There have been recent discussions about the role of India in future pharmaceutical and biopharmaceutical development. The yaysayers point to the significant investment in India and assert that this is evidence that India is “on the rise.” Patient advocates point to the needs of the billions in India and assert that their needs are paramount. Various divisions of the Indian government agree, and for both legal and political reasons have handed numerous “victories” to this faction. These recent changes in India IP laws, and a series of other decisions by the Indian government have left these individuals jubilant. India will likely, however, pay a cost for this relatively short-sighted populist “win.”
India’s pharmaceutical industry will suffer if there is a sudden spate of changes that immediately adversely affect the desire of multinational companies to invest in India.
There has recently been a series of IP and non-IP related issues that make investment into the Indian infrastructure problematic. Specifically:
- Intellectual Property:
- Compulsory Licensing: Several patents have been rendered unenforceable by the Indian government. Under the TRIPS agreement, urgent or emergent needs can be addressed via compulsory licensing. This was originally contemplated to be invoked during the AIDS crisis in Africa, but was also considered an option during the anthrax scare in the United States. India expanded this “urgent or emergent need” scenario to drugs that patients must have, such as cancer medications. The concern is that an expansion to cancer or other chronic diseases creates a slippery slope whereby there is a continuous and easy expansion to other disease states like diabetes.
- Patent Invalidation: India is required under the TRIPS agreement to provide product and process patents. India used to simply have what are commonly referred to as process patents. Process patents provided a way for a pharmaceutical company to protect the method of making a product without protecting the product itself. So, if one could come up with a new and unique way to make a drug that someone had spent billions of dollars developing and perfecting, that was considered acceptable by the Indian government and would not be considered a violation of a patent. This made brand companies uncomfortable, and investment in India by brand companies was lukewarm at best. However, under the TRIPS agreement, starting in 2005, India had to provide both product and process patents. Despite some initial concerns about entering into the TRIPS agreement, India, as a signatory, did agree to provide both product and process patents. However, India created section 3(d) which was unique at the time to them. Section 3(d) of the Indian Patent Act had good intentions: To allow for drug development, yet control evergreening. However, as interpreted, products that are globally considered “first in class” are being deemed mere modifications, resulting in potential losses of billions of dollars. This problem has affected several products including Glivec and Erlotinib.
- Marketing Updates: Targeting several of the inefficiencies in life sciences marketing, the government has recently created a voluntary code of marketing conduct for the Indian pharmaceutical industry. Since most generics do little to no marketing, such a code of conduct serves to primarily disadvantage branded players.
- Foreign Corrupt Practices Act: There has been a recent spate of investigations by the SEC and DOJ in relation to inappropriate payments. Several life sciences companies including Lilly, Pfizer, Biomet, Smith & Nephew, Orthofix, and Teva were either implicated or are under investigation. As a result, the companies are hesitant to enter into parts of the world that would result in significant susceptibility to such probes. India is deemed to be one such country. An Indian Parliamentary Panel in May 2012 found that several global drug makers had colluded with India’s drug regulators to speed approval processes. This exposure has resulted in these companies returning to scrutiny by the DOJ and SEC. Companies who want to avoid such attention will, thus, avoid countries like India if the risk-benefit profile does not work in their favor.
- Clinical Trials:
- Stoppages: India has, in recent times, been a hot bed of activity for the life sciences. With a population in excess of 1.5 billion people and the largest pool of “naïve” patients, most diseases can be seen and appropriately tested in India. However, India experienced a 7.5% decrease in approved clinical trials from 2010-2011. Life sciences clinical trial experts cited “delays in clinical trial approval, inadequately trained review staff, and a disinterested government” as the cause of the slowdown. Soon thereafter, the Indian Supreme Court decided to halt “uncontrolled clinical trials” since they were creating havoc in the country, including deaths. Such uncertainty in the availability and approval of study protocols and execution does not promote an environment where risk-overloaded companies, like most life sciences companies, want to test their products.
- Insurance: In light of previously cited concerns with clinical trials, the Indian government was concerned that for “those injured or killed in trials, there is no guarrantee [sic] of compensation.” CDSCO hence came up with a proposal to ensure compensation is paid to individuals for any injuries sustained during trials. Such an insurance proposal is unusual in most western nations and has resulted in several life sciences companies reassessing whether a foray into the Indian clinical trials market is advisable.
- Foreign Direct Investment: Due to the expertise already available in the pharmaceutical sector in India, there was an influx of global pharmaceutical companies trying to purchase domestic companies. Ranbaxy, Shanta Biotech, and Piramal Health Care’s health unit were each purchased as part of this influx. However, in an attempt to stymie such purchases, the Indian government added an element of governmental bureaucracy. The government required that foreign investments in existing domestic pharma firms should be allowed only after clearance by the FIPB.
- Advantage Generics:
- Free Generics: To support the generics industry and lower costs, the Indian government proposes to give free drugs to hundreds of millions of people (52% of its population by 2017) and has allocated $5.4 billion to achieve this goal. Under the plan, doctors will be limited to a generics-only drug list and face punishment for prescribing branded medicines. Such a proposal obviously places branded companies at a disadvantage since it forces them out of access to 52% of the population.
- No Brand Names: The Indian government, in a cost-cutting measure, has attempted to incentivize generic pharmaceutical companies. For this purpose, it is currently working to eliminate the use of brand names for all drugs. Thus, once a drug goes off-patent, without the use of brand names, there would be no way for companies to distinguish their product from competitor products since they would all have the same generic name on their label.
- Pricing Caps: The Indian National Pharmaceutical Pricing Authority (NPPA) was established around 1995 to fix/revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in the country. It created a list of 74 essential drugs and a single maximum selling price (ceiling price). In November 2012 this list changed from 74 drugs to 348 drugs to the ire of multinational companies who are often the subject of such maximum pricing measures.
- Biologics and Biosimilars: India has been famously able to provide high quality generics and has served as the pharmacy to the world. Despite such innovative capacities, it has not demonstrated the capability to bring innovative medications to the market. While several generic powerhouses have launched an effort to demonstrate such research prowess, there has been a significant dearth of innovative products invented in the sub-continent and now being sold globally. Indian companies have expressed an interest in participating in the “generic biologics” market. However, the creation of “generic biologics” or “biosimilars” has demonstrated that the efficacy associated with several copycat versions of biologics from sources including India is substandard at best. In a study comparing 11 epoetin alfa products from four different countries (Korea, Argentina, China, India), the isoform distribution among these products was variable, and there were significant diversions from specification for in vivo bioactivity. For example, in vivo bioactivity ranged from 71-226%, with 5 products failing to fulfill their own specification. Such examples prove that India must depend on multinational companies to provide expertise and life saving and dependable products.
Several of the changes proposed and/or performed are arguably necessary. Patient advocates are quick to point out that unenforced patent laws and low costs are in the best interests of patients. However, innovation is also in the best interests of patients. Without this innovation, patients will suffer in the long run when developments and/or improvements (as in the case of biologics) do not reach Indian shores.
In light of the recent losses, the pendulum may have swung too far to the side of supporting the needs of generic companies. The impact of this tidal wave of changes, when combined and imposed at or around the same time, forces life sciences companies, who had previously seen India as an integral part of their emerging markets strategy, to reassess whether, if at all, to enter the rapidly changing market.
For more information on this issue, contact the Kulkarni Law Firm.