Understanding why forcing Generic Drugs could create catastrophe to Indian Healthcare?

The Argument

A lot of Doctors and a group of public activists of the agency AIDAN (All India Drug Action Network) have recommend that branded drugs be phased out in a gradual manner to prefer generic over branded drugs.

Moreover, the suggestion recommends having flat pricing in the Generic drug market (Not seen anywhere in the world based on our report here).

Additionally, the recommendation mentions that it be a must for Doctors to prescribe Generic Drugs (an outlook we forecasted earlier here) to encourage pharma companies to push more generics into the market.

The Obstacles: The Indian Patent Law

The huge obstacle is the Indian Patent Office. Every need drives Innovation and the pharmaceutical market is no exception. However, every innovation carries immense risk of failure; therefore, it needs to be adequately rewarded through higher returns.

In the pharmaceutical world, the higher returns are in the form of profits to pharma companies. However, these may appear exorbitant at face value, but averaged out over the cost of Research and Development they normalize to average across any other industry in the longer run.

The Indian Patent Office only started accepting drug patents for India, the world’s third largest pharmaceutical market, in 2005. Moreover, the patents laws in India provide nowhere close to the protection to innovation as provided in developed markets such as US and Europe.

In India although the protection lasts for 20 years it could be amended through a compulsory license allowing another pharma company to manufacture the patent drug without consent from the patent holder in only 3 years of the patent grant.

The Patent office states that “Any person may request a compulsory license (allowing another pharma company to copy the constituents without consent) if, after three years from the date of the grant of a patent the needs of the public to be covered by the invention have not been satisfied, the invention is not available to the public at an affordable price, and the patented invention is not “worked in,” or manufactured in the country, fully possible.

In other words, the patent office ensures that no matter what, under most situations, will allow other pharma company to manufacture without consent from the patent holder.

Therefore, pharma companies are sceptical to bring in or manufacture newer drugs in India, but rather sell Generic drugs under branded names due to limited reward from the profitability of patented drugs.

The Indian patent law has been described as adolescent and one of the weakest patent laws in the world.

The Outlook

We believe before we observe any changes in the branded drug market in India, the patent law in the India needs to change. With limited profitability potential, we will either not be able to get access to innovative healthcare medicines (ex: The case with stents now) or get access only to substandard drugs that would be catastrophic to patient lives.

The Healthcare industry needs a revamp, not from the Doctors, but from the government to push innovative medicines and then through fair pricing. We believe price is usually the last problem; it’s usually a broken business model that’s the issue.