GD Monday – ‘Should patents be disallowed for life-saving drugs?’

You can participate in last week’s GD on internet and cable television here.

You can go through all the topics in the series over here.. You can share your views on the topic in the comments section.. (All the comments/views in the discussion are being rated on a scale of 10 by our experts, along with an explanation).

This weeks GD topic is drawn from the recent case of Novartis, whose cancer-fighting drug Glivec was denied a patent by the Indian Supreme Court. Read about the case and judgment here.

Let me summarize the issue for the uninitiated. (In case you are acquainted with it, please proceed to the comments section and start debating).

The business model of major international pharmaceutical companies like Pfizer, Merck, Novartis etc. consists of discovering, testing and bringing to market a few major drugs (each of these drugs earns millions and billions of dollars for them, and is known as blockbuster drugs). Now, this process of drug discovery (evaluating thousands and thousands of chemical compounds), testing, clinical trials (on rats, other animals, and finally humans), FDA approvals is extremely time consuming, costly and fraught with risk of failure. Normally it takes more than 15 years and costs more than a billion dollars just to get approval to sell a single drug.

To provide incentives to the pharma companies for taking these risks, their block buster drugs are protected by patents. A patent gives the pharma company exclusive rights (for a limited time) over the sale of its drugs in return for full disclosure about the constituents etc. Once the drug has been approved and patented, the parent pharma company will be able to charge an exorbitant monopoly price that helps it recover the billion dollar development costs.  Patented drugs are extremely profitable because the manufacturing costs are quite negligible, and all the risks, uncertainties and hurdles of the development stage have been passed. Their high price makes these life-saving drugs unaffordable for most people in poor countries. Enter generics..

Since the details of the patented drug are publicly available (through disclosures), it is easy for other (Indian) pharma companies to create  copy-cat (generic) versions of the drug by reverse-engineering the whole process. These companies incur only manufacturing costs (which are peanuts anyway) and  can afford to sell their copy-cat drugs (which do the job equally well) at a fraction of the price of patented drugs. The entire Indian pharmaceutical industry has been largely built on this premise – by making and selling copy-cat versions of drugs whose patents have expired (if the drug’s patent is in force, making and selling copy-cat versions is illegal.)

So now we come to the debate. Should patents be disallowed for life-saving drugs?

This will establish a generic industry that creates cheap alternatives to these premium drugs. It’s true that these alternatives will help save millions of lives, especially in poor countries. On the other hand, disallowing patents will send a demoralizing message to big pharma companies – that innovation is perceived as worthless  by markets and governments. It will erode their profitability. What do you think, what is the way forward?

Some of the questions that naturally arise are:

1. Can we really put a price on human life? Are some human lives more worthy of saving than others?

2. Should we have different policies for different nations, depending on income levels?

3. Should we tighten the conditions for doling out patents? Should we give patents only to breakthrough innovations, and stop giving patents for minor innovations?

4. Should we adopt a policy depending on the type of disease? For example, ‘lifestyleconditions like cardiovascular disease, diabetes, depression, obesity etc. affect rich people more than the poor (crude but somewhat true). In most cases, the sufferers can afford to pay for treatment. What about illnesses like HIV, cancer etc.?

Looking forward to an enthusiastic debate. Suggested reading:

1. Wikipedia on the meaning of patent

2. Wikipedia on grounds for patent validity (patentability)

3. Interesting article on the true costs of pharma R&D (De-mythologizing the high costs of pharma research)

4. The Novartis Case.

This is how it will work :

1) Users can post their arguments or views using their Twitter/Wordpress/OpenID accounts in the Comments Section below.

2) You can argue and counter-argue on the topic for the entire week.

3) The thread will be moderated by Team InsideIIM to ensure the discussion is kept relevant and is not abusive.

4) On Saturday, experts and industry professionals at InsideIIM (all ex-IIM,XLRI,ISB only) will rate each argument on the thread on the scale of 10 with some guidance.

This cannot replace the experience of the actual GD but this exercise will surely help you shape your line of thought. While we may not be able to help you here with your delivery, we ensure that if you go through these next few weeks with us on this thread you will markedly improve your content. Hopefully, there will be more substance when you actually speak in a GD after going through this exercise.


You can go through all the topics in the series over here

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Patents should not be disallowed. The underlying basis of assigning patents is to encourage & protect research initiatives taken by Pharmaceutical companies. As such Pharma business is a very high risk sector. A quick example can be brought up that of Biocon. It is an Indian Pharmaceutical company which became popular for its cheap human insulin product launched in 2003. The company has primarily focused on developing new drugs instead of solely focusing on generic drugs unlike its other Indian counterparts. Biocon has been facing lot of issues lately as it has not been able to bring into the market a new breakthrough drug for long time & therefore it has been facing a lot of financial issues lately. What encourages & drives companies like Biocon which are taking such a toll due to inherent risk in pharmaceuticals R&D is the allotment of patents. I believe it is a genuine way to drive such an industry.

However, I would do agree that some of the Pharmaceutical companies, especially in US are playing the patent provision inappropriately. Whenever there patent is about to end, they would tweak the original product & create a new patent out of it. Such misuse of patents should be avoided. Further, there could be a cap on the margins which the companies can charge based on the efficacy of a drug for various segments of the society in different geographies. Pricing strategy for novel drugs which has a huge market, for example for AIDS, can be rationalized by the regulators. The company can still earn a good profit just by driving the volumes of such drugs, thereby increasing their distribution of such drugs and making it available to all affected. For drugs affecting lifestyle problems, the regulators can allow to increase the pricing cap.


The patent system has now-a-days become a major factor in promoting inequity between the developed and the developing nations, between the rich and the poor. The research systems favour inventions for which there are many buyers. It works in tandem with the logic of the market, where people with money can avail of products they need, and the others are costed out. A great majority of people living in developing nations as India, suffer from what are termed as 'neglected disease'-malaria, tuberculosis, diarrhea,etc. These are neglected because the poorest of the globe's population suffer from them. And hence neglected by the research bodies, because patenting them would be of little value. Moreover, Indian pharma market accounts for less than 2% of the global market, while the US market alone accounts for about 25% of the global market. So a majority of pharmaceutical companies do not tailor prices on humanitarian grounds or on national situation, but on the fact that how much the market of developed nations can absorb.

Before India signed the TRIPS agreement in 1994, there was a 'no product patent' provision in the Patents Act, which benefited an overwhelming majority of the people.

However, patent system is necessary, for high amount of risk and cost that is incurred into it. Companies would not invest in R&D if the patent system were not to provide incentives in the form of patent monopolies. But having said that, there should different norms about the patent system for the developed and the developing nations. Categorization of diseases could also be done which could benefit all the sections of the society and stop promoting the inequity.