Medicinal discovery,
It moves in mighty leaps,
It leapt straight past the common cold
And give it us for keeps.
~Pam Ayres

Towards the close of his recent documentary ‘Sicko’ (2007), Michael Moore smuggles five 9/11 rescue workers over to Cuba on a boat to see if he can get them the medical aid they need, but cannot afford in the U.S. In one stirring scene, a single-mother living off a social security allowance of about $1,000 a month breaks down after learning that an inhaler cartridge, costing her about $120 in the U.S., was available for five cents in Cuba under that country’s universal healthcare programme. While the documentary itself argues for the universalisation of medical care, this anecdote emphasises the critical role that cheap/affordable medicine plays in access to health.

Prices and Generic Manufacturing in India
Since 1947, when India attained independence, there has been a dramatic improvement in our health infrastructure. From being one of the most expensive countries in the world for drugs, India has today emerged as one of the cheapest producers of drugs, and an important exporter of medicines to countries which do not have any production capacities. There are over 250 large pharmaceutical firms and about 9,000 registered small-scale units in India, and the Indian Drug Manufacturers' Association (IDMA) estimates that there another 7,000 unregistered small-scale units producing drugs. By 1996, of the top ten firms by pharmaceutical sales, six were Indian firms rather than the subsidiaries of foreign multinationals. Domestic firms now produce about 350 of the 500 bulk drugs consumed in the country.

While India does not, sadly, have a universal health care programme, the generic drug industry has been vital in ensuring that drugs are readily available at an affordable price. For instance, the most striking success of Indian pharmaceutical companies in recent times has been their ability to provide access to reasonably priced HIV/AIDS drugs. Till 2000, antiretroviral (ARV) drugs were not accessible to the vast majority of people living with HIV/AIDS (PLHA) all over the world because of the high price. Multinational drug companies priced ARV drugs between US$12-13,000 annually per person. From 2000 the prices started falling after manufacturers from India introduced generic versions of ARV drugs. These generic drugs are currently provided to patients for as low as US$140 annually per person.

Patent Laws in India
The generic drug industry in India was built on the absence of a product patent regime in India. As mentioned above, at the time of independence drug prices in India were among the most expensive in the world as a result of the patent monopolies that allowed large corporations absolute control over the market. The Government of India then appointed the Ayyangar Committee in 1957 to recommend reforms to India’s patent law to tackle this problem.

The Ayyangar Committee found that 80 to 90 percent of the patents in India were held by multinational companies, and that more than 90 percent of these patents were not even being exploited in India. The Committee stated that the existing patent regime system was being exploited to achieve monopolistic control over the market in vital industries such as food, chemicals, and pharmaceuticals, resulting in medicines being unaffordable. The suggestions made by the Ayyangar Committee were incorporated in the Patents Act, 1970, which aimed at spurring the development of a national pharmaceutical industry that would make medicines at affordable prices, thus prioritising national development over foreign corporations. The 1970 Act only allowed for ‘process patents’ for pharmaceutical patents but not the end product itself. This essentially meant that an Indian pharmaceutical company could find an innovative or new way to make an existing drug through the process of reverse engineering.

During this period Indian pharmaceutical companies were able to reproduce existing drugs rapidly and at a low cost, thereby making them competitive in both foreign and domestic markets.

The table to the right is from the 2000 HAI Report on Patents and Prices (K Bala and Kiran Sagoo) and demonstrates a time lag between the introduction of a new drug in the world market and its introduction in India by national firms.

Based on a comparative survey of drug prices, the report concludes:
“When competitors introduce their products, the originators will lower their prices and compete with the national firms. They will not withdraw from the market. Thus, it is important to introduce generic competitors as early as possible to prevent the originators having time to secure brand loyalty to their products by skillful promotion.”

In support of their conclusion, the report cites an example from Bolivia where 100 units of 100mg of Retrovir (zidovudine) was priced at US$626 in 1997. Prices dropped to US$258 in 1998 when the competitor’s product of zidovudine was made available and sold at US$427.

