Novartis vs. Colombia

In Colombia, the high cost of Glivec, a life-saving drug to treat blood cancer, became unsustainable for the public health budget. In 2015, the government declared Glivec a medicine of public interest and decided therefore to strip the pharmaceutical giant Novartis of its production monopoly, so that competition with generics would bring down the price. But Novartis was unwilling to give up its source of mega-profits and threatened to sue Colombia in an international arbitration tribunal. While the price for Glivec was ultimately reduced, the government no longer dared to touch Novartis’ monopoly. The company’s scare tactics averted a precedent that could have encouraged other countries to do the same, and reduced Novartis’ high profits worldwide.

Glivec (also known as Imatinib) is the drug that converted ‘a fatal cancer into a manageable condition’.¹ Approved in 2001, it was dubbed a ‘magic bullet’² for the treatment of leukaemia, a deadly form of blood cancer. In 2015, the World Health Organization (WHO) added it to its list of essential medicines,³ which means it should be available at all times and at a price that individuals and communities can afford.⁴

But the price of Glivec did not allow for that. While the annual production cost is estimated to be US$180,⁵ in Colombia it sold for US$19,819 per patient, per year (over 100 times the production cost) in 2014 – almost twice the average annual income in the country.⁶

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Patients may have become the ‘financial victims’ of the treatment success, having to pay the high price annually to stay alive.

OVER 100 EXPERTS IN CHRONIC MYELOID LEUKEMIA (CML), A TYPE OF BLOOD CANCER, COMMENT ON THE UNJUSTLY HIGH PRICES OF CANCER DRUGS WORLDWIDE⁷

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Public budget bleeds as a result of high drug prices

One key reason for the high price of the medicine was the patent that Novartis obtained in 2012 in Colombia. This meant that the company could now quadruple the price of a 400-milligram tablet of the drug to US$43, whereas the locally produced generic medicine cost US$10.50.⁸

For Colombia’s public health budget, the price of the non-generic drug became unaffordable. It is estimated that between 2008 and 2014, the country spent approximately US$200 million on the medication,⁹ bringing its health system close to bankruptcy.

The Colombian government’s battle for affordable cancer treatment for its citizens

This is why, in 2014, a group of Colombian public health organisations requested that the Minister of Health declare Glivec a medicine of public interest and issue a compulsory licence.¹⁰ When a patented medicine becomes subject to a compulsory licence, the government effectively breaks the producer’s monopoly and grants other pharmaceutical companies the right to manufacture generic versions of the medicine, leading to a drop in the price. Compulsory licences are an important flexibility recognised under the Agreement on Intellectual Property Rights (TRIPS) in the World Trade Organization (WTO)¹¹ and many other trade treaties. They have been used in particular by low- and middle-income countries to increase access to life-saving drugs for diseases such as HIV.

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Compulsory licensing is a key tool for protecting the financial stability of health systems and ensuring access to medicines and health services for all.

132 LAWYERS, ACADEMICS AND OTHER EXPERTS WROTE TO THE PRESIDENT OF COLOMBIA IN SUPPORT OF THE GOVERNMENT’S ACTIONS ¹²

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The Colombian government decided to pursue this strategy and issued a compulsory licence.¹³ In parallel, it also attempted to directly negotiate a reduced price with Novartis, but the company refused outright.¹⁴ It was estimated that opening the Glivec market to generics would have reduced the high prices charged by Novartis by up to 77%, translating into savings of around US$15 million per year for Colombia’s public health budget.¹⁵

Arm-twisting at the highest level

But with global sales of Glivec hitting US$4.7 billion in 2015,¹⁶ Novartis was making record profits from this cancer drug, which accounted for 10% of its total revenue.¹⁷ It was thus determined to defend the goose that laid the golden eggs.

On 21 April 2016, Novartis sent a letter to the Colombian government, formally threatening to sue it in an international arbitration tribunal unless the government reviewed its decisions in relation to Glivec.

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A compulsory licence is tantamount to an expropriation of the patent owner.

