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The U.S. Chamber of Commerce argues that Colombia's public interest declaration against Novartis (photo) is inconsistent with the spirit of certain trade agreements. (Photo: Andrew)
Tuesday, July 5, 2016

Colombia & Novartis: A Bad Move?

Experts debate Colombia’s curb on a Novartis cancer drug patent.

Inter-American Dialogue

Colombia’s health ministry announced June 9 that it will force Novartis, the world’s largest drug maker, to lower the price of its popular cancer drug, Gleevec. Why did the two parties come to such an impasse, and what does the move mean for public health services and consumers in Colombia? How will it affect other drug companies operating in Colombia? Will the government’s decision to declare Gleevec in the public interest have consequences outside Colombia’s borders?

Nuria Homedes, associate professor at the School of Public Health at the University of Texas: Many, including governments, consider Gleevec’s price and patent controversial. In 2003 Colombia refused to patent it. Novartis appealed and after a protracted process, and despite a dissenting opinion from the Andean Justice Tribunal, the State Council reversed the decision of its Trade and Industry authority (SIC) and granted the patent in 2012. Subsequently, the government imposed price controls. However, Novartis’ success in curbing the sales of similar non-patent infringing products selling at significantly lower prices ($3,000 per person per year versus $15,700 for Gleevec, twice the average per capita income) eroded the impact of such measure. In 2014, civil society requested the ministry of health to issue a compulsory license. It was estimated that in a competitive market Gleevec could be up to 80 percent cheaper. The ministry of health started the process by negotiating price discounts but failed. On June 14, the health minister published resolution 2475 recognizing the legitimacy of Gleevec’s patent and declaring it’s in the public interest, allowing the government to determine its price. This declaration has been hailed by those who consider that population’s health trumps the interest of corporations that abuse their monopoly powers. It adds to the efforts of an increasing number of governments and advocates to reverse the tendency to turn health industries into profit making enterprises at the expense of public health. This measure can only have a positive impact on consumers and the bankrupt Colombian health system. The total savings will depend on the price established by a three-member commission, including a representative of SIC who presumably will try to ensure that the decision does not damage the interest of Novartis and other industries. Even if Novartis decided not to supply the Colombian market, patients could be treated with alternative products, and such a decision could prompt the government to issue a compulsory license. Colombia is not alone in its efforts to curb prices. The pharmaceutical industry needs to resolve this issue.

Justin Duarte Pine, director, international affairs at the Biotechnology Innovation Organization in Washington: BIO welcomes Colombia’s interest in developing a globally competitive innovative biotech sector and has been collaborating with the Colombian government for several years in order to support this goal. News, however, of a recent resolution declaring a patent of public interest is disappointing to the global innovative biotech community. To begin with, the resolution and a threat of a compulsory license sends a worrisome signal to investors in this sector that innovations will not be respected. In addition, the use of a threat of a compulsory license is not an effective mechanism to determine the price of a drug and this resolution thus presents uncertainty and risk to biotechnology companies that are in Colombia or that may seek to do business in the country. All in all, for a country that has identified as a strategic priority area the sustainable growth of a globally competitive biotech sector, it is difficult to imagine a more damaging policy that can disrupt the positive momentum built towards achieving this ambitious and praiseworthy goal.

Katherine E. Bliss, senior associate in the Global Health Policy Center at the Center for Strategic and International Studies: The Novartis product imatinib, which is sold as Gleevec in the United States and as Glivec in Colombia and elsewhere, is used to treat leukemia. It is among the Swiss company’s best-selling products and was added to the World Health Organization’s list of essential medicines for low- and middle-income countries in 2015. A generic version of Gleevec is now available in the United States. However, Glivec remains under patent until 2018 in Colombia, where at least 2,000 patients take it, and the drug costs more than $15,000 per person per year, nearly twice the middle-income country’s annual GDP per capita. Referring to the drug’s high price and the importance of protecting the public’s access to life-saving medicines, in May the government of Colombia announced it would seek compulsory licensing for Glivec in order to realize savings of more than $12 million per year. Under the TRIPS agreement within the WTO, governments may seek compulsory licensing to allow generic production of patented drugs for public health purposes. Novartis protested Colombia’s move, warning that the compulsory licensing could reduce incentives for pharmaceutical research and discovery. The Colombian government’s recent announcement that it will utilize a new methodology to reduce the price it pays for Glivec by 40 to 50 percent apparently removes compulsory licensing from discussion for the moment. But other middle-income countries struggling to reach universal health coverage and address non-communicable diseases while containing costs within the health sector will be watching the Colombia-Novartis dispute over Glivec to see what lessons it may provide.

Frank R. Samolis, partner and co-chair of the International Trade Group at Squire Patton Boggs: While the Colombian government’s decision to issue a Declaration of Public Interest overriding Novartis’ patent is likely driven by an interest in increasing access to Gleevec and addressing financial challenges facing its domestic health care system, Novartis and others in the industry have expressed concern that the decision sets a bad precedent. Alejandro Gaviria, Colombia’s Minister of Health, has argued, however, that the decision is designed to be exceptional. Nevertheless, some in the United States, including the Pharmaceutical Research and Manufacturers of America, have suggested that Colombia’s decision undermines the incentives associated with high-risk research and development investments in medical innovation. The U.S. Chamber of Commerce, one of the most influential business groups in the United States, further argued the public interest declaration is inconsistent with the spirit of certain trade agreements. According to leaked diplomatic letters sent from the Colombian Embassy, a staffer from the Senate Finance Committee reportedly suggested that in response to the government’s decision, the U.S. pharmaceutical industry may become vocal and interfere with other Colombian interests in the United States, including funding for the Paz Colombia peace plan. Policymakers in the United States should proceed cautiously when engaging in disputes that do not directly involve any U.S. party and should seriously consider the implications of undermining high-priority foreign assistance programs. Instead, the United States and Colombia should work to address these issues through more formal negotiations, including under the existing U.S.-Colombia free trade agreement as well as any future negotiations for the Latin American country to join the Trans-Pacific Partnership.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor


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