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Are medicine prices set to zoom?

By Salil Panchal / Morpheus Inc. in Mumbai
April 11, 2005 07:07 IST
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With India embracing the World Trade Organisation's guidelines on various trade-related matters, the patents issue has come under the spotlight.

Will the prices of live-saving and other drugs rise in this new regime? How will Indian pharmaceutical companies be affected by the new rules? What are patents in the first place? looks at all these issues in this special series. In this third part of the series, we find out how the new patents era will affect the India pharmaceutical industry.

One of the biggest concerns arising from the passing of the controversial Patents Bill is whether drug prices for the retail sector, i.e. for the common man, will increase.

The Marxist-supported Congress-led United Progressive Alliance government at the Centre has faced rough weather in recent months on this issue.

Now international health activist groups have raised concern that millions of people across the world -- who are HIV-AIDS or cancer affected, would be impacted considering the prohibition on manufacture of low-cost generic drugs. The newer, innovative drugs will be too expensive for most of the world's poor.

However, some analysts and experts suggest otherwise. The off-patent market is still huge and can be explored further. Indian companies will gain strength in the coming years as partners in marketing and research-based outsourcing, ensuring cheap availability of drugs.

As far as the anti-AIDS drug prices go, the government will always have the power to intervene and come up with a desirable pricing policy, if prices move up.

Indian interests not compromised

The Indian government has gone on record to say that the fears of spiraling of drug prices is unfounded as 97 per cent of the drugs sold in India are off-patent. There are alternatives available to the government to ensure availability of patented products at affordable prices.

The critical issue is that drugs already being manufactured as generics are ineligible for patents. Hence fears that in the future all drug prices will be higher appear unfounded.

Analysts believe that India's cost edge will not be blunted in the short term. They  expect to see an increase in manufacturing and research outsourcing to India.

Experts think that global pharma companies would be now more inclined to use India as an outsourcing destination for manufacturing as well as research activities. This can lead to an increase in order flow for companies focussing on these business models.

"The passage of the Patents Bill for me personally and for India as a whole is a very tragic and a very sad day," said Yusuf Hamied, Managing Director, Cipla, a drug maker that gained fame by making cheap HIV / AIDS treatments available to the world's poor. "It will be the start of a predictable, long-term tragedy for the country," he claimed.

According to an analyst with global investment bank UBS, "We believe the concern of local prices of medicines rising by a large margin is overplayed as majority of drugs being marketed in India's $5 billion formulation market address tropical ailments. Most known medications for such diseases belong to older generation therapies, patent applications for which have been filed in at least one member nation of the Paris Convention Treaty (1978) prior to 1995."

"These products will not qualify for patenting, and hence domestic competition will continue to exist and help maintain a stable pricing environment," the report says.

The price of a patented drug would normally be much higher than other (generic) drugs. Currently, not a single drug in the Indian pharma market is patented in India (barring three under Electronic Medical Records).

With new drugs slated to be introduced in the Indian market, the share of patented drugs is expected to rise. But then patent expiries, too, would happen, contributing to the generics market.

The HIV-AIDS drug fears

International health activists fear that prices of drugs for treatment of AIDS (which is now gaining unmanageable proportions) could increase. "Because India is one of the world's biggest producers of generic drugs, this loan will have a severe knock-on effect on many developing countries which depend on imported generic drugs from India," said Samar Verma, regional policy advisor from Oxfam.

According to France-based Medecins Sans Frontieres, "People who rely on low cost medicines will have to wait three years before a generic company can even make an application for a right to produce the drug, whereas people in wealthy countries will have access to new medicines immediately, when they are proved safe and effective."

The key issue is that the government will have a clear role to play in terms of intervening to discuss pricing policies in an emergency situation. Further, the government would be in a position to break patents, including those for HIV / AIDS and tuberculosis.

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Salil Panchal / Morpheus Inc. in Mumbai

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