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Forum Post: A part of the solution to Healtcare costs.

Posted 7 years ago on March 14, 2012, 1:16 a.m. EST by toukarin (488)
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MUMBAI: In a landmark decision that could set a precedent on how life-saving drugs under patents can be made affordable, the government has allowed a domestic company, Natco Pharma, to manufacture a copycat version of Bayer's patented anti-cancer drug, Nexavar, bringing down its price by 97%.

In the first-ever case of compulsory licencing approval, the Indian Patent Office on Monday cleared the application of Hyderabad's Natco Pharma to sell generic drug Nexavar, used for renal and liver cancer, at Rs 8,880 (around $175) for a 120-capsule pack for a month's therapy. Bayer offers it for over Rs 2.8 lakh (roughly $5,500) per 120 capsule. The order provides hope for patients who cannot afford these drugs.

The approval paves the way for the launch of Natco's drug in the market, a company official told TOI, adding that it will pay a 6% royalty on net sales every quarter to Bayer. The licence will be valid till such time the drug's patent is valid, i.e. 2020. As per the CL (compulsory licence) order, Natco is also committed to donating free supplies of the medicines to 600 patients each year.

Bayer said it was "disappointed" and would "evaluate options to defend intellectual property rights" in the country. In July 2011, Natco had applied for the CL in the Mumbai patent office to make Sorafenib Tosylate for which Bayer has a patent in the country since 2008.

Under Section 84, a compulsory licence to manufacture a drug can be issued after three years of the grant of patent on the product, which is not available at an affordable price. Under the World Trade Organisation TRIPS Agreement, compulsory licences are legally-recognized means to overcome barriers in accessing affordable medicines. This is the first time in the history of the Indian Patents Act, 1970, that the provision under Section 84 has been invoked.

The patent office acted on the basis that not only had Bayer failed to price the drug at a level that made it accessible and affordable, it also was unable to ensure that the medicine was available in sufficient quantities within India. Controller general of patents, P H Kurian, based his decision on Bayer's admission that only 2% of kidney and liver cancer patients were able to access the drug, and its pricing (Rs 2.8 lakh for a month) did not constitute a "reasonably affordable" price.

Since 2005, domestic drug manufacturers have faced formidable barriers in the manufacture of patented drugs, and this has been remedied by the compulsory licensing provision to prevent patent holders from having a monopoly over certain essential medicines.

Interestingly, generic manufacturer Cipla has already launched generic Nexavar (Sorafenib Tosylate) at around Rs 28,000 per 120-capsule pack, and is embroiled in a dispute with Bayer in the Delhi high court.

Economist and intellectual property expert James Love said, "The Bayer price of Rs 34,11,898 per year ($69,000) is more than 41 times the projected average per capita income for India in 2012, shattering any measure of affordability. Bayer tried to justify its high price by making claims of high R&D costs, but refused to provide any details of its actual outlays on the research for Sorafenib, a cancer drug that was partly subsidized by the US Orphan Drug tax credit, and jointly developed with Onyx Pharmaceuticals. Bayer has made billions from Sorafenib, and made little effort to sell the product in India where its price is far beyond the means of all but a few persons."

Dr Tido von Schoen-Angerer, director of independent healthcare organization, MSF, said, "We have been following this case closely because newer drugs to treat HIV are patented in India, and as a result are priced out of reach. But this decision marks a precedent that offers hope. It shows that new drugs under patent can also be produced by generic makers at a fraction of the price, while royalties are paid to the patent holder. This compensates patent holders while at the same time ensuring that competition can bring down prices."

Link to Article: http://timesofindia.indiatimes.com/india/Govt-uses-special-powers-to-slash-cancer-drug-price-by-97/articleshow/12240143.cms

Educated comment by anonymous contributor: To a large part, this tactic is why most countries grant compulsory licensing in at least some instances -- to make it impossible for a company to metaphorically "take its ball and go home". Most countries besides the US take the attitude, "If the IP owner isn't interested in selling it here, and won't allow anybody else to sell it here by granting them a license under reasonable terms, we aren't going to stand in the way of somebody else independently taking the initiative to do an end run around them, make it themselves and sell it here anyway." India just happens to be notorious (within the pharmaceutical industry) for doing it openly, loudly, and proudly when lifesaving drugs are priced out of reach for most Indians by rent-seeking drug companies.

