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Drug Quality Imbroglio And ‘Culture of Bending Rules’ in India

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“Bottle Of Lies Exposes The Dark Side Of The Generic-Drug Boom” – re-emphasized the book, released in May 2019.  This confirms, the raging debate on the questionable quality of many generic drugs manufactured in India and involving several top domestic pharma companies, is a never-ending one. Numerous articles also ascribe many different reasons to this saga, leaving an overall impression – as if, blindfolded persons are trying to describe an elephant, touching and feeling different parts of the animal’s body, each at a time.

Let me illustrate the point with the Bloomberg article of January 31, 2019. It reported, “Culture of ‘Bending Rules’ in India Challenges U.S. Drug Agency.” And further commented: ‘The FDA confronts creative improvisation in the world’s largest generic-drug exporter.’ Curiously, according to the above report it seems to be a general belief among many, even within India.

This article will take into account the above apprehension – specifically raised against Indian drug manufacturers of both branded and non-branded generics. Accordingly, my focus will be on just three points – as possible causative factors for this critical issue:

  • Is it an India specific concern – thus related to ‘Indian cultural mindset’? or it’s a global issue, involving both Indian multinational drug manufacturers.
  • Is it a systematic attempt to create a perception bias against low-cost generic drugs, worldwide?
  • Are generic drug makers resorting to such unacceptable shortcuts due to increasing margin pressure?

Having deliberated these points, I shall try to outline a set possible remedial measures to address this issue in a holistic way, ensuring a win-win outcome. Let me first explore, whether or not this issue is specific to India, involving Indian drug manufacturers.

Is the issue India specific?

Is the issue of questionable quality of generic drugs, irrespective of whether they carry a brand name or not restricted to the shores of India? One can find its answer in the same report, as quoted above. A yearlong investigation by Bloomberg News into the generic-drug industry concluded, ‘FDA inspections at factories from West Virginia to China have found reason to doubt the data meant to prove drugs are safe and effective.’

One possible reason for such perception could be, since India is predominantly a branded generic market, voices decrying ‘questionable’ safety and efficacy of cheaper non-branded generic drugs, are too loud. Nevertheless, amidst all this, who’s who of branded generic manufacturers continue getting caught on the wrong foot by overseas regulators in the quality quagmire. Ironically, multinationals are also included in it.

Multinationals are also included in such quality quagmire:

There are several examples of non-compliance to requisite drug quality standards by multinational drug companies. Let me illustrate the point with an example that involves a top global pharma player.

The March 04, 2019 ‘Warning Letter’ of US-FDA for the Irungattukottai (Tamil Nadu) plant of Pfizer in India, clearly said: “Your quality system does not adequately ensure the accuracy and integrity of data to support the safety, effectiveness, and quality of the drugs you manufacture.”

This is not a solitary example of Pfizer’s generic hospital injectables manufactured in this plant. According to a media report dated July 17, 2018, twice before US-FDA had cited manufacturing and testing issues in this facility, containing 11 observations of the regulator, such as, workers “manipulated test sample weights to obtain passing results” for both batches of raw materials and finished product. It is a different matter that the company, later on, decided to close this plant for commercial reasons. Be that as it may, negative perception of generic drug quality is indeed an issue that needs to be addressed without further delay, holistically.

Studies have captured negative perception of generic drugs:

That this is a perception, has been well – elucidated along with its implications, in several studies. A few of which are as below:

A BMJ article concluded: “A significant proportion of doctors, pharmacists and lay people hold negative perceptions of generic medicines. It is likely these attitudes present barriers to the wider use of generics.” It further added, “Negative perceptions of medicine quality along with other drivers contribute towards choosing more expensive medicines in the private sector.”

Endorsing this point, yet another BMJ article inferred: “Negative perceptions of generic medicines and preferential promotion of branded medicines over generics by pharmaceutical companies could influence prescriber behavior and affect trust in healthcare provided in public services. To succeed, access to medicine programs need to systematically invest in information on the quality of medicines and develop strategies to build trust in healthcare offered in government health services.”

Again, in a separate survey of over 2700 physicians on perceptions of generic drugs, more than 23 percent of respondents expressed negative perceptions about their efficacy and nearly 50 percent. reported negative perceptions of generic drug quality. In the same survey, patients also expressed concerns that the lower cost of generics is associated with reduced medication quality.

