Utility Model: Would It Work In India For Pharma?

The revised draft of India’s IPR Policy penned by the Government constituted ‘Think-Tank’ in 2014, suggests enactment of new laws, such as for ‘Utility Models’ and Trade Secrets, to fill some gaps in the country’s IPR ecosystem .

However, media reports of May 21, 2015 indicate, the Department of Industrial Policy and Promotion (DIPP) is not in favor of changing the country’s ‘Patents Law’ framework to allow grant of utility patents, as suggested by the ‘Think-Tank’.

Though comments from the other Ministries and Departments on the revised draft IPR Policy is still awaited, DIPP reportedly feels, ‘Utility Models’ being less-stringent form of intellectual Property (IP) protection, could ultimately lead to ‘ever-greening’ of patents.

A volte-face?

This development is indeed interesting because on May 13, 2011 the same DIPP uploaded in its website a Discussion Paper on “Utility Models”. Many believed at that time, it as a precursor of a new policy initiative of DIPP on Intellectual Property Rights (IPR) to encourage innovation in the country, without diluting the prevailing strict criteria for patentability. The above Discussion Paper highlighted, among others:

“…minor technical inventions which frugally use local resources in a sustainable manner need to be encouraged by providing a legal framework for their protection and commercial exploitation. Such useful, low cost and relatively simple innovations which create new mechanical devices or contribute to the optimal functioning of existing ones may have commercial value only for a limited time period, before they are replaced by other products or rendered redundant by change of technology.”

In that paper DIPP also highlighted that many countries of the world, for example; Australia, China, Japan, Germany, France, Korea and Netherlands still find the ‘Utility Model’ as an extensively used tool to foster innovation within the local industries.

We shall also touch upon this point below.

The Discussion Paper did trigger a healthy national debate on this subject at that time, though Government did not make known to the public the outcome of this public discourse.

The definition:

The World Intellectual Property Organization (WIPO) defines ‘Utility Model’ as follows:

“Utility Model is an exclusive right granted for an invention, which allows the right holder to prevent others from commercially using the protected invention, without his authorization, for a limited period of time. In its basic definition, which may vary from one country (where such protection is available) to another, a utility model is similar to a patent. In fact, utility models are sometimes referred to as petty patents or innovation patents.”

Or in other words “A utility model is similar to a patent in that it provides a monopoly right for an invention.

However, utility models are much cheaper to obtain, the requirements for grant of a ‘Utility Model’ are usually less stringent and the term is shorter – mostly between 7 and 10 years, as against up to 20 years term of protection for a patent. 

Major differences between Utility Models and Patents:

According to WIPO, the main differences between ‘Utility Models’ and patents can be summarized as follows:

  • The requirements for acquiring a ‘Utility Model’ are less stringent than for patents. While the requirement of “novelty” is always to be met, that of “inventive step” or “non-obviousness” may be much lower or absent altogether.  In practice, protection for ‘Utility Models’ is often sought for innovations of rather incremental in character, which may not meet the patentability criteria.
  • The term of protection for ‘Utility Models’ is shorter than for patents and varies from country to country (usually between 7 and 10 years without the possibility of extension or renewal).
  • In most countries where ‘Utility Model’ protection is available, patent offices do not examine applications as to substance prior to registration. This means that the registration process is often significantly simpler and faster, taking on an average about six months.
  • ‘Utility Models’ are much cheaper to obtain and to maintain.
  • In some countries, ‘Utility Model’ protection can only be obtained for certain fields of technology and only for products but not for processes.

Countries providing ‘Utility Model’ protection:

Many countries do not grant ‘Utility Models’. However, the major countries granting ‘Utility Models’, as stated above, include: Australia, China, Japan, Germany, France, Spain and Italy.

According to WIPO, currently the countries and regions that provide ‘Utility Models’ are as follows:

Albania, Angola, Argentina, ARIPO, Armenia, Aruba, Australia, Austria, Azerbaijan, Belarus, Belize, Brazil, Bolivia, Bulgaria, Chile, China (including Hong Kong and Macau), Colombia, Costa Rica, Czech Republic, Denmark, Ecuador, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Guatemala, Honduras, Hungary, Indonesia, Ireland, Italy, Japan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Malaysia, Mexico, OAPI, Peru, Philippines, Poland, Portugal, Republic of Korea, Republic of Moldova, Russian Federation, Slovakia, Spain, Taiwan, Tajikistan, Trinidad & Tobago, Turkey, Ukraine, Uruguay and Uzbekistan.

