Patently unfair
In the battle between Indian generics companies and Western drugmakers, the losers may be millions of AIDS victims, Fortune reports.
By Daniel Pepper, Fortune

(Fortune Magazine) -- On the top floor of a drab apartment building on the edge of New Delhi, Ram Meher, 35, is taking his AIDS medicine, as he has every day for the past three years. Meher is a struggling wheat and sugarcane farmer who sold one of his three acres in 2003 for money to buy antiretroviral pills, which cost $125 a month. Before that he was swindled out of $477 by a traditional healer claiming to have a cure for the virus.

Last year Meher switched to a generic version of the pills, which cost only $36 a month. "I wouldn't know what to do but pray to God," says Meher when asked what he would do if the low-cost drug, Duovir, manufactured by Indian generics company Cipla, weren't available. "There is no alternative after this."

Meher is one of an estimated 5.7 million Indians who make up the world's largest HIV-infected population. Access to generic versions of brand-name drugs means an extra ten to 15 years of life for many Indians, a quarter of whom live on less than $1 a day. But with battles now being waged over patents for the drugs that Indian pharmaceutical companies copy, the question on many people's minds is how much longer cheap generics will be available.

Cipla's Duovir is an antiretroviral combination drug widely used in AIDS-treatment programs throughout Latin America and Africa. It also has the dubious distinction of being the first generic anti-AIDS drug to come under attack by a Western pharmaceutical company, GlaxoSmithKline (Charts), which filed a patent application in India in 1997 for its drug Combivir, on which Duovir is based.

Because the two antiretrovirals in Combivir were invented before 1995, when India signed the international intellectual-property-rights agreement known as TRIPS, they are not patentable in India. But Glaxo argues that the science behind combining the two drugs in Combivir - using the binding agent sodium dioxide, a form of sand - is more recent and warrants a 20-year patent.

Is it about the money?

Combivir is just the tip of the iceberg: India's patent offices are set to examine the patents for thousands of life-saving drugs in the coming months as it tries to bring its laws and practices in line with World Trade Organization regulations. Glaxo says the patent will have no impact on the price or availability of Combivir and that generic manufacturers will be able to apply for licenses and pay nominal royalties.

But for Leena Menghaney, who heads the campaign for access to essential medicines in New Delhi for Doctors Without Borders, that's irrelevant. "A combination of two drugs in one pill is not considered an invention under Indian patent law," says Menghaney, whose organization uses generic versions of Combivir in most of its AIDS-treatment programs around the world. "This is a clear case of trivial patenting by Glaxo." Cipla CEO Yussuf Hamied agrees. "There is no chance the Combivir patent will be granted," he says. "If [Combivir] is patented, you might as well shut shop and grant every patent on earth."

Earlier this year a number of public-interest groups, including Doctors Without Borders, filed a motion to oppose Glaxo's India patent application. If the patent is granted, Cipla could be required to pay standard 4% royalties to Glaxo, although Menghaney points out that the company could ask for much more. In South Africa, Glaxo demanded a royalty rate of 30% before being challenged by activist groups.

The same coalition also filed a motion to oppose the patenting of another antiretroviral, Viread, which is made by Gilead (Charts), a California company. The drug, the groups claim, is merely a crystalline version of an existing medicine. Gilead spokeswoman Amy Flood says, "Viread represents innovation and is patentable under Indian law." The company, she adds, "will use this patent responsibly and won't block access to our medication in India or in other resource-limited countries where the HIV epidemic has hit the hardest."

For the past two years, since the government unveiled plans for a free nationwide antiretroviral-therapy program for people with AIDS, India has bought its drugs from generic-pharmaceutical makers such as Cipla and Ranbaxy. Although at least 500,000 Indians have full-blown AIDS, enrollment in the free-drug program is fewer than 35,000. "We have been going forward in a slow, guarded manner," says A.K. Khera, who is in charge of AIDS drug therapy for India's Health Ministry. "Now we are scaling up and going to expand in a very big way."

The ramping-up of government-provided treatment - India will spend about $5.6 million on antiretrovirals this year - coincides with the campaign by Western pharmaceutical companies to pursue patents and royalties for their inventions.

That's what worries activists like Anand Grover, who works with the Lawyers Collective in Mumbai, which is spearheading the campaign against the Combivir and Viread patents. "Decisions made by Indian patent offices are a question of life or death for people with AIDS," he says. "They rely on the availability of affordable drugs and other essential medicines made by Indian generics manufacturers."

Glaxo sees things differently. "The challenge of HIV," it said in a statement, "needs to be tackled through intensive communication and education. The root cause of a country's inability to address its health-care problem does not lie with patents but with inadequate health-care infrastructure and funds."

A decision in the Combivir case is expected this fall. But other battles are just gearing up. About 9,000 patents have been filed in India by Western drug companies since 1995, all of them piled up in the so-called patent office mailbox. An estimated 1,000 of them are now under review. "There are hundreds of patents like this in the mailbox, and there will be many more challenges, especially with AIDS drugs," says Cipla's Hamied, who suggests companies withdraw many of the patents they have filed. "And who profits? Only the lawyers."

Patricia Dunn should resign as chairman of HP. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.