Although, the above survey was conducted in the United States, the current situation in India, I reckon, is no different, but with one caveat. Here, preferential promotion of branded generic medicines over cheaper non-branded equivalents, by the respective drug manufacturers, could significantly influence prescriber behavior. Therefore, the question that follows: Is this perception-creation based on facts?

Is the negative perception fact-based?

Although, even the US-FDA clearly states that: ‘A generic medicine works in the same way and provides the same clinical benefit as its brand-name version”, I did try to find some conclusive evidence depicting brand name drugs are superior to their cheaper generic equivalents. While doing literature searches, two types of results emerged – there are studies that do not find any significant difference between generic drugs and their branded equivalents. At the same time, a few other studies do suggest that there is a difference between these two, but admitting that these studies are not conclusive. Let me give below examples of each.

No quality difference found between generic drugs and the branded variants: 

I shall quote here three studies, out of which one is India specific. The analysis reported in the above BMJ article, found that ‘the generic and branded variants of the medicines tested were of comparable quality.’

Another study, published by PLOS Medicine on March 13, 2019 also said, “In this study of 8 drug products conducted using 2 large US commercial insurance databases, we observed that use of generics provided comparable clinical outcomes as the brand products.”

An India specific researchon the same also reported, most generic and branded drug users believed that their drugs were effective in controlling their ailments with no significant difference in reported adverse effects and drug adherence.

Slightly different results were also reported with generics, but not conclusive:

One such study questioned, whether generic drugs are truly equivalent to the brand-name versions.This article was published on January 2019 by Harvard Health Publishing with the title, “Do generic drugs compromise on quality?”

This article quoted a Canadian study, published in the October 2017 issue of ‘Circulation: Cardiovascular Quality and Outcomes’, which found that patients who took generic versions of three different blood pressure medications in the months after the generic drugs became available saw increased rates of drug-related side effects.

Was it due to a perception bias?

To ascertain whether or not there is a perception bias, let us look into the following details of the same study along with its conclusion.

In this study, the researchers ‘looked at the numbers of emergency room visits and hospitalizations for 136,177 individuals ages 66 and over (60% of them women) who used any of three blood pressure medications: losartan (U.S. brand name Cozaar), valsartan (Diovan), and candesartan (Atacand). The investigators examined data for the periods 24 months before and 12 months after the generic versions of these medications went on the market. And found that before the generic versions became available, about one in 10 people taking the blood pressure drugs had to go to the emergency room or be hospitalized each month. In the month after each of the generics went into use, the rates of these adverse events went up: 8% for losartan, almost 12% for valsartan, and 14% for candesartan.’ The study authors commented, this might suggest performance differences between the brand-name and generic drugs.

However, analyzing this study, the Harvard article suggested further probe on the question: Did it result from quality problems with the generic versions of these medications or were there other factors that occurred in this time frame?

Another research, aimed at finding, whether patients are more adherent to generic statins than brand-name statins (lovastatin, pravastatin, or simvastatin) and whether greater adherence improves health outcomes, also concluded, “An 8% reduction in the rate of the clinical outcome was observed among patients in the generic group versus those in the brand-name group.” This also wasn’t a conclusive one, either.

Nevertheless, the key point of a ‘perception bias’, is captured in a separate study, where the researchers did find higher rates of psychiatric hospitalization for patients taking generic and AG escitalopram and sertraline, compared with those who initiated the brand-name product. Importantly, they noted that these outcomes were likely due to either residual confounding or generic perception bias.

No quality difference also found between branded and non-branded generics in India:

There are studies, which captured no quality difference between branded generics and non-branded generics in the country. One such India specific study concluded: “Quality of branded-generics is same as for their branded version. The study highlights the need to modify the drug price policy, regulate the markups in the generic supply chain, conduct and widely publicize the quality testing of generics for awareness of all stakeholders.”

Thus, so far, we have seen in this article that concern on quality of generic drugs is neither India specific, nor is it related to ‘Indian cultural mindset.’ And this is, undoubtedly, a global issue, involving both Indian and multinational drug manufacturers. There are also ample evidences available that a systematic attempt is being made to create a perception bias against low-cost generic drugs, worldwide. Let us now look at the third possible causative factor, as I listed above.

