPR environment, India receives a measly 3% of global R&D spending. China which has a much stronger IP law attracts 14% and Japan around 11%. R&D spend by Indian drug companies too is meagre invariably less than 5% of revenue.
India’s own record of investment in R&D being poor and if our IPR and regulatory environment also does not let us benefit from fruits of research done elsewhere, we may land in a situation whereby the pipeline of new drugs and solutions turns dry.
The current approach to meeting the health needs of Indian public is not sustainable. It relies on supplying cheap medicines by enabling ‘generic’ companies to ride piggy back on innovator’s efforts. It gives little incentive to a company invest in R&D. And, it neglects need to build a sound infrastructure viz., doctors, clinics, hospitals, insurance (India spends only 1.2% of GDP on health care)
Government needs to come out of this archaic mindset. It should evolve a regulatory architecture that encourages R&D and innovations supported by a world class healthcare infrastructure. It should foster healthy’ competition to make ‘affordable’ medicines available to citizens.
Clearly, India needs a Government with a vision and long-term commitment to provide sustainable and affordable healthcare.