Business » Industry

Updated: April 3, 2013 03:09 IST

‘Destroying patent model is no solution’

Raghuvir Srinivasan
Comment (11)   ·   print   ·   T  T  
Ranjit Shahani
The Hindu
Ranjit Shahani

Cross-subsidy is one solution to make medicines affordable: Novartis MD

A day after losing in the Supreme Court its seven-year battle over patent protection for anti-cancer drug, Glivec, Novartis India’s Vice Chairman and Managing Director, Ranjit Shahani, said that destroying the patent model is not the solution to make medicines affordable to the poor.

“The solution is either a cross-subsidy model where the rich pay full price and the poor pay a subsidised price or the government purchases for the poor and supplies through government hospitals,” Mr. Shahani told The Hindu in an interview.

“If you see a child without clothes on the road do you blame the textile industry for it? So please don’t blame the pharma industry for access. While access has many dimensions, the least of all that is price. You can have solutions such as tiered pricing, donation programmes, public-private partnerships and so on to make access easier for the poor,” he said. Tiered pricing is an approach where pharma companies price their drugs differently for the developed market and India.

According to him, the cause of rural indebtedness due to health care costs is not pharma but hospitalisation. “Pharmaceutical prices account for only 6 per cent of the health care costs. So even if you parachute free medicines, you save only 6 per cent,” he added.

He denied that pharma companies make big profits by selling drugs at high prices. “It’s a fallacy to say you are making obnoxious profits. You have to make enough profits to invest in research. Today, it takes $3-4 billion to get a new molecule out. After a hundred thousand leads and 15 years you get one product and that gets outdated in 6 months because competitors come out with a similar product.”

In his view, the way to ease the burden of high medication costs for the middle class is by liberalising the insurance sector. “Insurance companies don’t reimburse medicine costs. Insurance companies are least interested in health care because they don’t make any money there,” he said.


Mr. Shahani also denied that the industry practices “ever-greening” of patents, a practice where a patent granted years ago is kept alive through minor innovations that extend the patent period. “I think it is pretty outrageous to say that. There is only ever-delaying of patents in India. There might have been one or two cases of evergreening. In any business, there will always be black-sheep but to use them to brand the whole industry is wrong.” According to him, lack of data protection is a major reason why multinational pharma companies don’t invest in research in India. The absence of a law for data protection is a hurdle.

Asked why they cannot adopt tiered pricing for critical drugs, Mr. Shahani came up with the explanation that it leads to a system of parallel trade in drugs where the cheaper drugs are smuggled to the developed world where they are priced higher.

Only a person who is involved in getting a new drug from the lab to the
clinic will understand what Mr.Shahani is talking about; and that
unfortunately excludes 99.9% of the public who are blindly
congratulating the so-called saviors of the nation (read Supreme Court).

from:  Dr Sajjan Shenoy N
Posted on: Apr 3, 2013 at 21:29 IST

(1) “If you see a child without clothes on the road do you blame the
textile industry for it? So please don’t blame the pharma industry for
access." Comparing apples and pears? The pricing models of textile and
pharma industries are very different.

(2) "You can have ... donation programmes". Few hand-out donations
without motive, and clearly Novartis does not, as recent statements
show. India must move away from an economic model of "hand outs,
subsidies and charity" if it wants to make best use of all its
resources, and allow all its citizens to have a fair chance to progress
in life.

(3) "Tiered pricing" is tiered taxation, where the taxing authority is a
for-profit global corporation, not a people's government. A democratic
republic should not go down such a dangerous path.

from:  D Mahapatra
Posted on: Apr 3, 2013 at 12:20 IST

The answer is very simple. One has look at the last twenty years to see how many life
saving new drugs have been introduced by these copy cat pharmaceuticals. The
answer is nil. Financial incentives are required for innovation and excellence. That is
not to say that a balance cannot be struck and the government must negotiate with
these centres of excellence to get a better deal for our poor. Penalising the
innovators and supporting the copy cats under the cover of producing cheap drugs
for the poor is not the way to promote further innovation and excellence.