Is it due to margin pressure on generic drugs?

The answer to this question was deliberated in an article titled, ‘Generic drug makers feel pinch as prices crumble,’ published in the Financial Times on August 17, 2017. Quoting a top global financial analyst, it reported – global generic drug industry, where Indian manufacturers are major players,has maintained roughly 30 per cent operating margins over a long period of time, with improvements year on year. But, since last few years, there has been a margin degradation, which may possibly further go down – even lower than what it is today.

The article further highlighted, a round of consolidation among their main customers in the US: the wholesalers, have escalated the problem.  Many of these groups have clubbed together to form “mega buyers”, known as general purchasing organizations, that can command large discounts. Moreover, for the US market, another area of ‘concern’ is that the US-FDA has identified boosting competition in the generics market as one of its main priorities. As this reform opens up, it could squeeze the generic drug margins further.

Many envisage that intense cost cutting measures, could have transgressed in the drug quality assurance area, aggravating this issue. Although, it needs to be verified through credible studies, curiously, some signs of improvement in this area has recently been reported.

That said, there appears to be a strange coincidence between recent reports on Indian drug makers showing improvement in USFDA inspection outcomes and attempts to increase generic drug companies and some of their top executives slapped with price-fixing lawsuits in the U.S.This needs to be studied further.

The way forward:

The negative perception of generic drugs, in general, and non-branded generic drugs, in particular, is most likely a well-crafted business issue, rather than a genuine patient safety concern. It calls for an immediate two-pronged approach:

  • Vigorous awareness and educational campaigns on safety and efficacy of generic drugs targeted to patients, medical and paramedical professionals.
  • New regulatory measures, especially the following five:

- No pricing pressure or price control in any form of generic drugs

- Abolish brand names for generic drugs

- Make generic prescription compulsory to boost intense competition and thereby     reducing the price.

- Restrict the number of ingredients in FDC not more than two or three

- Make Uniform Code of Pharmaceutical Marketing Practices (UCPMP) mandatory.

Conclusion:

Thus, the questionable quality of generic drugs is not an India specific concern and involves both Indian multinational drug manufacturers. This is also evident from the analysis, as quoted above, that underscores, ‘FDA inspections at factories from West Virginia to China have found reason to doubt the data meant to prove drugs are safe and effective.’ Many studies have revealed that there is a systematic attempt to create a perception bias against low-cost generic drugs, worldwide.

A sequence of remedial measures, as described above, also include fostering competition, instead of introducing government controls on prices of generic drugs with stringent regulatory oversight being in place.

Thus, the so called ‘belief’ that the ‘culture of bending Rules’ is culpable for dubious generic drug quality in India, is more akin to a strong perception, prevailing in India, rather than based on any scientific analysis related to this issue. This ought to change with a well-coordinated intervention – for patients’ health interest sake.

By: Tapan J. Ray  

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

The Importance of Managing ‘Perception’ in Pharma

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Each one of us – individually or collectively in a society, community or even as a supporter of anyone or anything, view certain things in a certain way, and tend to believe only this is true. This process consequently leads to developing a ‘perception’, which the Oxford dictionary defines as: “The way in which something is regarded, understood, or interpreted.”

A ‘perception’ once formed, creates a long-lasting impact – helps form a strong opinion, often making people judgmental in their expressions. Based on ‘perception’, people also try to act and influence others, which are not always in a persuasive manner. On the contrary, the methods, are at times rather coercive, using fear as the key. The sources that help create ‘perceptions’ may not be genuine, often fake or doctored and picked-up from half-baked, unproven and unverified provenance.

Just as any other business, in pharma industry too, stakeholder ‘perception’ plays a critical role, especially in building or tarnishing reputation of the sector or individual companies. In this article, I shall discuss, the importance of managing perception – the right way – overcoming a key barrier, for sustainable business success.

‘Perception’ often stands between success and failure or winning and losing:

In today’s world ‘perception’ often stands between success and failure or winning and losing, more than ever before. Creating and maintaining a ‘positive perception’ is time consuming and a challenging task, for anything. Interestingly, a negative ‘perception’ may also be deliberately created for self-serving purposes, and that too in a much shorter time. Although, there is a high financial cost attached to it, such instances aren’t too few, either.

