Big Pharma Stranglehold: Thwarting India As Independent Maker Of Blockbuster HIV Drugs?

By Daniele Dionisio

The current breakthrough of multinational drug corporations in India couples with the protectionist policies pursued by the United States and European Union and with India’s obligations as a World Trade Organization member. Taken together, these realities mean a heavy threat to India’s freedom as independent provider of lifesaving, affordable and state-of-the-art antiretroviral medicines to the resource-limited countries. Unless adequate corrections are made, this trend is likely to get worse.

Moving into India

Until recently, the pharmaceutical giants were little interested in the developing world, while looking almost exclusively to the profitable United States and European markets. But now, their momentum is substantially slowing down there mainly due to stiff costs to renew product pipelines, generic competition, recent economic downturn and cost-conscious government and commercial payers. Additionally, over the next five years, drug companies will lose patent protection of products worth US$140 billion in yearly sales [1]. As a result, the brand industry is increasingly looking to the emerging markets of fast-growing middle-income countries (including India, China, Venezuela, Brazil, South Africa, South Korea, Indonesia, Colombia, Egypt, Vietnam and Turkey) where a number of well-off elites, who can afford out-of-pocket spending (about 300 million people in India, at least 800 million in China), now live. Expanding middle classes in such countries are not only spending more on healthcare, but their rising wealth is contributing to increased rates of chronic diseases once limited to the western markets. Without counting that, sales of prescription drugs are forecast to wane in the United States as an effect of new health-care legislation that could lower the price of medicines. This is adding pressure on drug makers’ US businesses.

These reasons may explain why the sales of prescription drugs in emerging markets reached US$152.7 billion in 2008, up from $67.2 billion in 2003, while being expected to total $265 billion by 2013 [2].

India, whose economy is expected to grow by about 8.5 percent in the year ending March 2011 (according to government forecasts), is starting to take on a more mainstream role in the global drug industry and is expected to add substantially to the global pharmaceuticals market from 2008 to 2013 [3]. The multinational drug makers had a 19 percent share of India’s estimated 438.2 billion-rupee market in 2009 [4]. They will benefit in coming years from the implementation of intellectual property (IP) rights in India, a growing middle class, emerging rural markets and advances in medical infrastructure.

Overall, India is an exciting marketplace, with pharmaceutical sales expected to triple to $30 billion by 2020, compared with $11 billion last year, as per PricewaterhouseCoopers forecasts [5].

Four public agencies and 13 private companies are involved in pharmaceutical research and development (R&D) in India [6]. Taken together, their overall budget outlays didn’t reach $2 billion in 2005-2006 (compared with an $8.1 billion single Pfizer expenditure in 2007 alone!). While budget funds are increasing now, unfortunately none of the drugs developed by these Indian sectors has been commercially successful because of competition from similar products of multinational companies [6]. Nonetheless, the model still pursued by the Indian pharmaceutical sector is to develop new molecules up to a certain stage and then licence them out to the multinationals against royalties. As a result, the US Food and Drug Administration has issued roughly 900 approvals to plants in India to let the country export drugs or raw materials to the US [6].

Takeovers and Buyouts: Making Leadership Happen

Likely, the pharmaceutical giants are aware that they wouldn’t fast achieve leadership in India unless they acquire the local companies. As a win-win solution, this would enhance protection of their IP, while helping put an end to the lawsuits still being fought in courts between India and brand-name multinationals as a result of the tough 2005-enforced country patent law [7].

Big drug makers have spent more than US$6 billion in India in the past two years on healthcare acquisitions and buyout or takeover deals [4]. Abbott started gearing up in the country in 2001, through the acquisition of Knoll Pharmaceuticals. In September 2010, the company completed its acquisition of Piramal’s Healthcare Solutions business, thereby achieving leadership in the Indian pharmaceutical market. Just this year alone, Abbott also licensed at least 24 medicines from Indian firm Zydus Cadila [8]. Then, Daiichi Sankyo of Japan bought a stake in Ranbaxy Laboratories in 2008 [9]. A couple of years ago, GlaxoSmithKline tied up with Dr. Reddy’s Laboratories. Concurrently, Pfizer partnered with Claris Lifesciences, while Sanofi-Aventis took over Shantha Biotechnics, and Bristol Myers Squibb joined Biocon and set up a research centre in India [9].

While these acquisitions add to similar ones carried out by big pharma industry in other fast-growing markets, far more buyouts of Indian firms are expected to be inked in the near future.

Cheap brand and branded generics to rural India

Now that big pharma industry is pushing forward its breakthrough in India, the acquisitions of local firms, as just mentioned, have resulted in a multi-pronged, deeply profitable strategy wherein the impact of lower prices applied to end products is offset by taking advantage of the lower manufacturing, distribution and marketing costs in the country.

