Epw.in

DRUG PRICES AND PATENTS-II
The Harm Done by Patents
S S Sokhey
When he writes in his article, "one wonders how Librium could be legally imported into the country from an unauthorised source by a party other than the patentee,, (emphasis added), Arvind Nair not only gives, his whole case away but unwittingly draws attention to the real damage caused by the pernicious patents system. He is referring to the matter brought to light in the last session of the Lok Sabha and drawn attention to in an edi-torial in The Economic Weekly of January 16, 1965— that a Swiss firm which holds the patent for librium, a tranquilliser, was importing the drug into India at Rs 5,500 per kg, while an Italian firm was supplying it at Rs 300 Arvind Nair is right when he says that the import of the drug into India by a firm and from a firm other than the patentee, regardless of the price differential, is illegal Thus he himself brings out the fact that the patent law in force in India at present gives protection both for the process and the product and drugs can be bought only from the patentees or their licensees and at prices fixed by them. It is precisely the monopoly right thus conferred on the patentees and their licensees in India which is holding up the development of the drug industry and standing in the way of the supply of life-saving drugs to the for the broad-spectrum antibiotics, carry out all the stages of manufacture, Aureomycin and Achromycin, are but mostly use imported penultimate among the highest in the w o r l d . As compounds to make finished products, a matter of fact, in drugs generally, by easy technical methods. Besides India ranks among the highest tying down our domestic technological as w e l l as product for obvious reasons priced nations of me world—a case developments, they have made our of an inverse relationship between balance of payment's position worse. The patentees, who are entirely of India study has revealed that since effectively bars the development of foreign firms, have mercilessly exploit- ed a protected market for over half a Rs 5 crores and h a v e already taken plies from sources other than the century and had shown no inclination out of the country Rs 4.64 crores in patentee. This is borne out by price to use their patent rights to start in- foreign exchange in the shape of d i v i - information on 12 drugs gathered by dustry in India until they saw danger dends, royalties and service charges. American embassies from 17 countries to their interests a few years ago. As The main burden of the liability has-(1958). It was found that in 11 coun- recently as 1954, the Pharmaceutical yet to come, because most of the tries which granted patents on drug Enquiry Committee of the Government collaboration agreements were conclud products, the prices were 118.2 per of India made it clear that no essential ed after 1959 and what is equally cent to 355.0 per cent higher than in drugs were being manufactured in the bad, the value of shares held by foreign To give a few examples: Rhone ''may be considered to be non-exist- Poulene of France sells prochloperazine ent". Another report in 1956 showed
(Compazine) 50 tablets of 25 mg each the state of affairs was no belter. It
for $3.03 in U S A (through Smith said, "Almost all the essential drugs, Huge Profits
Kline and France), for $1,61 in Bel-
the availability of which determines the effectiveness of medical attention in their own plants, they naturally charge rican Home Products sells promezine the treatment of the most serious and any price they like for their products, (Sparin) at $3.00 in U S A , 31 $3.155 common diseases in India are not be- even when they collaborate w i t h Indian in Canada and at $1.32 in Italy. The ing produced in the country, but im- ported from outside in ' b u l k ' form or manufacture, they still retain control town for $3.28 in U S A , for $177 in in the form of completed penultimates of the price level. Because of the un-I t a l y and for only $138 in Germany. from which essential drugs can be pro- Ciba of Switzerland sells Serpasif for duced by methods of simple and easy chemical industry, odd firms who take: $4.50 in U S A but for $1.05 in Ger- The Government took up this matter patentee for their know-how and are bilities of setting up public sector ing out manufacture. The patentees Prices Highest in the World
In our country, which grants both pendent of foreign imports of drugs. to see that the licensees sell the process and product protection, the This brought home to the foreign pat- prices of the drugs have been found entees the risk they were running and by them which may be even higher than to be the highest. The Senator Kefau- they hurriedly used their monopoly the prices at which they sell in their "India which does grant patents heartedly put up some plants them- on drugs provides an interesting selves or w i t h Indian collaboration. on foreign firms in one way or i n -case example. The prices in India These plants, however, s t i l l do not other and have for long obtained our T H E E C O N O M I C W E E K L Y
April 3, 1965