Umpteen number of instances can be cited, in this regard. However, to drive home the point, let me quote just two examples – the first one is of a negative ‘perception’ mostly created by the industry from within. The other one – again a negative perception that prevails outside the industry, but mostly created due to the acts pursued within the industry. Interestingly, both these adversely impact the pharma consumers too, and are tough to neutralize.

1. ‘Perception’ created by the industry insiders:

The general ‘perception’ that ‘branded generic drugs’ are superior to more affordable ‘non-branded generic medicines’, mostly in terms of overall quality, efficacy and safety. This negative ‘perception’ has been successfully created without enough credible scientific evidence, and irrespective of names, size and the operational scale of the manufacturers. It is worth noting, both need drug regulatory approval and all such approvals come only in the generic names – and not in any brand name. The brands for a generic drug molecule may be as many as, say sixty or hundred, or even more. So are the numbers of ‘non-branded generics.’

To enable the consumers availing benefits of this category of drugs in reducing out of pocket expenditure on medicines, both the State and the Central Governments in India are trying hard through various measures, such as ‘Jan Aushadhi Scheme’. But the negative perception towards ‘non-branded generics’ doesn’t seem to wane a bit, in the face of an ongoing campaign to maintain the status quo.

2. ‘Perception’ created outside, due to the acts of the industry:

Similarly, the general negative ‘perception’ leading to a declining reputation of the industry, prevails across the world – even in India. Again, the issues leading to such negative perception may, at times, be grossly exaggerated and generalized. But the fact remains, despite serious attempts by individual companies and their lobby groups to negate the same, it continues to exist. Nevertheless,continuing efforts by the industry in this direction, which are often quite expensive, are visible globally.

Let me illustrate this point quoting a recent media report on PhRMA – arguably the largest pharma trade body globally. As the pharmaceutical industry faces potential pricing reform and continued criticism from patient advocates, PhRMA reportedly spent US$ 15.5 million lobbying in the first half of this year, which is an 11.5 percent increase (US$ 1.6 million) compared with the same period last year. But, the negative ‘perception’ is too strongly entrenched to neutralize so quickly and effectively. It continues to exist.

That the money spent to alleviate the impact of negative ‘perception’ has not yielded results since long, is vindicated by the June 19, 2018 Business Insider report. Quoting the research and consulting firm Reputation Institute, it says, in 2018, the pharma giants saw a 3.7 percent decline in reputation score from last year. This was driven by a decline in the public perception of transparency, openness and authenticity of drug makers. In the midst of an overall descending trend, of the 22 pharma companies ranked, Sanofi features in the first and Pfizer takes the last positions.

Reported practices of drug makers also influence public ‘perception’: 

While explaining why Pfizer has been ranked 22 with a strong negative ‘perception’, the same Business Insider article reported as follows:

“Pfizer had the lowest reputation score among the pharmaceutical companies that the Reputation Institute looked at, based on the general public’s perception of the product, prices and public hospitality. It was reported in May that Pfizer used charity to mask a heart drug price hike. Pfizer also had a huge role in the drug shortage crisis, according to Fortune.”

Similarly, in a relative yardstick, better public ‘perception’ for Sanofi’s among the big pharma players were ascribed to the following reasons:

“Sanofi’s winning characteristics lies in its promotion of ethics and transparency, according to Reputation Institute. Sanofi has in the past year promised to limit price increases and disclose ‘transparency reports’ behind overall costs of its drugs.”

Destructive power of negative ‘perception’ on pharma industry:

An interesting survey, titled “Restoring trust in the pharmaceutical industry by translating expectations into actions” conducted by PricewaterhouseCoopers (PWC) Health Research Institute captures the realities of ‘perception’ on the pharma industry. Pharmaceutical industry executives, consumers, and stakeholders, such as doctors in physician groups, researchers in academia, former health policy makers, hospital executives, managed care organization executives, participated in this survey.

The paper highlighted that ‘perception’ driven peoples’ behavior is triggered by a myriad of reasons attributing to the recent loss of trust of key pharma stakeholders’, such as regulators, payers, physicians, and patients. The authors suggested, the industry should act to restore trust as the central tenet of all of its relationships.

