Why India’s Novartis ruling is good for innovation

Today’s news that the Indian supreme court has effectively denied the Swiss multinational pharmaceutical company Novartis the patent protection for its ‘new’ blood cancer drug Glivec (Gleevec in North America) has been discussed controversially in the media. On the one hand, commentators sympathetic to the industry have pointed out that without patent protection a publicly owned company loses its incentive to develop new drugs. Pharmaceutical innovation, so the argument goes, is driven by the hope of future returns. Since development of new drugs is very costly, time consuming and competitive, companies can hardly justify investments when rulings such as today's kill their hopes of recouping the costs through future sales. In short, the Indian ruling "will hinder medical progress" (Novartis press release) and thus kills innovation.

On the other hand, activists and other voices critical of the industry argue that this is a win for all those that have the interest of poor people and their access to affordable drugs in mind. After all, a year’s supply for Glivec for a leukemia patient currently comes at a whopping $70,000, while Indian generics can do the same job for about $2,500! (Generics btw. are drugs, that use the same chemical recipe as the original and can be sold much cheaper as the generics company does not have to cover the R&D costs)  For India, which has the biggest generics industry in the world, this ruling of course has also a very national commercial interest...

What most commentators are missing though in their evaluation of the case is a somewhat minute detail, which however has huge ethical implications. The crucial point here is whether the version of Glivec for which Novartis was claiming patent protection, is actually a ‘new’ drug. What the Indian supreme court in fact ruled was not that Novartis should not enjoy patent protection on their new drugs; they mainly concluded that the new edition of Glivec, for which the company applied for protection, was in fact not sufficiently ‘new’, not different enough from the old version of Glivec, for which the patent had expired.

This points to a well know strategy of the pharmaceutical industry. Rather than fighting generic companies, ‘originator’ companies such as Novartis just marginally change the chemical formula of an existing drug whose patent is about to expire and then pretend to having come up with an entirely new one, for which of course they should enjoy full patent protection.

This, however, is just one trick pharmaceutical companies use in fighting generic companies. The EU Commission on Competition has had an eye on the practices of the industry in circumventing patent law for a long time. Their 2009 report is an inspiring read which sheds an interesting light on the claim, that it is the generics companies that stifle innovation (as rehearsed today on BBC, CNN and the likes).

Basically, companies such as Novartis and other ‘originators’ are using a whole host of ‘defensive patenting strategies’ and the use of ‘second generation products’ ruled out today in India is just one of them. Others include the filing of numerous patent applications for the same medicine (forming so called 'patent clusters' or 'patent thickets'). This is an important tool to prevent competitors in advance to develop new medicine as the potential new drug would already be covered by the patent right filed in advance by another competitor.

All in all, the EU Commission identified a host of industry strategies all of which resulted in numerous "situations where innovation was effectively blocked” (p. 19). So in reality, what Novartis was stopped doing – at least in India – is not so much about innovating for new drugs, but rather one element of a rich toolbox of strategies to stifle and prevent innovation while protecting patents and thus the profits of the company.

After all then, today’s ruling may indeed result in more real innovation. Rather than focusing their R&D teams on insignificant changes in existing drugs which may satisfy the legal team of the company to file a new patent application, Novartis and other pharmaceuticals might take this event as an incentive to actually develop new drugs that address hitherto unaddressed and untreatable diseases. One of the reasons the Bill and Melinda Gates foundation is so active in developing new drugs for the diseases of the poor (such as malaria) has to do with the fact that pharmaceutical innovation is too much driven by potential economic benefits of future drugs. And of course the diseases of the poor are bad for the business case of a drug.

This problem now hits a company whose outgoing CEO just had to turn down a $78m severance package - reacting to public outrage in Switzerland. After all, a company that can afford such golden handshakes for their CEO in the first place can’t be ailing too badly from all those third world generics producers...

(An edited version of this blog was published as an Op-Ed in the Globe and Mail, April 2, 2013).

Photo by Images_of_Money, reproduced under the Creative Commons License.

Corporate responsibility infographics - the good, the bad and the ugly

Data visualization, or the creation of "infographics", has been gradually seeping into the corporate responsibility world. And its no surprise. When their designers get it right, infographics can tell you an important story in a wonderfully accessible way using cool, hard facts. But when they get it wrong, it's just, well..... a mess. Too much data and it is confusing; too little and it risks being banal. And using the wrong data can simply discredit the whole enterprise from the beginning.