Interestingly, ‘Utility Models are not available in the United Kingdom or the United States.

A recent allegation of ‘Utility Model’ infringement against a global pharma: 

Quite recently, in November 2014, Copenhagen headquartered Forward Pharma A/S reportedly filed a lawsuit against Biogen Idec GmbH, Biogen Idec Internaional GmbH and Biogen Idec Ltd. in the Regional Court in Dusseldorf, alleging infringement of its German ‘Utility Model’ DE 20 2005 022 112 due to Biogen Idec’s marketing of Tecfidera® in Germany.

Tecfidera® – a product containing dimethyl fumarate (DMF) as the active ingredient, is used for the treatment of Myasthenia Gravis (MS).

Forward Pharma asserted that its above ‘Utility Model’ precludes anyone from selling in Germany, without the Company’s consent, drugs with DMF as the sole active pharmaceutical ingredient for the treatment of MS at a daily dose of 480 mg.

With this lawsuit Forward Pharma did not seek to stop sales of Tecfidera® to MS patients, but rather sought damages for what the Company believes are Biogen Idec’s unlawful sales of Tecfidera® in Germany.

Although ‘Utility Models’ are registered without substantive examination, the Company reiterated its belief in the validity and enforceability of the said ‘Utility Model.’

Subsequently, on April 14, 2015 Forward Pharma A/S announced that an interference was declared by the Patent Trial and Appeal Board (PTAB) on April 13, 2015 between the Company’s patent application 11/576,871 (the “’871 patent application”) and Biogen’s issued patent 8,399,514 (the “’514 patent”).

The PTAB reportedly designated Forward Pharma A/S as the “Senior Party” in the interference based on the Company’s earlier patent application filing date.

Would ‘Utility Model’ be useful in pharma?

Utility Models (UM) are considered particularly suited for SMEs that make “minor” improvements to, and adaptations of, existing products. It is worth noting that UMs are primarily used for mechanical innovations.

However, in India, the ‘Utility Model’ concept in pharma would be directly conflicting with the intent and spirit of the section 3(d) of the Patents Act 2005 of the country, which clearly stipulates that mere discovery of a new form of a known substance which does not result in the enhancement of the known ‘clinical’ efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant, is not patentable.

Therefore, section 3(d) of the Indian Patents Act 2005, is considered as one of the most important safeguards against “evergreening” of patents, usually done through alleged “molecular manipulation or tweaking”, that delays entry of affordable generic equivalents, adversely impacting the public health interest.

In that sense, enactment of a new law granting protection to pharma ‘Utility Models’ in India could seriously jeopardize both short and long term health interests of the patients, in general.

This is primarily because, being denied of a 20 year product patent under section 3(d), the same company would then be eligible to apply and may also probably get a monopoly status for that molecule, though for a shorter term with ‘Utility Models’.It would obviously happen at the cost of quicker entry of equivalent affordable generics.

Conclusion: 

Considering all these, and having witnessed a serious allegation of a ‘Utility Model’ (which goes through no more than a liberal regulatory scrutiny) infringement, against a major patented pharma product that passed through the acid test of stringent and cost intensive regulatory requirements, it appears that ‘Utility Models’ need to be excluded, especially for pharmaceuticals in India.

This is purely for the sake of patients’ interest, at least on the following two counts:

  • All new/novel drugs, without any compromise whatsoever, should pass through the stringent acid test of the drug regulatory requirements for requisite efficacy, safety and quality standards.
  • ‘Evergreening’ of patents, under any garb, delaying entry of affordable equivalent cheaper generics, should not be encouraged in the country.

Thus, in my view, Indian Government should continue to remain firm with its bold stance on the relevance of section 3(d) of the Indian Patents Act. Any possibility of its dilution by a grant of market monopoly, though for a much shorter period, covering incremental innovations that do not conform to the country’s IP laws, must be openly discouraged with robust reasons.

In that sense, the flag raised by the DIPP on the intriguing recommendation of the IPR Policy ‘Think Tank’ for enacting new laws in India for ‘Utility Model’, appears to be pragmatic and far sighted, specifically in the context of pharmaceuticals.

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.

Unsustainable New Cancer Drug Prices: Resolution Remains A Far Cry

Prices of new drugs for the treatment of life-threatening ailments, such as cancer, are increasingly becoming unsustainable, across the world, and more in India. As articulated by the American Society of Clinical Oncology in 2014, this is primarily due to the fact that their prices are disconnected from the actual therapeutic value of products.