Two major perceptions of pharma consumers and stakeholders were captured, as follows:

  • A high percentage of pharmaceuticals in the total healthcare costs, distorts the value–for–money argument used by the industry.
  • The process and the nature, extent and quantum of money spent on pharmaceutical sales and marketing lack transparency, especially with respect to drug risks and benefits.

Constructive power of positive ‘perception’ needs to be strengthened:

Likewise, the constructive power of positive ‘perception’ needs to be strengthened.

Let me illustrate this point with three examples out of many. The first two examples come from the pharma players in India, and the third one from a top non-pharma giant.

- To add public confidence to the corporate brand and strengthen its image among its stakeholders in India, Mankind Pharma appointed Amitabh Bachchan as the brand ambassador. The company wants to primarily emphasize the importance of good health and affordable treatment for all.

- To enhance public ‘perception’ and corporate reputation further, Abbott rolled out a corporatecampaign in India – ‘live life to the fullest.’ The advertisement communicates to the people in an interesting way that “At Abbott, we’re all about helping you live the best life you can through good health. We keep your heart healthy, nourish your body at every stage of life, help you see clearly, and bring you information and medicines to manage your health. Every day and around the world, we’re discovering new ways to make life better.”

Since,the public ‘perception’ of pharma keeps getting worse, let me illustrate the point of constructive power of ‘perception’ from the huge success of several companies from the tech industry. As featured in Tech Times on July 23, 2016, in the ‘perception strength’ of customers in the world on a yearly basis, Apple Inc ranked the world’s top company in 2016 followed by Microsoft.This survey conducted by FutureBrand asked 3,000 customers to rank the big enterprises by 18 different factors, such as trust, price premium, individuality and innovation.

As defined by the survey report, “future brands” are those with a high chance to grow in the future. One of the defining characteristics of such a brand is that it has a consistent balance between the customers’ perception of its purpose and its delivered experience, the article indicated.And that’s exactly what constructive power of ‘perception’ that needs to be strengthened.

…But a key barrier to remedial measures still exists in pharma:

Regardless of industry’s intensive advocacy and multimedia initiatives, a strong negative ‘perception’ on pharma business persists. One of the reasons could be that the nature of most of these overt and covert measures questions the stakeholders for their negative ‘perception’ – justifying the industry practices. This approach often boomerangs. Consequent responses keep getting stronger – leading to a no-win situation. This arises out of a discord between the two concerned entities on the merits of the views that lead to adverse ‘perception’.

The PWC research paper quoted above also substantiates this point. It brings to the fore that pharmaceutical executives and stakeholders hold strikingly different views on a number of issues related to the development of ‘perception’ affecting the reputation.

The article, titled ‘Reputation and Its Risks’, published in the February 2007 issue of Harvard Business Review (HBR) also emphasizes, a clear recognition that reputation is a matter of ‘perception’ of stakeholders, will help companies to effectively manage their reputation. It also says, if companies fail to be in sync with stakeholders’ changing beliefs and expectations, building reputation through effective ‘perception’ management, would appear a tough call.

Conclusion:

Public ‘perception’ plays a crucial role, not just in shaping government policies and regulations, but also in the long-term business success. More positive the ‘perceptions’ are, easier will it be for the company to smoothly sail through, in business – even while navigating through occasional headwinds. Thus, the ability in shaping up a positive ‘perception’ for any business, is fast emerging as an antidote even to any possibility of getting ultimately shipped out. This ability is not dependent just on presenting hard positive facts to all concerned, but a tad more.

Which is why, it is so critical to understand the root cause of the views or ‘perceptions’ of the stakeholders in the industry or an individual company. In case of pharma, when the ‘perception’ is so negative, it will be worthwhile to neutralize it first, rather than immediately trying to counter it with a fresh coat of yet one more fact-based narrative. As a ‘perception’ is not necessarily based on hard facts, such attempts may lead to a never-ending debate on which ‘perception’ is right – ‘your perception’ or ‘my perception’, rather than ‘what is right to do’?’

There lies, therefore, the criticality of effective management of ‘perception’ in pharma. The situation, I reckon, would be even more challenging in the days ahead, if the stakeholders and the pharma industry continue to hold strikingly different views on a number of crucial issues related to the development of such ‘perception’ – further denting its already dented reputation.

