Drugs, at what price?

The emails began flowing in as news trickled out that India had, for the second time, cast its vote for public health.

Pro-health groups from across the world, in their mailers, lauded India’s decision to stick with public health, rather than open itself to monopolies by honouring the patents on medicines.

But facing the rough end of the decision, German multinational Bayer expressed its disappointment, saying that access to drugs had more to do with the country’s health infrastructure, rather than patents and products.

The reactions were triggered by a late-evening order, last Monday, from the Intellectual Property Appellate Board. It had upheld an earlier tectonic decision by the Patent Controller, granting the country’s first ever compulsory licence (CL) to Natco.

The CL is an important tool in the Government’s armoury that can be used in the interest of the health of its people. A provision under the amended Patents Act, a CL allows a third party to make an innovator medicine, on the payment of royalty to the innovator company.

India’s first CL allowed Natco to make a less expensive version of Bayer’s kidney cancer drug Nexavar, on the payment of a now revised royalty of 7 per cent to Bayer.

The significance of the CL order cannot be emphasised enough, because of the ripple effect on public health. And when another key authority in India endorses an earlier decision to grant a CL, it clearly mirrors the health concerns in the country.

The latest IPAB order comes at a time when the Centre is thinking aloud on two drug-price related initiatives, ostensibly in the interest of public health.

One arm of the Government is exploring CLs on three more cancer drugs — trastuzumab and ixabepilone targeting breast cancer and dasatinib for blood cancer.

Another, though, recommends that price on patented drugs be negotiated, before being sold in India. And between the two recommendations is locked a possible contradiction.

CL vs price negotiation

Negotiating the price on patented drugs could dilute the country’s ability to issue CLs, is a concern raised not just by public-health advocates, but a Government arm such as the Department of Industrial Policy and Promotion (DIPP) as well.

When a drug price is negotiated between a company and the Government, prices come down between 25 per cent and 50 per cent, say health economists. But since that is an agreed price with Government, it dilutes the ability of a third company to seek a licence from the Patent office — to make the drug at a lower price.

Contrast this with the CL situation, where a generic company brings down the price on an innovative drug by over 90 per cent. A generic company is able to bring down cost on its version of another company’s innovative drug, because the generic is shorn off research costs.

Innovative patented products, medicines in this case, command a premium as they include the cost of research, development and marketing, say multinational firms who bring them in.

A patent gives a company 20 years of exclusivity to make and sell its innovative product, and with medicines, the fear is, it could give rise to monopolies by pricing the drug beyond a patient’s reach.

But India’s first CL on Nexavar was granted because the originator did not meet domestic demand, among other things. Price got woven in as the larger canvas of access and affordability came into the picture.

When the CL case was fought last March, Bayer’s Nexavar cost a patient about Rs 2.8 lakh per month. Generic drug-maker Natco pegged its version of this medicine at Rs 8,900 per month, 97 per cent less.

A third player in the arena, Cipla also launched the same drug for Rs 27,950 and subsequently, brought it down to Rs 6,840. Cipla fights a separate patent infringement battle with Bayer.

But as business strategies play out in the marketplace, the patient is not complaining as medicine prices come down. And that’s what competition does.

Opaque report

Against this backdrop, the Department of Pharmaceuticals’ draft report on price negotiation of patented drugs appears to shoot itself in the foot. It makes the right observation that drug prices will remain “unaffordable” for a majority, despite price negotiation — and yet goes on to outline models to negotiate prices!

Patient and health advocacy groups point out the unpleasant experience of price negotiation in other countries. In Brazil, negotiated price on medicines was seen to be four times higher than the price a CL brought it down to.

And in Thailand, it was seen delaying the issuance of CLs, they point out. The fundamental question to ask the patent owner is, ‘can you assure access’, and that seems to be missing in the report.

Multinational drug companies point out that price negotiation should be restricted to Government purchases. But health groups add that a negotiated price in India would skew the price for other developing countries, specially since India is a major global provider of quality, inexpensive drugs.

The draft report further talks of strengthening health insurance, since more than 80 per cent of medical expense in India is out of pocket. But health insurance in its present avatar has its own ills.

Patients suffer, because of the mistrust between insurer and hospitals, fault lines on pre-existing illnesses and often new medical devices and patented drugs not getting covered by insurance companies.

In fact, health insurance needs a fundamental change, where young people pay towards social support in their later years — as is seen in developed, mature countries. Only then will the Government be able to bargain from a position of strength on medicine prices.

The Centre had the opportunity, at least in a pre-election year, to bolster a few healthcare programmes. Instead, its promise to increase healthcare spends (from the abysmal about one per cent of GDP) is pending. The promise of free medicines across the country has lost momentum. And the Government has got itself wedged in a real hard place, between CLs and price negotiations on patented drugs.

Barely able to keep its balance on the tightrope it walks between protecting research and ensuring access, the Government seems to be taking three steps back, for every step forward.