ultimate compounds largely from ing drug patents to bring down drug operations of the 22 firms exceeded U n i t e d States, Our prices of drugs are prices, I am told. The United States the combined cost of production, te-affected by the U S A prices and the also took up this question some years search and administration and all other w o r k i n g of the United States drug i n - ago. The Senate under its resolution expenses". Profits before taxes amount- No 53, 87th Congress had an enquiry ed to 25.8 per cent and advertising The American drug industry make, conducted by a Senate Committee un- huge profits. Its rate of profit is more der the chairmanship of the late while only 6.3 per cent went to re- than double that of other United Senator Kefauver and its report on search. Research expense obviously "Administered Prices in the Drug I n - ing o i l , steel, automobiles and chemi- dustry" was printed under the Orders very large. It is, however, blatantly cals, and range from 58.6 per cent to of the Senate as Senate Report No cited as the principal justification for 78.4 per cent. The high American 448 on June 27, 1961. of our people and even the public
hospitals cannot use them freely. This Kefauver Committee Report
situation has been under the consi-
deration of the Government of india enquiry ever held into the working of Cost of Production and Price
dering effective long term measures, the Committee empowered it to call attention to the production and sale the Government fixed prices in 1962 for and obtain detailed financial stale- of antibiotics, corticosteroids, oral an- companies covering their receipts and constitute in money value the largest expenditure for 1958. It held numerous portion of the total sale of drugs in public hearings for about two years. the United States. Enquiry in UK
facturers had their full say and a the companies as to the total cost of This problem of high prices of drugs number of directors of research of production and the quantity of, the: ed countries. Something like the case cology gave evidence. The report is a veritable gold mine ed unit cost of production and the House of Commons some time ago. of precisely determined facts which sale price. I take a couple of examples. An M P had drawn the attention of throws a flood of light on the practices In the case of tetracyclin. a wide the Health Minister to the excessively of the drug industry and the role the spectrum antibiotic much in demand, high price being charged by chemists patents play. It is of incalculable the Committee computed the cost of for tetracycline—an antibiotic very value to all interested in the drug i n - much in demand. An enquiry elicited dustry and provides pertinent facts to each at 46 cents. These 16 capsules the information that 16 capsules of answer spokesmen of the foreign drug as well as 16 capsules of the other tetracycline 250 mg each were sold monopolies in India. shillings (Rs 18.20) and Government staking, sober, attempt to unearth were sold to the chemists at a uni- was paying this high price for all tetra- facts relating to the drug Industry. Its form price of $ 5.10 w i t h suggested report alongwith the previous three price of $8.50 to the consumer, i e, at tioners under the free National Health reports on administered prices in three more than 17 times the cost of pro Service, while the Government Used other industries- steel, automobiles was importing the same 16 capsules and bread--prepired by the sub-com- that did run grant drug patents for light on the practices of these pivotal sules to chemists in India at $ 6.52 use in its public hospitals. The drug industries in which the sales are con- at that low price could not be sold centrated in the hands of a few large controls drug prices at $1.19, i e, at from the chemists' shops because of companies. The report on the drug in the monopoly conferred on the dustry is particularly important be- The detailed financial statements of other than the patentee and filed a the 22 leading American firms sub- suit; ultimately the case went to the mitted to the Kefauver Committee Pravy Council which, I learn from a showed that in 1958 of their total the example of prednisolone, synthe-responsible source, abrogated the earning of $ 2.3 billion, only 32.1 per sized, patented and sold under the tetracycline patent on the ground that cent went to the cost of production, brand name of Medicortelone by the patent was being abused to charge while industry's gross margin came to Sobering Corporation who licensed high prices. 