By: Tapan J. Ray   

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

‘Big Pharma’ Prowls Falter: Triggers Off Yet Another Critical Debate

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The ‘Big Pharma’ prowls faltered yet again exposing the ‘fault line’ to all, when the GSK global head honcho, a pharma icon in his own right, Sir Andrew Witty supported the pharmaceutical policy of India, while in the country earlier this month. This support is quite in contrary to arrogant displeasure being expressed by his MNC counterparts against the pharma regime in India up until now.

Sir Andrew reportedly spoke against the usual pharma MNC practices of charging very high prices for patented medicines during an interview and said that multinationals need to look at things from India’s perspective. 

The above comment, when analyzed especially in context of one of the recent actions of Big Pharma MNCs complaining in writing to President Obama against India’s prevailing pharmaceutical regime, the fault line gets clearly visible.

In this context, a recent report captured the anger and desperation of Big Pharma. This hostility vindicates the general apprehensions in India that MNCs are once again pushing for a stringent patent regime in the country, against the general health interest of Indian patients for access to affordable newer medicines.

Quoting US Chamber of Commerce’s Global Intellectual Property Center another report reconfirmed the impatient prowl of the mighty lobby group in the corridors of power. This piece states, “Recent policy and judicial decisions (Glivec judgment and Nexavar) that invalidate intellectual property rights, which have been increasing in India, cast a daunting shadow over its otherwise promising business climate.” 

The ‘fault line’, thus surfaced, triggers off yet another critical debate, especially related to the slugfest on a stringent pharmaceutical product patent regime in India, as follows:

“Does Stricter IPR Regime Spur Pharma Innovation?”

Global innovator companies strongly argue that stringent Intellectual Property Rights (IPR) and stricter enforcement of IP laws have strong link with fostering innovation leading to a robust economic growth for any nation.

However, another group of thought leaders opine just the opposite. They argue that strong IPR and IP laws have little, if any, to do with fostering innovation and economic growth, as there are no robust research findings to drive home the above point.

It has been noticed that the MNC lobby groups quite often very cleverly use their magic word ‘innovation’ on a slightest pretext with an underlying desire of having a ‘very strict patent regime’ in India. Thus they seem to be trying to mislead the common man, as if India is against innovation.

Comment of the Chairman of National Innovation Council of India:

On September 15, 2012, while delivering his keynote address in a pharmaceutical industry function, Dr. Sam Pitroda, the Chicago based Indian, creator of the telecom revolution in India, Chairman of the National innovation Council and the Advisor to the Prime Minister on Public Information, Infrastructure & Innovations, made a profound comment for all concerned to ponder, as follows:

“Everyone wants to copy the American model of development.  I feel that this model is not scalable, sustainable, desirable and workable.  We have to find an Indian Model of development which focuses on affordability, scalability and sustainability.”

Recent Indian stand:

On March 5, 2013, the Government of India made a profound statement on the subject of ‘Innovation and Small and Medium Enterprises (SMEs)’ at the TRIPS Council meeting covering the following points:

  • There is no direct correlation between IP and Innovation even for the Small and Medium Industries.
  • The technological progress even in the developed world had been achieved not through IP protection but through focused governmental interventions.
  • The proponents of this Agenda Item have reached the present stage of technological development by focusing solely on the development of their own domestic industry without caring for the IPRs of the foreigners or the right holders.
  • After achieving a high level of development, they are now attempting to perpetuate their hold on their technologies by making a push towards a ‘TRIPS plus’ regime.
  • Their agenda is not to create an environment where developing countries progress technologically, but to block their progress through stringent IP regime.
  • It is essential that the flexibilities provided by the TRIPS Agreement need to be secured at any cost, if the people in the developing countries are to enjoy the benefits of innovations.

A Wharton Professor’s view:

As the Wharton professor of Healthcare Management Mark V. Pauly has been quoted saying that the link between patent protection and innovation has never been definitely proven.

However, Pauly reportedly is aware that the innovator global pharma companies do say, ‘If you don’t allow us to reap the benefits of our R&D expenditure, we won’t put as much into it, and we won’t invent as many great things’.

However, the Wharton Professor counters it by saying, “The problem is that nobody really knows how much less innovation there would be if there were less patent protection. We just don’t know what the numbers are.”

