Bitter Pill: Western Pharma’s Stunning Profits

A drug to control Hepatitis C that the American pharmaceutical giant Gilead Sciences Ltd sells for US$1,000 a dose in the US can be had for US$14 a pill in India. And it is exactly the same drug, both manufactured by Gilead to the same specifications. Gilead made the deal to sell the pills at cheaper prices overseas while charging as much as US$80,000 for a 12-week regimen in the US, according to a Hyderabad-based drug reform concern

Those prices stand in sharp contrast to India where the same drug regimen costs US$1,200 for 12 weeks of treatment. This wide disparity underscores the overarching difference between the Indian approach to medicine and the US one where prices of medicines are one of the world's most exorbitant.

The bizarre fact in this case is that the US drug and the Indian one are exactly the same. They are both manufactured by Gilead, according to the Cure Hep C Project, based in Hyderabad.

“Some say that Gilead was trying to fight the black market and to secure at least some revenue from the third world,” according to the organization. “Others say that the pressure of media and HCV advocates played a role. The goal of this voluntary licensing program and ‘partnership,’ according to Gilead, is to enable access to antiviral treatment for Hepatitis C for as many people as possible, as quickly as possible. Gilead ended up signing licensed agreements with 13 Indian drug manufacturers that allow the production and distribution of new Hepatitis C drugs in 101 developing countries.”

Gilead and other US drugmakers are also protected by a 2003 law put into place by the George W. Bush administration that prohibits price negotiation. The country’s Medicare regime is required to accept pharmaceutical prices without negotiation. The drugmakers can charge the system what they believe is appropriate. Those prices bleed out of the Medicare system into private medicine as well – paid for by insurance companies, which just jack up the cost of health care premiums.

Experts ascribe this discrepancy to the differing ecosystems of the two countries. In the west, "legal loopholes allow multiple and extended monopolies on the same medicine leading to exorbitant prices for lengthy periods of time," said Dr. Susheel Pande, Head of Internal Medicine at Max Hospital, New Delhi.

Indian policy- and lawmakers, on the other hand, have identified generic competition as the strongest and most effective tool to reduce drug prices. Controlled prices, they say, trigger more generic competition which results in more affordable medicine. Robust competition among generic producers in India has also resulted in price reductions of over 99 percent for medicines across different therapeutic areas, including Hepatitis C, HIV/AIDS, Malaria, Tuberculosis and medicines for non-communicable diseases that are critical for public health programs.

An article by Doctors Without Borders points out that this public health approach to setting strict patent standards is also in sync with international trade rules and encourages timely entry of affordable generics into the market, driving prices down. As a result the drug Imatinib Mesylate, produced generically, costs US$790 per patient per year in India compared to $106,322 per patient per year in the US.

Apart from a “public-first” approach to policy and stringent medicine patent laws, another reason why India is often referred to as the pharmacy of the developing world is that it leverages its reverse-engineering skills to introduce generic drugs. In fact Indian manufacturers were the first to market low-cost versions of the life-saving cancer (Imatinib) and HIV drugs (Zidovudine) within a few years of their US launch.

Similarly, in 1999, when the WHO announced that HIV/AIDS was the No.1 killer in Africa, big pharmaceutical corporations with patent monopolies mined this opportunity to charge over $10,000 per patient per year for antiretrovirals (HIV medicines), thereby making treatment economically unviable for millions of patients in the developing world.

Then Indian generic company Cipla stepped in to manufacture and supply the triple fixed-dose combination of HIV antiretrovirals at US$1 a day, a 99.99 percent price cut. Today, India is the world’s primary source of affordable HIV medicines and has the capacity to quickly produce newer HIV drugs as generics.

Marijn Dekkers, the CEO of the German pharmaceutical company Bayer, once candidly observed that the company didn’t develop a cancer drug for the Indian market, but rather "for western patients who can afford it." The comment sums up the attitude of the pharmaceutical companies towards the poor.

Thus increasingly, we’re seeing not only the unavailability of drugs for medical needs, but also unaffordability when drugs are priced out of the reach of most people. The drugs that are developed today are priced so high that even people in the US, UK and the EU – the very markets that Big Pharma are targeting – are unable to afford price tags such as US$84,000 for the new hepatitis C drug sofosbuvir, or cancer drugs priced at over $100,000.

In an article "Drugs for the Poor, Drugs for the Rich: Why the Current R&D Model Doesn’t Deliver," Manica Balasegaram, a doctor and health activist, laments insufficient R&D in developing affordable healthcare as a major ill plaguing the industry.

British/Swedish pharma company AstraZeneca announced it was pulling out of all early-stage R&D for malaria, tuberculosis and neglected tropical diseases – all diseases of the developing world. Instead, the company stated it will focus efforts on drugs for cancer, diabetes and high blood pressure, all diseases that affect rich countries, with potentially plenty of people to pay the high prices on new drugs.

"The problem is simply this," writes Dr. Balasegaram, "pharmaceutical companies like Pfizer, AstraZeneca and Bayer lack the incentives to develop drugs like antibiotics that are only taken for a short period of time, or against diseases that primarily affect the poor. With an obligation to shareholders, pharma companies develop those drugs that will most enable them to achieve high sales in targeted lucrative markets.”

Typically, he said, “these drugs are for diseases that affect mostly people in wealthy countries who can afford – for the most part – to pay the high prices that come with a R&D system which relies on patent monopolies to recoup costs."

However, despite its laudable aim to prioritize affordable medicine over fat profits for its pharma industry, one area where India really needs to pull itself up is violation of standards created by the Pharmacy Council of India which leads to fake or substandard medicines being sold in the market. According to data produced by the Department of Food Safety and Drug Administration, over 10 percent of the drugs introduced into the market are counterfeit and 38 percent of the drugs are not effective due to subpar quality.

"If we get our act together on this front through stringent legislation or punitive action or both," Max Hospitals Pande said, "we can truly claim to being the pharmacy of the developing world."