Playing the frenemy card

The pricing pill looks set to choke pharmaceutical companies in India again.  On October 9, barely a fortnight after the National Pharmaceutical Pricing Authority (NPPA) withdrew its now infamous ‘internal guidelines’, a Spicy IP blogpost reported that the All India Drug Action Network (AIDAN) had filed yet another PIL in the Delhi High Court. The AIDAN’s PIL alleges that the NPPA’s volte face was a result of ‘browbeating’ by the Secretary, Department of Pharmaceuticals (DoP). The PIL reportedly refers to internal memos where the DoP has sent an endorsed copy of its opinion on the guidelines and directed the NPPA to withdraw them. AIDAN alleges that this amounts to ‘sabotaging the efforts of the Union Government and the stand taken by the Union Government in their two affidavits’ at ‘huge financial benefits to the pharmaceutical industries.’

Will the AIDAN’s argument, that the NPPA is an independent body, and cannot be dictated to by the central government, prevail? The Spicy IP blog post comments that apart from its consequences for pharma companies and patients, the petition throws up interesting and important Constitutional and Administrative law questions.

But organisations like the AIDAN are not alone in questioning the escalating prices of medicines. On October 2, two US senators, Senator Bernie Sanders (who is also chairman of a US Senate health care subcommittee) and US Rep Elijah Cummings (a ranking member of the US House oversight committee) have written letters to 14 pharma companies, asking them to explain why there are “huge upswings in generic drug prices that are hurting (US) patients.”  Prominent Indian companies like Dr Reddy’s Laboratories, Sun Pharmaceutical Industries, and Zydus Pharmaceuticals (US) as well as the likes of Actavis, Mylan, and Teva are some of the 14 companies who have been sent such letters.

How will big generic pharma respond to these letters? Most probably by going on the offensive and questioning the data. Commenting on the Bernie Sanders report and its impact on the global generics industry, Bhavik Narsana, Partner, and Sameer Sah, Principal Associate, Khaitan & Co say that if the data is accurate, there is definitely a cause for concern. They are not surprised that a congressional investigation was initiated given the Obama administration’s healthcare reform agenda. But they stress that it remains to be seen whether the data is indeed reliable. They caution that if the (US) Government does take some remedial action, it is bound to hit manufacturers’ toplines as the US is an important market for generics manufacturers, including Indian exporters.

Sanders’ and Cummings’ letters were followed by a hard hitting report on CBS’ 60 Minutes, aired on October 5, questioning the rationale for increasing prices of cancer drugs. Keeping the drug price issue on the boil is an easy task for the media as well as patient activist groups and this pressure seems to be one of the reasons why some pharma companies are re-thinking pricing strategies. The most recent example could be Gilead Sciences’ decision, to license seven Indian generic drug companies to make and sell Sovaldi at a lower cost. But it does have its critics who say this just a smart way to negate competition, and avoid patent challenges from these generic companies. And since the deal covers 91 low and middle-income countries but excludes many middle income countries, was it really motivated by patient interest alone? Not likely but maybe it’s the best solution for now: the royalties reward Gilead’s R&D work, the chosen seven generic pharma companies benefit from the business and of course more patients can access the drug.

The Gilead – Sovaldi deal signals that innovator and generic companies are now firm frenemies: friendly enemies who are increasingly open to collaborate for mutual benefit. But will these partnerships result in the ‘greater common good’?  The argument against monitoring of medicine prices was that market forces, i.e. competition, would keep prices down. But what happens when competition slowly reduces? The Government of India and regulatory bodies like the NPPA, like their US counterparts, will have to increase their vigilance to prevent monopoly-like situations in the market. As well as acknowledge that drug R&D is an expensive business, and companies do need incentives to keep up investments. Unfortunately, when politicians get involved, the public backlash forces regulators to swing to the other extreme, as we have seen in the case of the amended clinical trial regulations.

Also, it’s easy to target an industry but more difficult to correct the inefficiencies that exist within our healthcare delivery system. The cost of medicine is but a fraction of the total cost of accessing healthcare. If we had a strong primary and preventive healthcare infrastructure, rather than a sickcare focus, we could reduce the need for medicines as well.

On the IPR front, Prime Minister Modi has managed to hold the line during his US trip. He has agreed to form a high level working group on IP where both the US and Indian sides will present their interpretations of the sticky points. This should not be seen as a capitulation but an engagement. It appears that he is intent on following the pre poll manifesto of his party, the BJP, which mentions that the country should “embark on the path of IPRs and patents in a big way” and “establish an Intellectual Property Rights Regime which maximises the incentive for generation and protection of intellectual property for all type of inventors.” Seems like PM Modi too is playing the frenemy card: keep your friends close, but your frenemies even closer!

Viveka Roychowdhury
Editor

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