Post Says Drug Companies Will Try to Use Economic Power to Retaliate Over Indian Patent Ruling

The Post told readers that drug companies would try to punish India for a Supreme Court ruling that denied Novartis, a Swiss drug company, a patent for its cancer drug, Glivec. The court determined that the drug involved only a minor modification of an earlier invention and therefore was not entitled to a patent monopoly. As a result, generic producers in India are able to produce and sell the drug for less than one-tenth its patent protected price.

"Many international drug companies have said that the Novartis trial was crucial to addressing the rapidly growing perception around the world that India’s patent protection system for drugs is weak. Such perceptions, many patent advocates say, will adversely affect foreign investment in India, especially by global drug companies that are eyeing the huge market in this nation of 1.2 billion people."

There is no economic reason that this court decision would affect the drug industry's investment at all. Drug companies will get the exact same patent protection for their drugs in India and every other country in the world regardless of where they conduct their research. If India was the most profitable place for a drug company to conduct its research before this patent decision then it is still the most profitable place for a drug company to conduct its research.

The only basis for shifting investment would be to punish India, presumably with the hope that if enough investment shifts India may change its patent laws. This means that drug companies and their shareholders (e.g. university and foundation endowments and public sector pension funds) are foregoing profits today in the hope that they can inflict enough punishment on India to change its patent laws. That is a striking claim and the Washington Post did its readers a service by calling it to public attention, even if the Post may not have understood the implications of what it printed.

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written by Bill Alrich, April 02, 2013 7:49

If a drug company "tweaks" a formula to get a new patent, what would prevent generic makers from producing the old (unprotected) formula? If the changes are truly inconsequential the old version should still be a bargain for most patients. What am I missing?

patent chicanery
written by frankenduf, April 02, 2013 8:17

yo Bill Alrich- there r many tweaks that co.s do to get new (bogus) patents: combination meds (2 drugs combined in 1 pill); extended release formulas; condensed dosing (1 pill weekly instead of daily)- probably a rational conjecture to ur question here is they may have modified for ease of administration (IV form vs. pill form), or modification in terms of compatibility of chemo regimen- i think a good rule of thumb for drug co. patents is to presume market inefficiency

punishment
written by Jennifer, April 02, 2013 8:39

Absolutely they will consider, and might leave, in order to punish India for daring to buck the system. This would not make economic sense in the short term, but if drug companies think they can get any modification of the current implementation of patent law they are more then willing to lose some money upfront. Actually in Canada, Eli Lilly was suggesting it would pull all of its operations in the Canada when Canada denied them a patent.
As for patent manipulation everything that @frankenduf mentioned is done on a regular basis, another cute move is when they apply for an extension based on extending the drug to children, even when it's quite obvious there is no market for it.

Retaliation of Charlatans:This is a Stickup, Give Me All the Money ... Ok, Just Half
written by Last Mover, April 02, 2013 9:19

There is no economic reason that this court decision would affect the drug industry's investment [in research] at all.

The usual rebuttal from defendents of big pharma charlatans is it's in a high fixed cost - low variable cost industry for which only recovery of variable cost is not enough to cover fixed cost.

Of course the problem is fixed cost has been recovered many times over due to patent abuse like evergreening, which is why Novartis has the same incentive to invest in research in India despite the court ruling.

Specifically, when the Novartis unit price for Glivec drops from a higher price to a lower price, Novartis still covers its true opportunity cost - the incremental of production and distribution. The lost economic rent in between is not part of legitimate opportunity cost because Novartis needs only enough "normal profit" to cover its true opportunity cost of capital - that available in the next highest rate of return from an alternative investment (presumed to reflect a competitive return based on normal profit).

Like any business, Novartis depends on market power to charge what the traffic will bear when it can. When that includes the collection of economic rent then part of the revenue is pure gravy windfall having nothing to do with incentives to produce more or increase quality (true quality, not evergreening of patents).

Novartis is not stupid. It won't leave money on the table just because there's less money involved. The opportunity cost of getting it is still below the reduced price of selling it.

When WaPo claims Novartis and others will cut back on investment for lost economic rent, it reflects the ongoing brainwashing of the public by big media to paint rogue monopolist rent extractors as "competitors, job creators and life savers" in this case, rather than the economic charlatans they are, charging stratospheric prices for what they would produce anyway.

Real Life Difference
written by James, April 02, 2013 2:26

A big pharma like Novartis has benefited so much from gov't help to boost up their monopoly profit. They feel like they are entitled to such in every country on this planet.

Meanwhile, if a migrant worker feels like his pay of picking straberry from India is way too low compared to his labor. He could try unionize and pray that will help or as the huge media say, "Get better skills." Farmers will cry increasing pay will make your fruits too expensive.

Anyone complains that granting patent will make our meds too expensive?

Post Says Drug Companies Will Try to Use Economic Power to Retaliate Over Indian Patent Ruling

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