So what does a good corporate responsibility infographic actually look like then? We've been taking a good look at the craze for infographics, and picked out some of the best and the worst that relate to corporate responsibility issues. There are more and more appearing every day, so we're not claiming to provide anything like an exhaustive review, but here are a few examples that we think give a good flavor of the potential and pitfalls of turning business ethics into pictures. And if you don't agree with us, then please tell us why in the comments field ..... or better still, create an infographic to explain it all!

The Good

There has been a few corporate taxation infographics doing the rounds in the last couple of months. What we like about this one from onlinemba.com though is the funky design (you've gotta love that faux factory styling), the solid citations, and the clear storyline. Yes, it takes a fairly hardline anti-business stance, but it doesn't pretend the answers are obvious or simple.



Another powerful infographic is this one detailing the role that pharmaceutical companies play in influencing doctors to prescribe their medicines. We like it because although it is a little on the long side (click on the image for the full image) it tackles an important question; it is controversial without being sensationalist (again, the referencing is pretty tight), the design is smart, and it rounds out the story with advice on what you can do to make a difference. Let's call it activism meets journalism.

Of course, infographics can be a lot more than just simply static visuals. And they don't have to be critical of business! Videos, animations, music and all kinds of possibilities are out there to tell corporate responsibility stories in interesting ways. We like this one from Fortune and CNN because it offers some nice simple interactivity about something all of us care about - what makes some places better to work in than others. Based on Fortune's annual 'Best companies to work for' survey, it not only shows which companies score well, but also lets you search the kinds of words that employees use to describe their companies - the top ones being "people", "time", "family" and benefit". But some of the cross-company comparisons are really interesting. Whilst top spot holder SAS includes words like "care", "life" and "health", Goldman Sacks at 23 emphasizes words like "best", "firm", "people" and "individual". Just goes to show that what makes a firm good to work for is very much in the eye of the beholder.

The Bad


Corporate tax dodging again. But this time the infographic is less successful. Sure it has an easy to understand message, but it doesn't have the richness of data to be authoritative. For a start it doesn't cite its sources, which immediately threatens some of its credibility. Second, it doesn't look to explain any of the facts it presents, but instead relies on some slightly shonky political posturing. Good infographics should make you feel like you've read an informed newspaper article. This comes across more like a bumper sticker.


Source: US Uncut - No Cuts Until Corporate Tax Cheats Pay Up!


The Ugly


Sometimes, not even well researched corporate responsibility infographics hit the mark. Getting the balance right between telling a clear story and getting the facts on the table can be tricky. We wanted to love this incredibly informative infographic about the BP oil spill from 2010 by Carol Zuber-Mallison but frankly it just doesn't cut it like it should. It's simply too crammed with data. Sure, it tries to describe a complex situation of corporate responsibility, but if infographics are going to be successful they've got to render that complexity easily understandable in a single narrative. This tries to cover too much. Plus, given all the data, the referencing could be better. How else is anyone supposed to check the facts? So although this is an impressive effort in many respects - especially the crazily ambitious attempt to update it in real time - it's ultimately an infographic fail. Too much info, not enough graphic.

Orgasm Inc.

Now you can accuse Dirk of having a somewhat predictable taste in film titles. After all he got introduced to this media somewhat later in life… But he honestly swears that he went to see this film at the current Hot Docs Film Festival in Toronto for the purest of professional reasons. It is a brilliantly shot, researched and told story about how the pharmaceutical industry identifies and defines new ‘diseases’ which can be a market for newly developed products.

It’s a remarkable film for many reasons. First, we think it really shows the reach of the corporate world up into to most private and personal spheres of human beings. After the tremendous success (commercial that is) of Viagra a lot of pharmaceutical companies have tried to see if similar products could be developed for women. The problem though is that while problems in bed with many men are clearly, say, a ‘mechanical’ dysfunction, the alleged absence of sexual satisfaction with women is a much more complex phenomenon. By carefully funding research, paying celebrity sex columnists and TV presenters and a whole host of players the pharmaceutical industry has – so the film – virtually created the diagnosis for a new disease: ‘Female Sexual Dysfunction’ (FSD).

Once that had been achieved, the next step is obvious: create a pill, a patch, a lotion, an implant – in short: a profitable product – to ‘cure’ women of FSD. Now there are two problems here: all products so far have severe risks and side effects and none of them really work. And that leads to the second problem: FSD - as many of the experts consulted in the film lay out – is not even a proper disease which can be cured by popping a pill. Rather, difficulties to experience a pleasurable and satisfying sex life for women depends by far the least on physical factors, but a whole host of social, psychological, economic and relational conditions. The film shows to which efforts the industry has gone to make female sexuality into just another commodity, which can be made of source of profit; in other words, ‘Orgasm Inc.’