Today, a very large number of poor and even the middle-income patients, who spend their entire life-savings for treatment of a disease like cancer, have been virtually priced out of the patented new drugs market.

The plights of such patients are worse in India and would continue to be so, especially when no trace of Universal Health Care/Coverage (UHC) is currently visible anywhere near the healthcare horizon of the country.

I discussed about the recent decision of the Government for shelving UHC in my recent Blog Post titled, “Would Affordable ‘Modicare’ Remain Just A Pipe Dream In India?

Irresponsible pricing?

To highlight this point, I shall quote from the research paper titled, “Five Years of Cancer Drug Approvals, Innovation, Efficacy and Costs” published in JAMA Oncology dated April 02, 2015. This report states that just one year’s cost of treatment with a patented new cancer drug now routinely exceeds US$ 100,000. It is much known today that the medical bills for cancer treatment have become the single largest cause of personal bankruptcy, in many countries of the world.

The issue is even more impactful and heart wrenching in India, as with much lower per capita income, compared to the global median, a cancer patient pays around the same price for the same patented drugs in the country. Much talked about Nexavar of Bayer, has been a good example.

The above report underscores, the big global pharma players still vigorously contend to establish that the high cost of drugs is required to support their research and development efforts. However, none would possibly deny the hard data that, when costs and revenues are balanced, the pharmaceutical industry generates high profit margins.

On a lighter vain – the fact that the richest person in India is a pharma player of ‘low price generic medicines’ vindicates this point.

The latest report on pharma R&D costs:

In a ‘Press Release’ of November 18, 2014, Tufts Center for the Study of Drug Development announced, “Cost to develop and win marketing approval for a New Drug is US$2.6 Billion”.

This is around 2.5 times more than its previous estimate published in 2003, which reads as US$802 million.

Although the study is not publicly available, neither has it been peer reviewed, it does reflect that above overall inflation rate, pharma R&D costs are reportedly going up at an annual rate of around 8 percent!

Even if the R&D cost of US$2.6 Billion is accepted as correct to justify high prices of patented drugs, one should note that this figure is applicable only to those types of New Chemical Entities (NCE) that did not receive any outside funding in their developmental process, such as, from the National Institutes of Health (NIH).

It is worth noting, such types of NCEs account for less than one-sixth of the annual new drugs approval in the United States.

Interestingly, Tufts Center receives its funding from the pharmaceutical industry, according to reports.

When is a high cost of medicine defendable?

According to some, high price may be justified, if novel products offer significant benefits to patients giving rise to indirect quantifiable economic value through restoration of health of patients.

This is understandable, as those patented drugs represent significant and well-accepted pharmacological advances over the existing ones, offering novel mechanisms of actions for better treatment value through ‘high-risk-high-cost’ research.

Price is a function of the value that a drug offers:

The price of any drug must be a function of the value that it offers to the patients. Not just the cost of its innovation, irrespective of the fact, whether it is a ‘New-Class (Novel)’ or ‘Next-in Class’ or even a ‘Me-too’ NCE.

The above April 2015 research report published in JAMA Oncology, investigated at length, whether novelty of medications or their relative benefits dictated drug pricing.

In that endeavor, the authors found out that from January 1, 2009, to December 31, 2013, the USFDA approved 51 drugs in oncology for 63 indications. During this period, 9 drugs received more than 1 approved indication.

The study observed:

Of these 51 drugs:

- 21 (41 percent) exert their effect via a novel mechanism of action

- While 30 (59 percent) are next-in-class drugs

Despite this fact, there was no difference in the median price per year of treatment between the 30 next-in-class drugs (US$119, 765) and the 21 novel drugs (US$116, 100).

Global cancer market is soaring high fuelled by astronomical prices:

According to a report that quotes an official of IMS Health, the overall cost for cancer treatments per month in the United States is now US$10,000, up from $5,000 just a year ago. At the same time, according to a 2014 study by the IMS Institute for Healthcare Informatics, global oncology spending has hit US$91 billion in 2013, and despite patent cliff is growing at 5 percent annually.

None likes nightmarish cancer drug-pricing trend:

None likes this worrisome drug-pricing trend, not even in the developed world. God forbid, just one cancer patient in the family can drag even a middle class household to the poverty level, especially in a country like India, where Out of Pocket (OoP) expenses for health hovers around 70 percent and Universal Health Coverage still remains a pipe dream.

