Millions of people in the developing world rely directly on cheap, generic pharmaceuticals as their only source of affordable medicine. A majority of these generics are produced in India, often referred to as the “pharmacy for the developing world” because of their unique patent laws. However, recent market intervention from the United States and the European Union threatens India’s ability to produce these drugs, and thus, the availability of medicine in the developing world. Let’s take a look as to why these drugs are overpriced, and what Western intervention on the pharmaceutical market for developing countries means for the future of Big Pharma.
Why are drugs so expensive?
Because of patents and cost of production. Or at least that is what the drug companies say. For years, drug companies have been using $1 billion as the industry standard for the cost of production of a new medication. A recent Forbes study found that the actual cost of production for every successful drug brought to the market is about $5 billion, because a vast majority of drugs fail to make it past clinical trials and FDA approval.
Many CEOs of these pharmaceutical companies use these numbers the justify why they need to set prices so high in order to run a successful business. Novartis CEO Joseph Jimenez recently discussed how the cost of production factors into pricing the medicine.
“Drug pricing is a very complicated topic because we invest in high-risk activity. This is a very high-risk activity when you’re discovering and developing new drugs. When you look at the cost of development, it continues to go up and up. So when we price a drug, we price it based on the value it will bring into that marketplace, and also how its price compares to the other therapies currently on the market,” Jimenez said in an interview with the Washington Post.
While it seems justifiable that firms have to set prices high in order to cover the massive cost of drug production, the main problem arises with the elimination of competition.
For a most patented drug, the expiration of their patent which is usually 20 years after it is issued allows other drug companies, especially companies specializing in generics - copies of brand name drugs that have the exact same effect - in India, to begin production. This influx in the amount of the drug available naturally drives down the price of the drug, making it more readily available.
Pharmaceutical companies, however, engage in the process of “evergreening” their patents, by which they modify an existing drug just enough so as to not change its chemical interactions, but still enough to extend a patent on it. This effectively establishes a monopoly of the production of this drug and creates difficulties for foreign generics companies in joining the market.
India’s growing pharmaceutical power
The reason India has emerged as the leading generic powerhouse for the developing world is that India’s patent law does not recognize evergreening as a legitimate practice. Pharmaceutical companies, however, argue that India’s total disregard for updates on existing drugs is dangerous, because changes made to the drugs are necessary for proper treatment.
Paul Herring, chair of the board of the Novartis Institute for Tropical Diseases in Singapore, addressed the difficulties in determining the patent extensions that are legitimate and those that are simply evergreening attempts.
“I agree that if it doesn’t provide the slightest advantage to patients, it does not deserve protection. You can’t merely take a molecule and paint it a different color. But anything you do to a molecule as small as it could be, if it results in a clear medical advantage for patients, then it should be protected,” Herring said in a study for the National Center of Biotechnology Information.
India’s resilience to foreign pressure to change their patents policies has caused United States and European based pharmaceutical companies to pressure Free Trade Agreements like the Trans-Pacific Partnership to impose regulations on India and to enact harsher intellectual property regulations.
The implementation of such restrictions would be devastating to relief organizations like Doctors Without Borders (MSF). MSF relies on India generics for more than 80 percent of the medicine they use for HIV treatment. The presence of generics has reduced the price of HIV treatment from $10,000 to $100 in the past 10 years. Furthermore, they rely vastly on the availability of these generics for treatments of other diseases and vaccines. MSF encourages the Indian government to resist foreign pressure and calls for other countries to fight patent evergreening.
With many pharmaceutical companies currently in legal battles with the Indian High Court over patent legality, the balance hangs in the air over the availability of affordable generics to developing nations.
Experiencing the effects of these decisions first-hand, MSF pharmacist Janice Lee described the situation if low-cost generics became unavailable.
“Patients would die! When you remember that there is already a funding crisis today that threatens countries’ ability to put more patients on treatment, then having medicines become more expensive in the future is a very frightening prospect,” said Lee in an interview with MSF.