India is also somewhat unique in that it doesn't grant or recognize patents for "method of use" or "molecules", only manufacturing processes. So when finasteride was repurposed in lower-dose form as Propecia for baldness, it wasn't eligible for a new patent in India. That's why Propecia is patented and expensive in the US, but costs next to nothing when purchased from India. Likewise, when Indian companies came up with new ways to manufacture atomoxetine (the ingredient in Strattera), they were able to get their own patents and begin selling it, even though the original patent for Strattera was still in effect and valid in India. In the US, you can combine two old drugs in new doses into a new drug, and get it patented for another 17 years. In India, you'd be laughed at (unless you somehow came up with an innovative new manufacturing process that did something differently than just making the two original drugs by their original processes, mixing them together, and pressing them into tablets containing both).

My thoughts: Before people start bitching about how pharma companies need to recover R and D costs and need money for more R and D, consider that they spend just about the same amounts of money on 'marketing' their drugs. They routinely settle lawsuits for billions of dollars. They have not posted an operating loss in decades.

They keep renewing patents using these ludicrous tactics in the US and keep minting money off old drugs and thereby inflate cost of healthcare.

LET THEIR PATENTS FRICKING LAPSE! Contrary to belief it will SPUR more R and D cause companies will now be FORCED to come up with treatments that are ACTUALLY NEW(!) in order to stay competitive.

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10 Comments


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[-] 1 points by francismjenkins (3713) 7 years ago

We need more doctors (physician fees make up about 75% of healthcare costs, so everything else is only chipping at the fringes). Not to say pharmaceutical costs aren't out of control or that our patent system doesn't need revision, but still, the math is pretty clear.

[-] 1 points by craigdangit (326) 7 years ago

Um, actually they will go out of business because they won't be able to recoup the investment they made in researching the drug. But we don't need to let the laws of economics get in the way...

[-] 1 points by toukarin (488) 7 years ago

BTW, heres something you apparently missed: "Bayer tried to justify its high price by making claims of high R&D costs, but refused to provide any details of its actual outlays on the research for Sorafenib, a cancer drug that was partly subsidized by the US Orphan Drug tax credit, and jointly developed with Onyx Pharmaceuticals. Bayer has made billions from Sorafenib, and made little effort to sell the product in India where its price is far beyond the means of all but a few persons."

Also some reading matter about what Bayers research outlay was on this project: http://www.cbgnetwork.org/downloads/BackgroundNexavar.pdf

[-] 1 points by toukarin (488) 7 years ago

17 years is not enough to recoup expenses on R and D? I am not against patents. I am against having them extended for existing treatments due to minor modifications.

By all means, maintain that 17 year monopoly. But after that... its time to move on...

Excerpt from comment: "When finasteride was repurposed in lower-dose form as Propecia for baldness, it wasn't eligible for a new patent in India. That's why Propecia is patented and expensive in the US, but costs next to nothing when purchased from India. Likewise, when Indian companies came up with new ways to manufacture atomoxetine (the ingredient in Strattera), they were able to get their own patents and begin selling it, even though the original patent for Strattera was still in effect and valid in India. In the US, you can combine two old drugs in new doses into a new drug, and get it patented for another 17 years. In India, you'd be laughed at (unless you somehow came up with an innovative new manufacturing process that did something differently than just making the two original drugs by their original processes, mixing them together, and pressing them into tablets containing both).

From Wiki: The evergreening process has caused some controversy in the pharmaceutical industry. In this context, evergreening may be used by manufacturers of a particular drug to restrict or prevent competition from manufacturers of generic equivalents to that drug. In 2002, an extensive and lengthy inquiry by the US Federal Trade Commission (FTC), found that the Hatch-Waxman legislation or Drug Price Competition and Patent Term Restoration Act (which was instrumental in establishing the US generic pharmaceuticals industry) had resulted in as many as 75% of new drug applications by generic drug manufacturers experiencing legal actions under patent laws by the original brand name patent owner. These were driving up US drug costs by keeping the cheaper generic versions off the market. The FTC recommended only one evergreening injunction against a potential generic market entrant be permitted per product, and an expedited process of resolving such claims.

