GEO-POLITICAL ENVIRONMENT

Vs.

Presented by;
Section B ; Group -7

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 Process flow of the assessment

Comparative
position of two
AIDS companies

TRIPS

IMPLICATIONS
LDC DEVELOPED
COUNTRIES

Strategic difference of two

Companies

Geo-political War

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GSK’s Stand Point:
“This is an economic war. There are a couple of
pirate companies who want to undermine the
patent system and they have found the best
horse of Troy - whatever it's called in English - to
come in against the patent. This is the first time
there is a genuine risk that intellectual property
would disappear in the developing world.”
M. Jean-Pierre Garnier
Chief Executive Officer
GlaxoSmithKline

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CIPLA’S Counter…

“If we’re pirates, (let them) litigate against

us...Where is the question of piracy when we
abide by the laws of the land?”
Dr Yusuf Hamied,
Chief Executive Officer
Cipla

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IPR as per TRIPS
1. Process as well as product patenting 1. Process Patenting only recognized.
recognized
2.
2. Patent given for up to 20 years.
3.
3. Compulsory licensing only in emergency
situations. (In Doha meeting of WTO,
compulsory licensing allowed for AIDS,
Tuberculosis and Malaria)
4.
4. Reversal of burden of proof will be
there.
5. Plant varieties and Microorganisms in 5.
which genetic modification work is done
can be patented.
Indian Patent Law
1970
Patent given only for 5 to 7 years.
Compulsory licensing is available.
When a company alleges another
company is copying it, is the
complainant’s burden to prove the
fact of copying.
Plant and Microorganisms can not
be patented.
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CIPLA’s Stand Point:

"We have never been against

patents. We have been against
monopoly, because monopoly
leads to higher prices."
Dr Yusuf Hamied,
Chief Executive Officer
Cipla
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GSK’s Counter…:
• Price of medicines not the only reason for
deaths due to HIV/AIDS

• Stance:
– Lack of political will to spend money on medicines
– Lack of health infrastructure in LDCs

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Classification of LDCs:
• It is on based on UN classification
• A low income criterion:
 based on a 3 year estimate of the gross national
income GNI per capita (under $905 for inclusion
and above $1086 for graduation)
• A human capital status criterion involving a
composite Human Assets Index
• Composite Economic Vulnerability Index

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True Colour OF LDCs’

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UGANDA

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GHANA

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 South Africa

• Annual govt. spending on health is $50 for each citizen

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MALAYSIA

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 AIDS Situation
• 30 million patients suffering from AIDS in the
world.

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 CIPLA: SWOT ANALYSIS
Strengths Weakness

 Low R&D cost  Weak Financial Muscle power

 Pool of rich human resource who were able to  Weak Geo-Political Nexus
perform Reverse Engineering  Inability to invent new anti-AIDS medicines
 Under-developed R&D infrastructure
 Product Patent in most of the countries

Opportunities Threats

 The average cost of the AIDS cocktail in the West The international patent and trade regime seeks to
 The Biased Pricing Structure choke off any large-scale attempt to produce and
 Without cheap generic drugs, millions of poor market the drugs at affordable levels
would have no access to medicines Strong financial position of GSK
 Indian Patent Law 1970-only Process Patent Well net political nexus of GSK spear headed by
USA

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CIPLA’s Strategy:Marketing
• “I am not a westerner marketing drugs for western markets. I
represent the Third World and its needs and aspirations. I also
represent the capabilities of a country with a population of a
billion. Please do not link up the problems of the Third World
and India with those of the West. We haven’t broken any
laws...the main reason for reasonable drug prices in India is
the absence of monopoly because of the Patents Act, 1970.”
• Aids is an "entirely predictable tragedy", he says. "In this
disaster there is room for everybody."

Dr Yusuf Hamied,
Chief Executive Officer
Cipla

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CIPLA’s Strategy: Legal

• Doha Declaration :: In Paragraphs 4 to 6 :

– The TRIPS Agreement does not and should not prevent Members
from taking measures to protect public health.
– Each Member has the right to grant CL and the freedom to
determine the grounds upon which such licenses are granted.
– Each Member has the right to determine what constitutes a national
emergency ,including those relating to HIV/AIDS, tuberculosis,
malaria and other epidemics
• Dracovian Provision:
– LDC’s are exempted from patenting obligations by another ten years
starting from 2006 while developed countries are obliged to provide
incentives to their firms to transfer and promote technology.
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CIPLA Vs. GSK : Geo-Political War

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 GSK Vs. CIPLA:
South Africa Episode
o 1997: Medicines and Related Substances Control (Amendment) Act passed
 Compulsory licensing
 Parallel importing
o The global pharmaceutical companies (including GSK) files a suit.

o WHO makes a public appeal to the pharmaceutical companies.

o South African government condemned GSK’s policies.

o The MNCs announce price cut subject to burden sharing by

governments and reinforced protection of the industry’s patents.