67.9 per cent. "Fully three quarters Upjohn Company to make it for them. Recently the Labour Government in of the margin (or more than half of They charge the Corporation $1.19 for Britain has made it known that it is the industry's receipts) was either used going to conduct an enquiry into the to promote the sales of its products or cost after bottling came to $1.57 per prices of drugs. Canada also has been went into profits. Indeed promotion bottle of 100 tablets. They sold it to wholesalers at 514.32 who retail it to high level for years. For instance, the supply a bottle of 100 tablets of 500 gested price to the consumer of $29.83 romycetin, Terramycin and tetracyclic the price of imported drug or the drug per bottle, i e, 18 times the cost of which are produced tinder patents, was made in India for a bottle of 100 production. Oral antidiabetics and kept unaltered at $5.10 for 16 capsules tablets of 500 mg each varics from Rs of 250 mg each between 1951 and 13,50 to Rs 21.10. It is to be noted that the entire 1960. The only reduction of 10 per American drug industry, including cent in prices was made in 1961. Dur- these 22 firms, spent in 1958 as much ing the same period, the b u l k prices ment Council for Drugs and Pharma- as $ 750 million on advertising and of unpatented antibiotics, penicillin ceuticals. So I am not taken in by the sales promotion. They lavishly printed and streptomycin, fell by about 90 per Council's wisdom. circulars and brochures, advertisements cent—from 25 cents to 2.1 cents per
in medical journals and employed mega unit and from 32 cents to 3.6
about 20,000 super-salesmen, each cents per gramme respectively; this in
costing about $ 15,000 a year for visits spite of the world-wide inflationary Patents Must Go
to physicians. This wasteful expends trends to which A r v i n d Nair draws ture compares ludicrously w i t h $200 attention. m i l l i o n w h i c h the U S A spent o n all Drug Production in India
of drugs. If these expenditures were do demand that all the modern life interest of the state and private i n - saving drugs should be manufactured dustry, is to make inventions in drugs in the country and made available to non-patentable both as regards pro- the people at the lowest possible price, cess and product in future and to even w i t h o u t an element of profit. abrogate old patents which have still This could be effectively done in large more than three years to run alter the Patents Stifle Research
state plants. The know-how required Bill is passed. For this action, an opportunity now exists, as a new B i l l Patents particularly product patents, for setting up such plants is not any on Patents is going to be introduced though they may not be the sole longer the exclusive property of a few in the present session of Lok Sabha. factors, are the main factor which western firms but is now widespread The mere abrogation of product pat- keeps prices high. Worse s t i l l , they stifle research. Patents are now taken without having to pay royalties. In fact in 1956, a proposal was well. We can and we must build our to put up a fully integrated drug i n , basis of known processes. We can sion reached by a British Cabinet dustry to make India completely in- Committee during W o r l d War 11, dependent of imports consisting of (1) come up to the world level of drug when Government itself had to take a plant to make 33,000 tons of inter- up manufacture on a large scale. The mediate chemicals and solvents for position to begin to contribute to the patents system, the committee Thought, making all the drugs and dyes, (2) a world fund of knowledge by our re- prevents research and recommended plant to produce about 3,500 ions of searches. In the meantime, until we that to meet this evil, patents should about 65 essential drugs needed, (3) put up our own planus, we shall be ment. The British Council of Medical tics. This proposal was made on very cheapest sources. Research insisted that this should be favourable terms. If accepted in its done at least in the case of patents original form, the plants would have The same conclusion was arrived at how or the other, the scheme did not discourage research workers in India by the 20-year old Pharmaceuticals go through in its full form. The inter- and Drugs Research Committee of our mediate chemicals plant was taken out Committee brings out the fact (hat the Council of Scientific and Industrial of the integrated plan and turned over "mere existence of patent protection to private industry but the plant has is not a guarantee of invention nor is portant agencies engaged in research not been built up to this day. Inter- on, and the manufacture of, drugs mediate chemicals continue to be im- both in the public and private sectors. ported and those manufactured in the "drugs discovered in foreign countries country are made in small plants. The w i t h o u t product patents outnumber t i o n of Government to the fact that capacity of the plant for synthetic those discovered in countries with drugs was reduced to 800 tons and such protection in the order of 10 to ture b u t interfered with research and the rest of the drugs passed on to 1". Thus a large number of the most passed Resolutions asking Government small private firms with unhappy re- important drugs and the most widely sults. Take for example, Vitamm-C used in the world were discovered The most pernicious feature of the (Ascorbic acid). If the original pro- either in public laboratories or in coun sale of drugs produced under patents posal of the big plant had gone tries which have never awarded patents is that the prices are kept pegged at a through, we would have been able to on pharmaceutical products.

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