In 2005, pursuant to commitments under the TRIPs agreement, India was forced to amend its Patent Act to allow for ‘product patents’. This has triggered fears of a 200 to 700 percent increase in the price of certain antibiotics, which are yet to be borne out. Fortunately, however about eleven leading drugs, including four blockbuster drugs worth $20 billion are going off-patent this year in the US, presenting continuing opportunities for established generic players.

Patent Protection, Underdevelopment and Generic Industries
From the foregoing account, it would appear that a loose patenting regime is the only requirement for the promotion of local pharmaceutical manufacturing capacity. However, this is not the case and a host of extraneous policy and other environmental factors can play a limiting role in the effectiveness of a generic industry. For instance, Bangladesh, through the mechanism of a Drug Control Order prohibits the import of drugs that are manufactured locally. This has led to the development of a bustling local generic pharmaceutical manufacturing industry that exports a wide range of pharmaceutical products (therapeutic class and dosage forms) to 67 countries (Gehl Sampath). While this ought, intuitively, to spell good news in terms of cheaper access to medicine, this has not in fact been the case in Bangladesh. Prices of even such common drugs such as Paracetamol tend to be many times higher than the average price of the drug in India. This is because of a “drug distribution system that is organised solely around pharmacies (run by unqualified or inadequately qualified personnel) and doctors” resulting in “firms relying solely on extensive distribution systems that promote their brand name products through medical practitioners, often in unethical ways”.

Further, the presence of a large pharmaceutical industry in the country has not prompted the growth of innovative capacity as it has in India. Companies are engaged in “formulation of APIs requiring manufacturing skills only, and are presently struggling to build capacity in the more knowledge-intensive processes of reverse engineering active pharmaceutical ingredients.” This is on account of Bangladesh having a “weak knowledge infrastructure, in terms of secondary and tertiary enrolments, R&D investments and scientists per million of the population” in comparison to India which provides extensive funding to public sector organisations to boost the capacity for pharmaceutical research through such institutions as the Council of Scientific and Industrial Research, Central Drug Research Institute and the Indian Drugs and Medical Research Institute.

So if the Indian experience highlights the importance of loose IP regimes in building indigenous manufacturing capacity, the experience of Bangladesh calls to attention the vital importance of supportive investment in knowledge infrastructure and quality control mechanisms in sustaining such activities.

Last month European regulators raided some of the world's biggest pharmaceutical companies in an inquiry into whether they conspired to keep up the price of drugs after patents expired through “delayed launch” agreements with generic manufacturers. Just last week, it was reported that the Federal Trade Commission of the US was suing Cephalon, a US drug manufacturer for paying USD 200 million to four generic manufacturers to delay their launches of generic versions of the sleep-disorder drug Provigil.

In addition, the Drug Controller General of India recently passed orders banning the sale of about 120 "fixed dose combination" drugs, deemed to be creations of commercial motive rather than scientific reason.

These trends call attention to the fact that even generic industries may not always have clean hands, and sometimes a good business deal may appeal more than public access to health. For instance, in the past few months, three generic manufacturers – Sun Pharma, Watson and Dr. Reddy’s Labs – entered into agreements with Novartis to delay “until sometime prior to the expiration of the patents” the launch of their variants of the drug Exelon – used for the treatment of Alzheimer's disease. In return Novartis would abandon patent litigation that had been instituted against each of them.

I would like to end this article with a second table (right) extracted from the report which compares the prices of proprietary brands in different countries

This table demonstrates that multinational drug firms market their proprietary brands at widely different prices in different developing countries. Specifically, it indicates that in countries like India, where multinational corporations must compete with local manufacturers, their prices will tend to be much lower than in countries that lack a manufacturing base. This prompts us to reflect on the extent to which the price of a drug, and access to medicine is determined not so much by the amount it actually costs but by extraneous factors (including opportunism) as well.

tags: Bangalore, Hyderabad India science-research access-to-medicine generic pharmaceuticals drugs hiv aids

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