Novartis has given up the fight to protect its Indian patent on cancer drug Glivec. This may seem irrelevant to its investors. After all, the Swiss drug maker already gives this medicine away almost all the time on the subcontinent.
Nonetheless, Novartis International AG put up a huge legal fight .
Why? Well, protecting patents in fast-growing emerging markets is crucial to drug companies’ prospects. They are surprisingly dependent on a handful of countries for growth. In fact, Brazil, Russia, India, China (Bric) and Turkey could account for half of Novartis’ growth over the next five years.
Big pharma’s business in rich countries is slowing. Governments and insurance companies are clamping down on drug prices and switching patients to cut-rate generics. Meanwhile, drugs are getting more expensive to develop.
So, drug companies want to expand sales to poorer countries. Yet, almost half of the world’s 6.5 billion inhabitants live on less than $2 (around Rs81) a day. They, and many of their governments, cannot afford most medicines.
That leaves the newly industrializing countries. They are growing rich enough to pay for the drugs that big pharmaceutical companies are producing. But it is often tough to obtain or enforce patents in these countries. The latest example of this is an Indian court’s ruling on Monday that Novartis’ Glivec doesn’t qualify. That looks bad for drug makers.
Yet, as countries grow richer, they become more interested in protecting intellectual property.
India, for example, has many companies that produce knock-offs of Western drugs. But these indigenous pharma outfits are starting to develop their own medicines—and they want their inventions protected.
India now allows patents on drugs developed after 1995. Glivec was developed before then, but modified after 1995, so it wasn’t clear whether it qualified. The courts may have ruled that it doesn’t, but one shouldn’t worry too much about that setback. Over time, pressure from domestic firms for patent protection will increase. And that will benefit big pharma outfits like Novartis.