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  • Apr 20, 2014
  • Updated: 1:07pm
CommentInsight & Opinion

Novartis drug ruling shows up the failures of capitalism

Kevin Rafferty says drug research and patents are overly driven by profit

PUBLISHED : Saturday, 06 April, 2013, 12:00am
UPDATED : Saturday, 06 April, 2013, 5:41am

One cheer for India: its Supreme Court stayed on the right side this week when it refused to grant a new patent to Swiss pharmaceutical company Novartis for an updated, or tweaked, version of its leukaemia treatment drug Glivec.

The decision caused controversy, much of it for the wrong reasons. It leaves open questions about India and its attitudes to investment and intellectual property and about the operations of the giant pharmaceutical companies, or Big Pharma.

More important, it throws a small light on the failure of governments and markets in tackling critical questions over the health and well-being of the planet's seven billion people.

Novartis and Big Pharma immediately damned the judgment and howled that it would discourage them from investing the necessary millions of dollars to try to find cures for all manner of unconquered life-threatening diseases. Ranjit Shahani, managing director of Novartis India, said: "This ruling is a setback for patients that will hinder medical progress for diseases without effective treatment options." He noted that Novartis had in any case already transferred its investment in drug research to China where manufacturers were more welcome.

Big Pharma's American industry group complained that India's Supreme Court decision "marks yet another example of the deteriorating innovation environment in India". True enough, India's overall regime of attracting foreign investment and protecting intellectual property rights still leaves much to be desired.

Ernst & Young pointed out recently that India's foreign direct investment regime had been "progressively liberalised". Even so, the practical business of doing business in India means going through a maze of bureaucracy and corruption that makes the country less attractive than China.

But in pharmaceuticals, India is becoming a world leader, particularly because of the growth of its giant generic drugs manufacturers. India's drugs industry is worth more than US$26 billion a year and is earning a reputation for being "the pharmacy of the developing world" because it produces large quantities of generic drugs, such as the Indian version of Glivec.

Glivec produced by Novartis costs US$2,200 for a month's supply of 30 tablets; the Indian version costs US$175 for the same dose. Novartis says that it gives Glivec free of charge to 95 per cent of patients; but why not then adopt a more realistic pricing policy which would bring the drugs within the reach of those who need them?

Big Pharma, dominated by Western companies based in high-cost, slow-growing countries, has a real problem, compounded because big companies rely heavily on patented drugs, cheered or jeered on by stock markets, which tend to mark down a company's shares heavily when a valuable patent is running out. That is why companies twist and tweak old formulae to win a new patent and reset the clock for another 20 years of protection to have the lolly rolling in.

A cynic might ask what this has to do with creating life-saving new drugs for sufferers of real pain.

But scientists and commercial companies have gone on a spree of patenting everything in sight, including human genes. One company, Myriad Genetics, holds patents to two genes associated with breast cancer. The US Supreme Court is due to rule on April 15 on challenges to Myriad's claims to be able to patent genes.

Beyond this, the real questions to ask are whether the development of modern capitalism and markets has become too dangerous for the survival of the planet.

Bill Gates recently lamented that capitalism is "flawed" because it devotes more money to trying to cure male baldness than it does to diseases such as malaria.

The world spends US$2 billion a year on surgical procedures for hair loss and US$547 million for malaria. Indeed, only 10 per cent of global expenditure on health research is devoted to diseases that afflict 90 per cent of the world's population. But what can you expect when capitalism is increasingly being driven and distorted by the super rich?

Kevin Rafferty is professor in the Institute for Academic Initiatives at Osaka University

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