The film is also great learning stuff for other reasons. Institutional scholars have shown the importance of the ‘organizational field’ for business to be successful. Orgasm Inc. shows how companies actively shape this environment: doctors, academics, columnists, TV show hosts, sex helplines, governmental agencies. They all are crucial for corporate success and companies have for long actively shaped, manipulated and used these actors for their interest. By choosing such a rather personal and intimate backdrop, the film just exhibits to which ends companies are ready to go to achieve their goals. Indeed, nothing is sacred any more.

But whatever the somewhat somber story line – it’s an incredibly funny documentary, very watchable. Liz Canner, the director, initially got drawn into this topic through an assignment to put together film material for sexually stimulating women for clinical trials for a pharmaceutical company. The film never lectures, but just by letting people talk, digging behind the surface of sleek corporate executives and mixing material it just achieves its goal in a still rather lighthearted fashion. Highly recommended.

‘Schwein gehabt?’ – The new scare of the Swine Flu Pandemic

As you know, one half of the Crane&Matten team saw its early years in Germany. ‘Schwein gehabt', to ‘having had swine’ (literally translated) in German just means ‘having been lucky’. So, how lucky are we then with this new outburst of Swine Flu?

Well, as long as we are living far enough away from Mexico, do not travel, or spend time at airports – indeed, ‘Schwein gehabt’! But it’s quite remarkable to see the social and political implications of what is going on. Loads of things spring to mind.

First, the pandemic shows the nature of globalization. It transcends borders; it defies economic, social and political boundaries; and it is a threat – in theory – to the world in general. British tourists returning from holidays in Cancun, French businesspeople coming home from Mexico City, migrant workers at the US/Mexican border – they all are potential disasters in waiting. What can national governments or health authorities do? Not too much. President Obama hinted at this in his 100-days-in-office speech. But unless he closes the border to Mexico and shuts down flights from there – there is precious little local authorities can really do. Other than monitoring the disaster.

Second, with the threat of loosing lives, the pandemic immediately raises ethical issues. Yesterday, on the Canadian Radio CBS, the representative of the farm worker’s union was interviewed. Without Mexican labor, Canadian agriculture would come to a grinding hold. So letting these workers in is an economic imperative. At the same time, Toronto still remembers vividly the SARS pandemic, and the effect it had on the city (Toronto being one of the first and worst hit places by SARS back then – due to its significant Chinese population). So how do we deal with Mexicans coming here? Should they not come? What is their responsibility in containing the virus? These questions gave the union representative some headaches. First signs of discrimination and incrimination of Mexican workers are already emerging in Canada, according to the radio program.

Finally, what can governments really do? Crane&Matten have worked and written (not at least in the Business Ethics textbook) about the ‘Risk Society’ thesis by the sociologist Ulrich Beck. The key solution here seems to be a vaccine. Created by who? Yes, pharmaceutical companies. But even they need at least six months to develop a vaccine. So it all depends on business here to provide the solution. Pharmaceutical multinationals have the research and knowledge base to address this pandemic. But they would only really do so if they can make a profit on the drug. So here is the dilemma: yes, business can produce a great benefit for society. Pharmaceutical products have changed our lives for the better and, in fact, saved millions of lives. But are there the right incentives for these companies? We all remember how the pharmaceutical company Bayer was forced to sell its anti-Anthrax medicine for basically nothing to the US government, when the Anthrax scare hit the country in the early 2000s. Why would any company be motivated to invest millions of dollars developing a medicine, which they would not be allowed to sell profitably once it’s on the market and able to address a social need at this magnitude? So much to what Beck calls the 'organized irresponsibility'...

Don’t get us wrong. We are not defending the pharmaceutical industry. We just want to point the spotlight to the fact that the solution to this, yet another, pandemic lies in the private sector. And to make the private sector live up to its potential and its responsibilities towards the greater good of society is still an unresolved issue. This crisis shows yet again: to have corporations working just to enhance shareholder value is indeed a ‘dumb idea’ – as even the late Jack Welch (former CEO of General Electric and poster boy of the shareholder value ideology) admitted. For the time being then, let’s hope we stay lucky. Not getting swine flu. As we said, ‘Schwein gehabt’ is the motto of the day.