Payers, including governments and private insurers, in the top cancer markets such as the United States and Europe, are trying hard to bring the cancer drug prices to a reasonable level through regulatory pressure of various kinds and forms. For example, National Institute for Health and Care Excellence (NICE) in the United Kingdom and the regulators for drug cost-effectiveness in other large European countries, are coming hard on patented new cancer drugs with small improvements in survival time but priced much higher than the existing ones.

Even many private insurers in those countries are now raising questions about the additional value offerings in quantifiable terms, especially for the new cancer drugs and other treatments for life-threatening ailments, such as hepatitis C. To give an example, in late 2014, Express Scripts in America negotiated hard for an exclusive deal with AbbVie to provide its hepatitis C treatment Viekira Pak over Gilead’s exorbitantly priced Sovaldi.

Action by the doctors outside India:

In 2012, doctors at the Memorial Sloan-Kettering Cancer Center reportedly announced in ‘The New York Times’ that their hospital would not be using Zaltrap, a newly patented colorectal cancer drug from Sanofi. This action of the Sloan-Kettering doctors compelled Sanofi to cut Zaltrap price by half.

Unlike in India, where prices of even cancer drugs do not seem to be a great issue with the medical profession, just yet, the top cancer specialists of the American Society of Clinical Oncology are reportedly working out a framework for rating and selecting cancer drugs not only on their benefits and side effects, but prices as well.

In a recent 2015 paper, a group of cancer specialists from Mayo Clinic also articulated, that the oft-repeated arguments of price controls stifle innovation are not good enough to justify unusually high prices of such drugs. Their solution for this problem includes value-based pricing and NICE like body of the U.K.

This Interesting Video from Mayo Clinic justifies the argument.

Tokenism by the Indian Government:

India sent a signal to global pharma players about its unhappiness of astronomical pricing of patented new cancer drugs in the country on March 9, 2012. On that day, the then Indian Patent Controller General issued the first ever Compulsory License (CL) to a domestic drug manufacturer Natco, allowing it to sell a generic equivalent of a kidney cancer treatment drug from Bayer – Nexavar, at a small fraction of the originator’s price.

In this context, it won’t be out of place recapitulating that an article published in a global business magazine on December 5, 2013 quoted Marijn Dekkers, the CEO of Bayer AG saying: “Bayer didn’t develop its cancer drug, Nexavar (sorafenib) for India but for Western Patients that can afford it.”

Whether, CL is the right approach to resolve allegedly ‘profiteering mindset’ at the cost of human lives, is a different subject of discussion.

Be that as it may, India did send a very strong signal in this regard, which some construe as mere tokenism. Nonetheless, this action of the Indian Government shook the global pharma world very hard, that it would find difficult to forget in a foreseeable future.

Government’s determination to make it happen is still eluding:

The headline of this article would probably invoke an instant negative response from my friends in the industry, an understandably so, expressing… ‘Hey, are you talking against innovation and suggesting one more regulator for the heavily regulated pharma industry?’ 

I would very humbly say, no…I am suggesting neither of those two, but requesting to give shape to a very important decision already taken by the Government on this issue, in a meaningful way. That decision has been scripted in Para 4.XV of the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) and was notified on December 07, 2012.

On ‘Patented Drugs Pricing’, it categorically states as follows:

“There is a separate committee constituted by the Government Order dated February 01, 2007 for finalizing the pricing of Patented Drugs, and decisions on pricing of patented Drugs would be based on the recommendation of this committee.”

The following long drawn unproductive events would vindicate, beyond even an iota of doubt, that a strong determination to make it happen, by even by the new Government, is still eluding by far.

Is this committee ‘Jinxed’?

To utter dismay of the patients and their well-wishers, the above committee took over six years after it was formed to submit its report.

It recommended ‘Reference Pricing’ for the Patented Drugs in India, after adjusting against India’s Gross National Income and Purchasing Power Parity. The suggested ‘Reference Countries’ were UK, Canada, France, Australia and New Zealand, where there exist a strong public health policy, together with tough bargaining power of the governments for drug price negotiations.

However, our Government found this report useless for various reasons and dissolved the panel. The grapevine in the corridors of power whispers, it could possibly be due to intense pressure from the global pharma players and their powerful lobby groups.

