Why Chemotherapy That Costs $70,000 in the U.S. Costs $2,500 in India

Why does Gleevec, a leukemia drug that costs $70,000 per year in the United States, cost just $2,500 in India?

It's seemingly simple. Gleevec is under patent in the U.S., but not in India. Accordingly, Novartis, its Swiss-based manufacturer, may prevent competitors from making and selling lower-cost versions of the drug in the U.S., but not in India.

Last week, India's highest court rejected an application to patent Gleevec. While the legal issue in the case is important -- the patentability of modifications to existing drugs under Indian law -- the impact of the decision will likely be broader than just that issue, escalating a long-simmering fight over patented cancer medications in emerging markets.

Rejecting the Gleevec patent application is not the only step that the Indian government has taken to circumvent patents on cancer drugs. Last year, India issued a compulsory license on Nexavar, a late-stage kidney and liver cancer treatment, enabling a local drug firm to produce a generic version of this medicine without the permission of Bayer, the patent holder. India has recently announced plans to grant compulsory licenses on another leukemia drug and two breast cancer therapies.

India is not alone. Indonesia recently issued a compulsory license for a treatment for liver cancer-causing hepatitis B. China and the Philippines amended their pharmaceutical patent laws, making it easier for those governments to take similar measures as India.

Three trends are driving these moves, suggesting more fights over patients, patents, and drug prices are forthcoming.

First, cancer rates are increasing fast in many developing countries. With rising incomes and better access to childhood vaccinations, people are living longer in most developed countries. The major health risks worldwide are now behavioral -- such as tobacco use and household air pollution. The increases in longevity and exposure to behavioral risks are outpacing the improvement in health and regulatory systems in developing countries. As a result, people in these countries are developing cancers younger, in greater numbers, and suffering more chronic disability for cancer and other noncommunicable diseases (NCDs) than ever seen in developed countries.

Second, access to effective cancer treatment, patented or otherwise, is limited in developing countries. Most patients pay out-of-pocket for most of their medicines, and high prices put drugs beyond their reach. Cancers that are preventable or treatable in wealthy countries are death sentences in the developing world. Cervical cancer is largely preventable in developed countries with the human papillomavirus vaccine; in sub-Saharan Africa and South Asia, it is the leading cause of cancer death among women. Ninety percent of children with leukemia in high-income countries will be cured, but 90 percent of those with that disease in low-income countries will die from it.

Third, middle-income countries like India have both health and industrial policy reasons for encouraging domestic production of cancer drugs. Cancer rates are growing fastest in these populations, and governments are under pressure to better address the health needs of their ailing citizens. India, China, and other emerging nations are expanding coverage of medicines in their public sectors, but expenditures are rising astonishingly fast. IMS Health projects that annual drug spending in middle-income countries will double between 2012 and 2016, to more than $300 billion. Requiring local production of cancer drugs lowers their cost and also helps domestic manufacturers break into the oncology market, a lucrative therapeutic area in which multinational drug firms are heavily invested.

The measures that India and other countries have taken -- compulsory licensing and adopting strict standards on patentability -- are consistent with its international trade commitments, but will be corrosive to the way that pharmaceutical research and development (R&D) is funded internationally. More countries are likely to follow India's lead. Cancer is not the only NCD on the rise in developing countries, with rates of diabetes, cardiovascular, and chronic respiratory illnesses likewise increasing. U.S. patients will not indefinitely pay a 20-fold increase on the price of medicines that Indian consumers pay.

The fight over cancer drugs in India exposes a fundamental tension in the way we fund pharmaceutical R&D. Patents allow pharmaceutical firms to charge high prices for drugs for a limited period of time to recoup their investment in R&D. This results in more of the drugs that we need, but makes them less accessible to those who need them. The tension becomes greater in the global context because the income disparities between developed and developing country patients are so vast.

This tension in the patent system has been exposed before. A decade ago, courtroom battles and protests over access to patented HIV/AIDS medications in South Africa dominated international headlines. Those fights subsided when multinational companies donated their drugs, charged rock-bottom prices for them in poor countries, or allowed local companies to make generic versions. Yet the emerging fight over cancer medicines threatens to be bigger, as it involves the emerging markets and disease groups on which the multinational drug industry has banked its future.

The international community shows no appetite to agree on new ways to fund pharmaceutical R&D. Talks on alternatives like prize funds and R&D treaties at the World Health Organization have gone nowhere. The United States, Europe, and other developed countries have too much invested in the intellectual property (IP) system. According to the U.S. Patent & Trademark Office, IP in the U.S. is worth more than $5 trillion and is responsible for the employment of as many 18 million U.S. workers. On the other hand, countries like India are not about to agree to tightening standards on the flexibilities that the current IP system gives them on patentability and compulsory licensing.

The solutions to fights pitting cancer patients against patents in India are more likely to reside in making the current system of funding pharmaceutical R&D work better.

First, multinational drugs firms can, and should, reduce the cost of R&D, which would enable these firms to better function in the increasingly price-sensitive global marketplace for drugs. Last month, Andrew Witty, the CEO of GlaxoSmithKline, called the often-cited $1 billion price tag for developing a new drug an "industry myth," based on unacceptably high research failure rates. Government programs can help. The U.S. Food and Drug Administration's Critical Path Initiative is working with the drug industry to improve R&D productivity and could do more with greater funding.

Second, multinational firms must realize that there are low-income segments of the global marketplace that these firms cannot serve, but whose health needs must be met for international support of the pharmaceutical, trade, and IP system to persist. These companies must again be willing to license their patents to emerging country generic manufacturers better able to meet the low-cost, high-volume treatment needs of their poor. Novartis has protested that it was providing free Gleevec to nearly 16,000 patients in India, but more than 300,000 patients had been receiving the drug through local generic producers.

The international patent system has spurred tremendous pharmaceutical innovation. The inventors of Gleevec were awarded both the Lasker Award and the Japan Prize for their contributions to medicine and science. But the patent system must meet the legitimate needs of its constituents to function. If not, accommodations must be made, or last week's fight in the Indian Supreme Court will be simply one of many to come