from:  Sri
Posted on: Apr 3, 2013 at 12:19 IST

I am sure Mr Ranjit Shahani must not have ever heard of Karl Marx, or Gandhian philosophy of 'commerce mixed with morals', what he is talking about is plain bluff and shortsightedness, we should never forget that globalization is neo-capitalism in old rags of predatory profiteering instincts

from:  Prabhakar Mishra
Posted on: Apr 3, 2013 at 12:08 IST

Here comes another smart pharma guy, hiding behind statistics
"Pharmaceutical costs are only 6% of healthcare cost". Let me ask him,
at regular price of over 1 lakh per month, does your drug Glivec fall
under this statistics you quote? Then comes comparison with textiles.
Well Mr. Shahani, there is no comparison. Medicine is a question of
life and death, clothing isn't. I just wonder how shameless he has
become. You milked a drug for so long earning billions worldwide. When
the patent life expires, at least make it available. Make your money
from true innovation and not by trying to hoodwink the authorities,
the courts and most importantly the patients, who are the reason why
you exist.

from:  Dev
Posted on: Apr 3, 2013 at 11:22 IST

It's a stupid explanation. He hide the profit margin they are making
in a poor country like India. Medicines are not like clothes bhai!!
It's life. So companies should undertake a social responsibility.
He is talking a policy about drinking water should supply to poor in a
govt. subsidy while corporate's can loot the entire money from

As per Noverties this medicine costs 1.5 lakh per dose!!! In India who
can purchase this ?? & the fact is that from this 1.5 lakh production
cost is below 1% & the rest for innovation!!!!! If Govt. started to
purchase this for its billion+ population, we will be like Somalia &
this companies will price higher than today's rate.

from:  Joe
Posted on: Apr 3, 2013 at 10:53 IST

Having failed to convince Indian courts that the patent application for Gleevec is not a case of evergreening, Mr. Shahni preaches about government policies. What is with Indian industry leaders? A ruling by US Supreme court is gospel, while a ruling in Indian Supreme court is shortsighted approach?
Given the sort of positive feedback I see in international press and media, I think it is Novartis which streched it too far. They should have stopped when Madras High Court ruled against them.
Contrary to what they say, they will not stop R&D in India. See what is happening in China.

from:  ravikirank
Posted on: Apr 3, 2013 at 09:15 IST

Why should Indian govt should bare the subsidy cost of drug which is
invented in developed world where the production & RnD cost so high. You
need to come up with a pricing model where it is affordable to massess
of India.

from:  Lokeshwar
Posted on: Apr 3, 2013 at 08:39 IST

Dr. Shahani's recommendation of cross subsidy of the cost of medication,
the rich paying for the poor, has not worked even in the USA and has
caused a crisis not only for the people but for the financial health of
the US Government itself and its key programs like Medicare. It is a
highly biased recommendation. The Supreme Court of India made a wise
ruling and should be commended for that.

from:  V. Ramaswami
Posted on: Apr 3, 2013 at 05:19 IST

Mr. Srinivasan's figure of six percent is dubious. In India, a poor person go to govt hospital only because he will get free medicine there.
and when electronics industry can make profit by selling cheap mobile phones to masses and earn from the scale of operation keeping low profit margin per item, why cant pharma do that considering such a huge market for medicines. textile industry and naked child analogy is strange. in India you can buy a shirt ranging from 20rs (in the streets of metros like delhi and bangalore) to 2000 rs in showrooms. and all serve same purpose. but thats not in case of medicines. everyone need same medicine.twenty year time for patents was chosen to allow companies to get back their investment cost back and of course initial pricing should take care of that.whats the point in having a new medicine if it cant reach poor. otherwise you better transparently declare actual cost of research for a molecule and recover it and many will come forward to help you.

from:  pradeep
Posted on: Apr 3, 2013 at 03:58 IST

Corporates are interested in only thing - profit, they could give a hoot about everything else. So thanks to Supreme Court fr the landmark judgement, cancer patients in India still have a chance at obtaining medical care that are within their reach. For all the professing Novartis makes, patients in even the hig GDP nations find cure out of their financial reach. The Supremen Court did what it deemed best - put the country's interests before everything else.

from:  Satish
Posted on: Apr 3, 2013 at 00:47 IST
Show all comments
This article is closed for comments.
Please Email the Editor

Commodity prices

Take a look at the prices of various commodities in Chennai here»





Recent Article in Industry

Britannia net profit up 68 per cent

Britannia Industries Ltd. closed 2014-15 with a 68.3 per cent rise in its net profit, which increased to Rs.622 crore. Standalone revenu... »