The above report says, according to Pauly, the onus to prove that patent protection matters should be on the drug industry itself.

He argues, “Rather than always just insisting you should never limit intellectual property protection, they really ought to develop some evidence to show that without that protection, there would be an impact on the rate of adoption of new products. Everybody has an opinion, but nobody knows the facts.“

A French Professor’s view:

In another WIPO seminar held on June 18, 2013, Margaret Kyle, a Professor at the Toulouse School of Economics and the Université de Toulouse I in France, reportedly presented preliminary findings of a study.

This paper explored in detail the impact of World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in various areas related to the speed of launch, price, and volume of sales of drugs across countries and across different drug products.

In this study, as the above report states, Kyle analyzed the trade-off between the dynamic and static effects of Intellectual Property Rights (IPRs).

The dynamic effect of IPRs was considered as an incentive for innovation based on the general belief that patent protection, through granting market exclusivity, incentivizes companies to invest in the research and development (R&D) to develop new drugs.

On the other hand, the static effect of IPRs in the short term is that granting market exclusivity often leads to innovator companies pricing their products at levels, which will be unaffordable by a large number of patients, especially in lower-income countries.

Kyle explained that the results implied as follows:

  • IPRs are neither necessary nor sufficient to launch new pharmaceutical products.
  • The existence of a product patent does not always inhibit generic imitation, nor does the lack of such a patent necessarily deter an originator from making a product available in a given market.

Other eminent voices:

While highlighting that TRIPS-Plus intellectual property protection is passed by some developing countries in order to implement FTA obligations, another recent paper presents the following examples in support of the argument that there no correlation between strong IP laws and fostering innovation:

  • UK Commission on Intellectual Property Rights. Integrating Intellectual Property Rights and Development Policy. 2002. (Link)

“…Strong IP rights alone provide neither the necessary nor sufficient incentives for firms to invest in particular countries… The evidence that foreign investment is positively associated with IP protection in most developing countries is lacking.”

  • Robert L. Ostergard., Jr. “Policy Beyond Assumptions: Intellectual Property Rights and Economic Growth.” Chapter 2 of The Development Dilemma: The Political Economy of Intellectual Property Rights in the International System.  LFB Scholarly Publishing, New York. 2003

“…No consistent evidence emerged to show that IPR contributed significantly to economic growth cross-nationally.  Furthermore, when the nations are split into developed and developing countries, results to suggest otherwise did not emerge.”

  • Carsten Fink and Keith Maskus. “Why We Study Intellectual Property and What We Have Learned.” Chapter one of Intellectual Property and Development: Lessons from Economic Research. 2005. (Link)

“Existing research suggests that countries that strengthen their IPR are unlikely to experience a sudden boost in inflows of FDI.  At the same time, the empirical evidence does point to a positive role for IPRs in stimulating formal technology transfer.”

“Developing countries should carefully assess whether the economic benefits of such rules outweigh their costs. They also need to take into account the costs of administering and enforcing a reformed IPR system”

“We still know relatively little about the way technology diffuses internationally.”

  • Keith Mascus. “Incorporating a Globalized Intellectual Property Rights Regime Into an Economic Development Strategy.”  Ch. 15 of Intellectual Property, Growth and Trade. (ed. Mascus). Elsevier.  2008.

“Middle income countries must strike a complicated balance between promoting domestic learning and diffusion, through limited IP protection, and gaining greater access to international technologies through a strong regime… it makes little sense for these nations to adopt the strongly protectionist IP standards that exist in the U.S., the EU and other developed economies.  Rather, they should take advantage of the remaining policy space provided by the TRIPS Agreement.”

“It is questionable whether the poorest countries should devote significant development resources to legal reforms and enforcement of IPR.”

  • Kamal Saggi. “Intellectual Property Rights and International Technology Transfer via Trade and Foreign Direct Investment. Ch. 13 of Intellectual Property, Growth and Trade. (ed. Mascus). Elsevier.  2008.

“Overall, it is fair to say that the existing empirical evidence regarding the overall technology-transfer impacts of increased IPR protection in developing countries is inconclusive at this stage.  What is not yet clear is whether sufficient information flows will be induced to procure significant dynamic gains in those countries through more learning and local innovation.”