Until recently, the brand companies doing drug business in emerging economies have focused mostly on the wealthy and middle class. Now, they are turning also to the “bottom of the pyramid” and are conducting an exercise in how to cut prices down to seduce poorer customers and rural villagers in India while still turning a profit. To this aim, nearly all companies have boosted their sales forces (as an example, Abbott now employs approximately 10,000 people across all of its country businesses) [8]. Reportedly, these pitchmen are fanning out in rural India, where they train doctors and patients also hoping to capitalise on a $19.5 billion Indian public healthcare programme for 742 million villagers [10].

In short, the multinational companies are selling some branded treatments to Indian customers at lower-than-Western prices, while licensing cheap therapies from local firms (the so-called branded generics) to build portfolios of low-cost medicines [4]. Through the branded generics (90 percent of drug sales), the multinationals are deeply involved in the current rise of India’s pharmaceutical market [11]. It comes as no surprise that in countries where generic drugs may frequently be substandard or fake, selling generics under the brand of a leading enterprise can look to doctors and patients as a more trustworthy and reliable option. The branded generics market is generating nearly $8 billion in pharmaceutical sales this year, a figure that is expected to more than double by 2015 [11].

US and EU policies gathering steam

The insights so far couple with the protectionist policies still pursued by the US and the European Union with the developing countries in terms of:

• Free trade agreements (FTAs): as an example, TRIPS-plus clauses involving data exclusivity, extended patent terms and border measures are feared they are going to be approved inside an EU-India FTA under final negotiation now [12].
• IP enforcement agenda: early this year, the US 2010 trade agenda showed an intention to strengthen the global trade system and enforce obligations and US IP rights [13]. Accordingly, the Pharmaceutical Research and Manufacturers of America (PhRMA) advocated, in its 2010 Special 301 submission, several countries to implement data exclusivity provisions going far beyond their TRIPS obligations [14].
• Pressures to refrain from using TRIPS flexibilities: questioned US moves include the USPTO (United States Patent and Trademark Office)-Pfizer joint programme (“to fund and manage seminars in India on misconceptions of evergreening and the importance of regulatory data protection and patent linkage”), and the George Washington University Law School-associated “India Project”. Reportedly, with backing by a number of major corporations with extensive patent and copyright interests, the India Project “targets high level Indian government officials and judges, who are invited to participate in a number of seminars and trips, to receive training and advice in how to increase the level of patent and copyright protection in India, featuring one-sided presentations from a selective group of experts” [15, 16].

Impact on HIV Indian industry sector

More than five million people in low- and middle-income countries benefited from HIV treatment in 2009, largely due to India’s cheap and quality generic antiretroviral medicines (ARVs) and competition among local makers [17, 18]. Yet, much more has to be done. Following WHO’s 2009 recommendations to begin HIV treatment earlier, the estimates of people needing treatment have reached 15 million now, with sub-Saharan Africa being home to three-quarters of them [17]. As a result, the cost of treatment could skyrocket if products at affordable prices cannot be made available soon. That’s why the lifeline of Indian ARVs must not be cut off.

Since 2006, Indian ARVs exceeded 80 percent of the donor-funded developing country market, while reaching 87 percent of ARV drug purchases in 2008. At that time, Indian generics accounted for 91 percent of paediatric ARV volume. By 2008, Indian ARVs totalled 65 percent value ($463 million) of ARV drug purchases (with 13 percent and 22 percent market value for non-Indian generic and innovator ARVs, respectively) [19]. From 2003 to 2008, the Indian firms rolling out ARVs to the developing world rose from 4 to 10, while expanding production from 14 to 53 ARVs [19]. Currently, breakthrough ARVs in fixed-dose combinations (FDCs) are rolled out by the Indian manufacturers, while a number of them are not available yet from the brand companies [20]. Among the Indian FDC (or co-packaged) ARVs, tenofovir/lamivudine+atazanavir+heat stable ritonavir (by Mylan/Matrix) and tenofovir/emtricitabine/efavirenz (by Matrix, Emcure and Cipla) deserve special mention respectively as forerunner formulation and copy of the blockbuster brand FDC ATRIPLA® (by Bristol Myers Squibb-Gilead joint venture).

Indian compliance with WTO TRIPS since 2005 shadows, however, the optimistic figures above as the Indian companies are prevented, due to TRIPS-bound obligations, from making generics for drugs introduced post-2005 [21]. From bad to worse, it is feared that the EU-India FTA now on track to conclusion will raise ARV drug prices, hamper the development of up-to-date formulations, and delay access to improved treatments.

