Award: Conscious Capitalist for the Year
Name: YK Hamied, cipla
Why the Company Won: For making AIDS treatment affordable. Cipla made a conscious decision not to profit from anti-AIDS drugs. In 2001, the company took on MNCs by announcing that it would sell its triple cocktail of antiretroviral drugs in developing countries for $350 per patient per year, a fraction of what the MNCs were charging at that time (about $12,000).
Pirate or messiah? Yusuf K Hamied has been called both, depending on which side of the patents protection versus access to affordable drugs debate one is coming from. What no one disputes is that he is one among a very small breed of contrarian leaders.
Every time Hamied’s company Cipla challenges patents of expensive drugs, he comes under fire from big pharma. But that doesn’t bother him. “I am very friendly with some [chief executives of multinationals]. That’s my nature. I don’t fight,” he says.
More than a decade ago, by offering cut-price HIV drugs to Africa, Hamied had forced the multinational pharma companies to reduce their prices in the rest of the world. Today, once again, his defiant, contrarian streak has drawn the battle cry from some multinationals. In May this year, he shook the industry when Cipla slashed prices of some cancer drugs.
Two months earlier, India’s patent office had issued the first compulsory licence to Natco Pharma to make kidney cancer drug Sorafenib by paying royalty to German drug maker Bayer, which holds the patent. (Compulsory licensing is a provision of the Trade Related Intellectual Property Rights agreement under the World Trade Organization. It allows a government to give a licence to a domestic company to produce cheaper generic versions of patented drugs in public interest.)
Cipla went one step further: It had already challenged Bayer’s patent; now it further reduced the price of Sorafenib and two other cancer drugs of the same family. Bayer has challenged the government decision as well as Cipla’s move.
From the outside, it may appear to be a cauldron of court cases bang in the middle of Cipla’s growth story. But for Hamied, 76, it is a matter of principle, a battle against monopoly.
Before he’ll tell you where this will lead to, he wants to talk about where it’s all coming from, about how the thinking on patents has evolved over time.
Back in the 1960s, when he was heading the Indian Drug Manufacturers’ Association, the industry had fought for a change in the patent law, from product patents to process patents. The policy was finally changed in 1972, spurring the Indian pharmaceutical industry to grow from Rs 360 crore to Rs 65,000 crore in 2011.
The next turning point, Hamied recalls, was the Gujral parliamentary committee recommendation of 1993. It advised against treating “importation as working of patents”—meaning, that patents are granted to encourage innovation and not so that the holder enjoys a monopoly. This, in fact, is at the heart of most pharmaceutical court cases today. Then came the Doha declaration of 2001 that gives each member country the right to determine what constitutes a national emergency; 148 countries voted for it, but it hasn’t been ratified till date.
The more recent product patent regime, introduced through the Patents (Amendment) Act 2005, does away with the system of process patents. But the new regime, the industry discovered, was backdated to 1995.
This is retroactive patenting, against WTO principles, says Hamied. “When I argue how you can backdate [legislation], they say it was agreed at the WTO but nobody shows me the proof. I’d like to see the proof as today we are fighting cases that were filed in 1996,” he says defiantly.
His defiance comes from many sources. From the fact that he is a brilliant chemist (he was a student of Nobel laureate Alexander Todd) and voraciously reads to keep up with science. It also comes from his understanding of the market and the IP regime everywhere; and from the fact that he is one of the few business leaders who has public health on top of his mind.
“It takes a lot of b***s to fight big companies. From the net impact point of view, what Hamied has done is legendary,” says Shamnad Basheer, a ministry of HRD professor in IP law at the National University of Juridical Sciences, Kolkata.
While his opponents may accuse him of taking advantage of weak patent laws, Hamied says he never breaks any law. It’s true, says Basheer, whenever the court has restrained him, he has respected the ruling.
Rather, he “does his homework” and uses “loopholes” in existing patents. Take for instance, Tenofovir, the anti-HIV drug for which he fought with Gilead for several years. He won it in 2009 because the drug’s patent was filed in erstwhile Czechoslovakia in 1992 and Cipla proved that it couldn’t be patented in India as prior knowledge existed before 1995. The same logic applied to Roche’s flu drug Tamiflu where Cipla found another patent dating pre-1995.
Fairness is another virtue Hamied strives for. When Cipla slashed Sorafenib prices to Rs 6,840 (for a month’s treatment) in May, lower than Natco’s Rs 8,880, and a fraction of Bayer’s Rs 280,000, some experts said the company was trying to undercut competition. But Hamied has a different explanation. Since the government has mandated Natco to pay 6 percent royalty to Bayer and give free medication to 600 patients annually, Cipla calculated the net income that would accrue to Natco and priced its own brand accordingly.