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 GSK Vs. CIPLA:
South Africa Episode Contd…

• Dec-00, CIPLA moves forward and seeks permission from BMS, GSK and BI to
manufacture their patented drugs in return for a 5% license fee.

• Feb-01, CIPLA offers to sell its triple-therapy cocktail using a 3-tier pricing strategy.

• Mar-01, CIPLA asks South Africa to unilaterally grant it a CL to sell CIPLA’s generic
versions of the drugs.

• USA’s Toggling Stance & shadow Support

• Apr-01, the 39 drug makers drops their suit owing to public pressure, effectively
opening the door to CIPLA.

• Mar-02, the WHO releases its first list of safe AIDS drugs, including CIPLA’s Nevirapine,
Zidovudine and Lamivudine.

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 Backlash in SA
• Medecins Sans Frontieres (Doctors without
Borders) and Treatment Action Campaign
(TAC) argue for further slashing of drug prices.
– large number of AIDS patients earn less than one
dollar a day. 
– Judge Ngoepe appointed TAC as amicus curiae
(friend of the court).
• Medecins Sans Frontieres launched the global
‘Drop the Case’ petition.
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 GSK Vs. CIPLA:
Ghana Episode

• GSK boasting of the four patents issued by the ARIPO

• Lawsuit slapped by PMASA:

– Merck, Glaxo-SmithKline, Bristol-Myers Squibb and Boehringer Ingelheim involved in AIDS drugs
– Pressure from remaining 35 members

• Accusations of unethical acts upon Cipla

– Cipla forced to retreat from Ghana

• Ghana had filed legal documents that clearly state the country had rejected the three
patents.

• Later GSK admits that it had no valid patent in Ghana and an ‘overzealous’ company
official made the mistake.

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 GSK Vs. CIPLA:
MALAYSIA Episod
• Victory Post:
– On 29 October, 2003, Malaysia issued
the world’s first compulsory license
(CL) for four AIDS anti-retroviral
formulations to Cipla.

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 GSK Vs. CIPLA:
USA Episode
• TNC is formed

• Attention Diversion:
– Drug TNCs launched misinformation campaign
– Argument: AIDS in Africa due to lack of health infrastructure

• Allegedly - PhRMA spent $236 million in lobbying the US Congress and the Govt.
between 1997 and 1999.
– The Clinton administration raised the drug TNCs’ grouse against the Act during the President’s visit
to South Africa in March 1998. 

• 1998: Suspension of additional benefits under the Generalised System of Preferences

• April 1999: South Africa placed on the Special 301 ‘watch list’.

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 Change of stance by US Govt??

– Mid-1999:
• Health activists and groups turned the heat on during the Presidential
election campaign.
• Students organised protests within university campuses
– Later half of 2000:
• July 2000: $500 million in loans announced by Export-Import Bank of
US.
• But these loans could only be used to purchase drugs from the US
TNCs.
– Executive Order by Clinton administration not to challenge
TRIPS-compliant policy measures
• Executive Order limited only to sub-Saharan Africa and only to AIDS
drugs.

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 Fallacious Claims of TNC’s
• Several of the patented drugs were never ‘discovered’ by the TNCs.
– Publicly funded universities and research institutions had carried out the initial
research and development.
– NIH estimate in 1995:
• Private industry contribution was 52%
• NIH alone accounted for 30%. 

• NIH was instrumental in the discovery of 3TC, Invirase, Ziagen, Zerit and
Viramune. 
– December 2000: NIH demanded $9 million in royalties from Bristol-Myers Squibb

• A 1998 investigation by the Boston Globe:

– 45 of the 50 top-selling drugs approved in the US between 1992 and 1997 had
received government funding

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 Facts to consider!!!
• Only 10% of the global research and
development directed towards diseases of the
poor.
• Of the 1,233 new drugs between 1975 and
1997 only 13 were approved specifically to
treat tropical diseases.

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 Justification Contd…
• Oxfam report
– Operating Profits in drug industry > 20% prior to TRIPS
implementation
– Glaxo earned 28% profit on sales of $1.5 billion on
Combivir

• Is the profit justified for GSK??

– Production Costs - 21%
– R & D costs - only 14%
– Marketing and other costs - 37%

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 After-Effects
• Withdrawal of lawsuit in 2001

• Glaxo offers discounts of 85%

• Cheaper generics produced by Hetero & Aurobindo

• Glaxo grants voluntary licence to Cipla Medpro to make generic

copies of its patented drugs lamivudine, zidovudine

• 40% of HIV/AIDS patients undergoing ARV therapy take Cipla

drugs.

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Recommendation:
What else could GSK have done than concentrating on suit
against Cipla ?
Immediately implement steep discounts in the prices of antiretroviral
drugs to affordable levels.

Match the generic offering price.

Provide antiretroviral drugs in donation programs, which may

presumably confer some tax benefits for your company.

If you choose not to undertake the expense of providing discount

antiretroviral drugs to poor countries where they are most desperately
needed, permit generic manufacturers to manufacture and distribute
them in your stead.

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