  • Alexander Koff, Laura Baughman, Joseph Francois and Christine McDaniel. “Study on the Economic Impact of ‘TRIPS-Plus’ Free Trade Agreements.”  International Intellectual Property Institute and the U.S. Patent and Trademark Office. August 2011.

“TRIPS-Plus IPRs viewed as ‘important, but not essential’ for attracting investment. Many other factors matter like, taxes, human capital, clustering, etc.”

Patients versus Patents:

Another recent  article on this subject states as follows:

“Compulsory licensing and stricter patentability standards allow domestic manufacturers to produce lower-cost versions of patented NCD medications and break into lucrative therapeutic areas, such as oncology, in which multinational drug firms are heavily invested.”

The paper clearly highlights, “If patients are pitted against patents, international support for IP protection—upon which drug firms and many other developed country industries now heavily rely—will again diminish.”

Yet another article published in The New England Journal of Medicine, July 17, 2013 states:

“Patents are government-granted monopolies. As monopolies, they can drive the prices of drugs up dramatically. For example, in 2000, when only patented antiretroviral drugs for Human Immunodeficiency Virus (HIV) infection were widely available, they cost approximately $10,000 per person per year, even in very poor countries. Today, these same medicines cost $150 or less if they are purchased from Indian generics companies…. patents cause especially acute problems for access to medicines in developing countries – not only because of low incomes but also because insurance and price-control systems are often absent or inadequate.” 

A WHO Report:

To chart the way forward at the backdrop of ongoing global debate elated to the relationship between intellectual property rights, innovation and public health, the World Health Assembly decided in May 2003 to give an independent Commission the task of analyzing this key issue. Accordingly, the Director-General of WHO established the Commission in February 2004. This report titled, “Public health, innovation and intellectual property rights” was published in 2006 and articulated that neither innovation nor access depend on just intellectual property rights and highlighted, among others, the following:

  • Intellectual property rights have an important role to play in stimulating innovation in health-care products in countries where financial and technological capacities exist, and in relation to products for which profitable markets exist.
  • In developing countries, the fact that a patent can be obtained may contribute nothing or little to innovation if the market is too small or scientific and technological capability inadequate.
  • In the absence of effective differential and discounted prices, patents may contribute to increasing the price of medicines needed by poor people in those countries.
  • Although the balance of costs and benefits of patents will vary between countries, according to their level of development and scientific and technological infrastructure, the flexibility built into the TRIPS agreement allows countries to find a balance more appropriate to the circumstances of each country.

India – now the most attractive global investment destination:

Trashing the anger and displeasure of pharma MNCs, as per the latest international survey, India reportedly has emerged as the most attractive global investment destination followed by Brazil and China. It is worth noting that even recently, during April- June period of 2013, with a capital inflow of around US$ 1 billion, the pharma sector became the brightest star in the FDI landscape of India.

Conclusion:

In the Indian context, a 2013 paper titled, “Intellectual Property Protection and Health Innovation: Concerns for India” published by Center for WTO Studies highlights that the regime change in the patent system has not been very supportive for improving access to medicines in India. It reiterates, it has not been established yet that a stricter patent regime in the developing countries like India, has helped health innovation and access to medicines at economically viable prices.

The paper recommends, although India is trying to incorporate all the flexibilities under TRIPS in its Patents Act, the ‘Indian Policy Makers’ should not give in to the pressure of western powers to make IPR more stringent in the country.

In the backdrop of arrogance exhibited by Big Pharma MNCs, in general, against Indian policies and judicial verdicts on this subject, the comments made by Sir Andrew on the issue, as deliberated above, are indeed profound and far reaching. However, it clearly exposes the fault line in the collective mindset of pharma MNCs, without any ambiguity.

I shall not be surprised either, if clever attempts are made now by the MNC lobby groups to negate or trivialize the profoundness of this visionary statement not just in India, but beyond its shores, as well.

Further, as stated above recent emergence of India as the most attractive global investment destination with pharma leading the deck is a point worth noting, more in the context of policy and statutes that India has decided to follow.

Be that as it may, it is beyond the scope of any doubt that innovation or for that matter encouraging innovation still remains the wheel of progress of any nation.

However, have we garnered enough evidence yet, to establish that stringent IPR regime with absolute pricing freedom would lead to fostering more innovation leading to well-being of people of the developing countries, like India?

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.