[-] 1 points by craigdangit (326) 7 years ago

I don't know if 17 years is enough and neither do you. What I do know is that it takes around 12 years to get a new drug to market, start to finish, and testing and approval takes about half of that. If we get the approval process streamlined, we can improve time to market and save the lives of the people dying from conditions waiting for treatments. As far as recouping an investment in a new drug goes, It is an entirely fiscal matter. I do know that if you invest in something knowing you can't make a dime on it for at least 12 years, and maybe not even then, the price will in fact go up on the ones that do make it to market. The only factor that can limit costs is competition, and reducing the regulatory burden slightly.

[-] 1 points by toukarin (488) 7 years ago

This is a drug that was ruled too expensive in the UK as well.

Combined R and D and testing/approval processes expenditures came in around 300 million. Lets call it half a billion. To gross 500 million, at $5500 per monthly dose would require less than 450 patients to take full 1 year courses of the drug each year for 17 years. Considering the millions afflicted by cancer I would think that not a tough number to get to.

17 years is more than enough to make money on a drug.

Those 12 years you are talking about? A good chunk of the trials processes gets covered by the NIH. Govt provides tax credits for such related expenses too.

To be sure, a more streamlined process would help drugs get to market faster and require less expenditure from the companies, but I doubt it would compel drug makers to reduce their prices.

Heck, most of them simply REFUSE to provide details about their R and D expenses (unless someone goes and digs it up) even though they chant "High R and D costs" whenever people ask for a lower price on their products.

Even if you consider high R and D cost. Does it not strike you as odd that even a copy can be sold at a full 97% discount, and still provide a 6% royalty to Bayer while at the same time retaining a profit margin for the generic manufacturer as well?

[-] 1 points by craigdangit (326) 7 years ago

No. It becomes a manufacturing issue after all the hard part is done, the development. It's like saying, "I can sell Windows 7 for $.35, pay Microsoft 10%, and make a profit". Drugs themselves cost almost nothing.

As far as investments go, are you ignoring all of the drugs that make it almost to market, only to be swatted down by an oversight? 17 years worth of R&D down the drain. What about lawsuits? Suppose one of your researchers makes a mistake and somebody dies, then all of a sudden you are out an extra $10 million. What if you get 16 years of work down the road, the drug is almost to the market, and your competitor finds out how to do the same thing better and at a lower cost? 17 years worth of R&D down the drain.

And then after all of that risk, you still need to turn a profit. No sane investor would give either of our theoretical drug companies $300,000,000 and only expect to break even after 17 years. The investor could make 5%/year with certificates of deposit, and virtually no risk at all. Probably more like 15%/year is considered going rate, for that much money and risk, if not more.

I did the compounding interest math on the investment, if you want to make just 15%/year on a 300,000,000 investment after 17 years, you will need to make over 3 billion dollars just to meet that point.

Not that any of this excuses excesses or corporate gluttony. But look at it this way, if it weren't for those companies producing the drugs, would the drugs exist? Probably not. Do I have a right to something before it exists? No.

The answer is more competition to reduce costs.

[-] 1 points by toukarin (488) 7 years ago

3 billion is still 450*6 = 1800 patients. You could find that many in even one major city.

Generic manufacturers face the same liabilities from lawsuits.

Drugs making it almost to market cost money too. Agreed, but again, 17 years of monopoly on any drug is more than enough to recoup expenses, turn a profit and cover a few failed programs.

Bayer made multiple billions on this drug in under a decade. A drug which was developed in partnership with another company and partly subsidized by the US public.

Streamlining process for drug approval, reducing drugmaker liabilities are important but its not like they reduce the prices after accruing enough to cover any potential liabilities from any lawsuits.

Drug companies WILL produce drugs because they will still be able to sell them at a profit, for a full 17 years.

Its not anyone having a right to drugs. Its about big pharma not being allowed to abuse patent privileges by making minor modifications to existing drugs and jacking up prices.

Consider that Bayer even tried to screw Onyx out of its share of profits from Nexavar by 'developing' another drug with one atom swapped around and trying to get a separate patent for that.

[-] 1 points by craigdangit (326) 7 years ago

No, I generally agree with the tenets of what you are saying, although I think there are more than a few failures on the road to making a new drug, but neither of us knows for sure. And I think giving government money to drug companies is an act of treason.

One atom? that is the difference between hydrogen peroxide and water...

[-] 1 points by toukarin (488) 7 years ago

Rephrase is in order: A medically inconsequential atom swap.