Thoughts here repeat the main concerns of HIV Indian industry sector as echoed in a 15 June 2010 Cipla report [22]. The report includes the third-line ARV drug darunavir (DRV) among the medicines in Cipla list. While aligning with the recent Indian patent office rejection of brand DRV patent application [23], this inclusion reveals Cipla and other like-minded organisations’ willingness to challenge the barriers.

Meanwhile, though the US National Institutes of Health (NIH) just licensed to the UNITAID medicines patent pool a royalty-free DRV-related patent (to benefit middle-income countries too), this is not enough to allow a generic low-cost version to be produced as other major manufacturers own different DRV patents [24]. The concerns of some originators about the UNITAID patent pool model suggest that a few adjustments would probably be needed to better harmonise all parties’ interests and secure more sustainable results [25]. Actually, while some multinationals would be prone to join, under certain conditions, the UNITAID patent pool, others would prefer to improve the affordability of their in-house pro-poor programs, or would rather agree bilateral voluntary licences (VLs) with the generic firms, while being reluctant to give up their IP rights via the patent pool to the advantage of competing industries in the middle-income countries.

Indian manufacturers are excluded from a July 2010-widened VL policy by ViiV Healthcare (GlaxoSmithKline-Pfizer HIV/AIDS joint venture) to benefit 69 countries [26]. A number of constraints limit the VL model potentials basically because the originators are granted full control over the whole manufacturing, distribution and pricing chain of steps: an unbalanced mechanism. On the contrary, unrestrained competition by compulsory licences (CLs) would be a far better mechanism for maximising the affordability of ARV prices. Unfortunately, pressures currently placed on India by the wealthy countries create a poor premise for CLs being extensively adopted.

These remarks make even more sense by considering that several new ARVs and a novel booster drug (adding to heat-stable Abbott ritonavir) will be rolled out soon by the multinational companies, while further brand joint ventures for ARVs development are approaching, now that Tibotec is working with Gilead to roll out a rilpivirine/tenofovir/emtricitabine cutting edge FDC [27].

The conflicting matters above add to the overflowing breakthrough of pharmaceutical giants in India and to TRIPS-plus policies pursued by US and EU. Taken together, these realities mean a heavy threat to India’s freedom as independent, key provider of lifesaving, affordable and state-of-the-art ARV formulations to the resource-limited countries. Unless adequate corrections are made, this trend is likely doomed to get worse in the mid-term. Should worst come to worst, the Indian pharmaceutical industries could unfortunately be restricted, under close control of drug giants, to an almost exclusive role as a sophisticated R&D arm.

How to reverse?

Up-front consensus models shouldn’t be given up when tackling such tough challenges as above. Inclusive attempts should face IP, policy, funding and infrastructure issues, while involving all interested parties, such as the Indian trade partners, international organisations, donors, national governments, civil society and pharmaceutical manufacturers as well. On its own, the Indian government should discourage monopolies and reject IP obligations that stifle the Indian industry role as a lifeline to affordable and quality ARV treatments. The Indian government should stick up for open competition through the CL system, while setting up pull mechanisms to build more competitive market and enhancing push incentives to ARVs development (i.e., tax reliefs, R&D grants, public spending priority reallocations) far beyond their secured extent so far [6]. Again, the Indian government should strengthen the national grant programme aimed to reverse the brain drain and call back home the young Indian scientists abroad [28].

India would be up to an R&D business model outflanking control from multinationals and developed countries. India definitely could turn to advantage the costs for ARV drug development arising from clinical trials and active pharmaceutical ingredients (APIs). While clinical trials account for roughly 40 percent of development costs, these are much lower in India due to its cost competitiveness and large number of people. Moreover, as a major supplier of APIs to both the developed and developing world (which account for 55-99 percent of direct manufacturing costs), India has great power to influence the ARV drug price evolution worldwide [21]. On these grounds, India should consider stepping up partnerships for clinical trials with high-tech, fast-growth developing countries (including Brazil, China, South Africa, Thailand, Indonesia, and South Korea) to gain good price regulatory approvals there, expand its market and cut the development costs further [6]. This would add to the free trade areas already set up by the developing countries to enhance trade with one another and to a number of regional collaboration efforts like the India, Brazil and South Africa network (IBSA) [29].

References

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Daniele Dionisio is reference advisor, “Drugs for the Developing Countries”, SIMIT (Italian Society for Infectious and Tropical Diseases). He is a member of the European Parliament Working Group on Innovation, Access to Medicines and Poverty-Related Diseases, and a member of the Italian Global Health Watch. Dionisio is former director, Infectious Disease Division, Pistoia Hospital, Pistoia (Italy). d.dionisio@tiscali.it