Novartis loses patent battle in India: Time to realign the business model to emerging markets?

• Main Authors: REDDY, Srinivas K., LLEWELYN, David, MATHUR, Sarita
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2013
• Subjects: Pharmaceuticals; Intellectual Property; IP; Emerging Markets; Novartis; Glivek; Drugs; Business Models; Ethics; Patenting; Big Pharma; Business Model Adaptation; Pricing; Pricing Strategies; Business Administration, Management, and Operations; Business Law, Public Responsibility, and Ethics; International Business; Marketing
• Online Access: https://ink.library.smu.edu.sg/cases_coll_all/54; https://cmp.smu.edu.sg/case/2601
• Institution: Singapore Management University

On April 1, 2013, the Supreme Court of India rejected Novartis’ patent application for its cancer treatment drug, Glivec. Novartis had applied for patent protection in 2006, and after a seven-year legal battle, it all ended in disappointment for the Swiss pharmaceutical company. Public opinion seemed to overwhelmingly support the Supreme Court’s decision - legal counsel, politicians, public health advocates and heads of generic drug manufacturers - all shared the opinion that Indians should rightfully have access to cheaper generic alternatives for lifesaving drugs and that multinational pharmaceutical companies should not be allowed to benefit from “evergreening” – that is, making minor improvements to existing drugs and prolonging the patent life. However, drug companies often spent decades and invested billions of dollars to develop a single drug. These companies expected a reasonable return for the investments and risks that they had taken. If their innovations were not protected from generics in developing countries like India, what incentives would pharmaceuticals companies have to market their life-saving drugs in these countries? However, this side of the debate seemed to have been drowned in the sea of idealistic and nationalistic sentiments. The patent protection available in the United States, Western Europe and Japan had made the existing business models and pricing strategies viable and effective for decades. Yet these now needed to be re-evaluated for emerging markets such as India; taking into account affordability, limited access to health insurance and government safety nets, different marketing and distribution networks, and the powerful generics lobby. So what should Novartis’ strategy be in India, and for emerging markets, in general? The company needed to redefine its business model and consider alternative pricing, marketing and distribution strategies if it hoped to expand its footprint in one of the fastest growing pharmaceutical markets in the world.