In September, the Delhi High Court rejected an injunction plea by Roche to prevent Cipla from selling generic versions of its patented cancer drug Erlotinib (brand name Tarceva). The court noted the huge cost difference between the two drugs. Cipla’s victory in the four-year-long legal battle could also influence the legal prospects of Natco, Dr Reddy’s and Glenmark, which have been sued by Roche over the same drug. Though it’s a different matter altogether that Cipla has spent more in legal fees on Erlotinib than it has earned from the drug so far.
“Hamied was the first to come out with many drugs in asthma, anti-cancer, cardiac…He’s been a visionary, paving the way for many [companies] but today he’s fighting alone,” says AV Rama Rao, founder chairman of Avra Labs, a contract research and manufacturing services company. As a scientist at the National Chemical Laboratory in Pune and later as director of the Indian Institute of Chemical Technology in Hyderabad, Rao was a consultant to Cipla and played a key role in the launch of many early drugs.
Hamied’s focus and passion have remained unchanged over the 30 years that most people have known him. Even at Cipla’s annual general meetings, he never forgets to raise the issue of humanitarian cause. That’s in Hamied’s DNA, and as long as he is steering the company, he will ensure that it remains in Cipla’s DNA too.
In the last few decades, he has taken up neglected therapeutic areas like kala-azar, malaria, thalassaemia, and responded to national needs many times, even though the government did not always reciprocate with speedy policy implementation. Worse, it sometimes took counter-intuitive measures as in the case with Tamiflu when there was fear that a flu epidemic was impending. Making generics of Roche’s anti-bird flu drug Tamiflu required several process technology breakthroughs. After Cipla achieved it, post its legal fight against Roche, the government “banned Cipla from selling it to pharmacies even though the drug was freely available in the hospitals”, says Hamied.
Times have also changed from the days when Cipla scripted the anti-HIV success story. These drugs are now procured through tendering which results in a monopoly; the winner takes it all. Hamied has suggested a pragmatic tender system where the lowest bidder gets 70 percent of the business and the remaining goes to the next lowest bidder provided it matches the lowest bidder. If the second lower bidder refuses, it should be offered to the third lowest bidder and so on. But nobody knows if pragmatism will prevail.
In any case, the fight against high cancer drug prices is different. Hamied is calling for an automatic compulsory licensing for all monopolistically priced cancer drugs. He says if a rich country like Canada could allow compulsory licensing from 1969 to 1983 by paying 4 percent royalty, why can’t India?
The issue has divided the industry. Some business leaders who have invested in research and development fear their intellectual property could fall under compulsory licensing and they would lose their lucrative margins. Basheer thinks that while automatic compulsory licensing is a “brilliant mechanism” to avoid monopoly, it can’t be applied as TRIPS requires nations to grant it case by case. Those like K Anji Reddy, founder of Dr Reddy’s Laboratories, believe that it is a valuable tool and its use should be restricted for real crisis. “When it comes to HIV, Hamied has been a hero. When a similar situation arises in cancer, when people are dying without drugs, he should be there to fight but for now he should leave this goddamn compulsory licensing,” says Reddy.
Whichever side of the fence people may stand, one thing is certain: It will bring about change in the behaviour of multinational companies. “I am reasonably sure that this will prompt changes in the way in which international companies will look at pricing in India,” says Dilip Shanghvi, founder and managing director of Sun Pharma.
Hamied himself admits it won’t be easy because unlike in HIV infection, cancer patients pay for drugs themselves and are dependent on doctors for the drug choice. It’s a prescription-, not an over-the-counter market. And doctors have a penchant for prescribing certain brand names, without necessarily having a consideration for lower prices. Rama Rao cites instances where doctors have refused to vouch for generics, telling patients that if it is not an imported drug, they are not sure of its effectiveness.
The regulatory framework in India also makes it difficult. The government wants to bring more and more drugs under price control. In this uncertainty, Hamied is ensuring that he keeps his ‘philosophy’ separate from Cipla’s growth strategy. Its revenue grew from Rs 795 crore in 2000 to Rs 6,847 crore in 2012; Hamied’s target is Rs 10,000 crore by 2015. The current mix of domestic to overseas revenue of nearly 50-50 is going to change to about 25-75 in the next few years.
For overseas expansion, Hamied is doing things which he hasn’t done before: He is opening up to investments in other markets, and is building and consolidating brand presence with partners for whom Cipla has only been a supplier so far. For someone who always believed in grooming leaders from within and keeping a flat organisational structure that facilitated cross-functional roles, Hamied is now hiring senior executives. Nephew Kamil Hamied and niece Samina Vaziralli have been brought into leadership roles.
“He is responding to the changing environment, he is willing to take risks now,” says Cipla’s chief executive S Radhakrishnan.
Talking about change, Hamied gets philosophical. By 2020. the top five Indian companies, including Cipla, will not look the same, he says. Already most of the companies “have abandoned” India. “We grew up in the era of Gandhi; by and large my thoughts are very national. I am being stopped by the government. They are pushing us out—something I cannot comprehend why.”
(This article is excerpted from the latest Forbes India 12 October, 2012 issue which is now available at news stands and book stores. You can buy our tablet version from Magzter.com)