Interestingly, again by the end of 2013, the Department of Pharmaceuticals (DoP) set up a brand new inter-ministerial committee with four representatives each from the Ministry of Commerce and Industry, Ministry of Health and Family Welfare, National Pharmaceutical Pricing Authority (NPPA) and one from the DoP to resolve the same issue of ‘Patented Drugs Pricing’ in India.

Unfortunately, a serious issue of this magnitude has still remained unresolved, even under the new seemingly dynamic Government, till date. There were media reports though, just prior to the Union Budget in January 2015, that ‘the Government may negotiate prices of patented medicines with their manufacturers before allowing pharmaceutical companies to launch them in India.’

The scenario is still far from even sketchy. A lurking fear, therefore, creeps into the minds of many: Is this committee on ‘Patented Drugs Pricing’ jinxed or incompetent or has deliberately been kept non-functional under tremendous external pressure on pricing of patented drugs?

The way forward:

To find an implementable ‘Patented Drug Pricing Model’ soon, the new committee of the Government should consider Pharmacoeconomics Based or Value-Based Pricing (PBP/VBP) Model for the country.

Pharmacoeconomics, as we know, is a scientific model of setting price of a medicine commensurate to the economic value of the drug therapy.  Pharmacoeconomics principles, therefore, intend to maximize the value obtained from expenditures towards medicines through a structured evaluation of products costs and disease outcomes.

Thus, PBP/VBP basically offers the best value for money spent. It ‘is the costs and consequences of one treatment compared with the costs and consequences of alternative treatments’.

To the best of my knowledge, the Public Health Foundation of India, spearheaded by well-reputed internationally acclaimed physician – Dr. Srinath Reddy, has requisite expertise in this area and to build on it further, as required by the committee.

This new model would help establishing in India that the price of any drug is always a key function of the value that it offers and not of the so called ‘high cost of innovation’, irrespective of whether it is a ‘New-Class (Novel)’ or ‘Next-in Class’ or even ‘Me-Too’ NCE.

The concept is gaining ground: 

The concept of ‘Value-Based Pricing’, has started gaining ground in the developed markets of the world, prompting the pharmaceutical companies generate requisite ‘health outcome’ data using similar or equivalent products.

Cost of incremental value that a product delivers over the existing ones, is of key significance and should always be the order of the day. Some independent organizations such as, the National Institute for Health and Clinical Excellence (NICE) in the UK have taken a leading role in this area.

Conclusion:

Warren Buffet – the financial investor of global repute once said, “Price is what you pay. Value is what you get.” Unfortunately, this dictum is not applicable to the consumers of high priced life saving drugs, such as, for cancer.

Price tags of most of the patented new cancer drugs, do not seem to give any indication that the pharma players believe in this pricing model, even remotely. As JAMA Oncology has established in their recent research study, there is no difference in the median price of per year of treatment between ‘Next-in-Class’ and ‘Novel Drugs’.

Thus far, India has been able to address this issue either through section 3(d) or Compulsory Licensing (CL) provisions of its Patents Act. As the saying goes, ‘proof of the pudding is in the eating’, the net fall-out of these measures has been demonstrably profound. For example, the global pharma giant Gilead has entered into voluntary License (VL) agreements with several local companies to market in India one of the most expensive products of the world – Sovaldi, at a small fraction of its original price of US$1,000/tablet. 

That said, effective long-term resolution of ‘Patented Drugs Pricing’ issue, in my view, is long overdue in India, especially for the treatment of life-threatening diseases, such as cancer. This has been necessitated by the fact that in many cases, therapeutic benefits of most of these drugs are not commensurate to their high costs.

The provision for ‘Patented Drugs Pricing’ has already been made in the NPPP 2012, though not implemented, as yet. While working out an implementable mechanism for the same, the new committee of the present Government may consider ‘Pharmacoeconomics Based or Value-Based Pricing (PBP/VBP) Model’ to effectively resolve this crucial issue. The specialized group that will operate this system could be a part of the National Pharmaceutical Pricing Authority (NPPA) of India.

The struggle for life in the fierce battle against dangerous ailments, without having access to new life-saving drugs, has indeed assumed a mind-boggling dimension in India, especially in the absence of Universal Health Coverage. It would continue to remain so, unless the new Government demonstrates its will to act, putting in place a transparent model of patented drugs pricing, without succumbing to any power play or pressures of any kind from vested interests.

The bottom-line is: It has to happen soon…very soon. For patients’ 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.