SWISS GOVERNMENT TO COLOMBIA’S MINISTRY OF HEALTH²³

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Novartis claimed that Colombia had violated its bilateral investment treaty (BIT) with Switzerland, where the company is based. More specifically, the company argued that the measures taken were unjustified and discriminatory, and that reducing the price of the medicine to the level of generics was equivalent to an indirect expropriation of the Glivec patent. Novartis also argued that the government had violated the company’s ‘legitimate expectations’ of stable patent rules.¹⁸ The arbitration threat was repeatedly echoed by powerful actors – including the CEO of Novartis,¹⁹the US and the Swiss government.²⁰ The US government also threatened to cut US$450 million of funding for the ‘Paz Colombia’ peace process²¹ and to block Colombia’s efforts to join the Organisation for Economic Co-operation and Development (OECD) club of wealthy countries.²²

Government fails to break Novartis’ monopoly

The pressure worked. Less than a week after Novartis’ letter to the Colombian government, on 27 April 2016 the country’s embassy in Washington, DC recommended that the Ministry of Health take all measures necessary to avoid an investor–state lawsuit.²⁴ And while the Ministry eventually declared that access to Glivec was of public interest,²⁵ forcing a 44% reduction in the price of the drug,²⁶ the government dropped its plan to issue a compulsory licence.

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When a commodity affects the individuals’ lives or health, a just price should prevail because of the moral implications. Examples include the price of bread during famines…

OVER 100 EXPERTS IN CHRONIC MYELOID LEUKEMIA (CML) COMMENT ON THE UNJUSTLY HIGH PRICES OF CANCER DRUGS WORLDWIDE²⁷

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Preventing the compulsory licence was what most mattered to Novartis. The Colombian market for Glivec is only 1% of Novartis’ global sales for the medicine,²⁸ and thus is too small for a price cut to lead to huge losses for the pharma giant. But, in the context of increased global attention to, and critiques of, the high costs of brand-name pharmaceuticals for low- and middle-income countries, the compulsory licence would have set a dangerous and worrying precedent for Novartis. Asked whether it was ‘true that Novartis is more worried about the signal this would give abroad than the impact in Colombia’, the company’s President of the Andean Region confirmed this analysis, replying: ‘Yes, because this is a global company and any country that takes a decision like this… is cause for concern’.²⁹ Pharmaceutical companies like Novartis have systematically used their considerable financial resources to try to avert the use of compulsory licences around the world, according to WHO research on 89 countries published in 2018.³⁰

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A strong response to the plans of only a few countries to issue compulsory licences for cancer medications is likely to have a chilling effect on others.

RESEARCHERS FROM THE UNIVERSITY OF GRONINGEN³¹

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It was a historic step that Colombia declared a patented medicine to be of public interest and succeeded in reducing its price significantly.³² However, using its threat of investment arbitration, Novartis reined in the possibility of establishing a global precedent, and further steps to grant access to affordable medicines across the world.

A booby-trap for access to medicines

Novartis’ threat to take legal action against Colombia was not the first time, nor will it be the last, that a major pharmaceutical company used international investment agreements to attack decisions to alter patent protections of medicines for public health objectives.

In 2013 Canada was hit with a US$483 million investment arbitration claim by the US pharmaceutical company Eli Lilly, for invalidating patents for drugs to treat attention-deficit hyperactivity disorder (ADHD) and schizophrenia. Canadian courts had ruled that evidence provided by Eli Lilly did not support the therapeutic uses claimed, and the company’s response to the public interest ruling of the courts was to sue the country.³³ In 2017,Ukraine settled a US$800 million case with the US company Gilead Sciences, after the government agreed not to break its monopoly, and not to allow the production of a generic equivalent to a hepatitis-C drug manufactured by Gilead.³⁴

Researchers have warned that these cases mark ‘the beginning of an ominous and poisonous trend’ of big pharmaceutical companies ‘proclaiming their ‘legitimate’ expectation of monopoly prices… to punish countries that attempt to use lawful flexibilities to assure more affordable access to medicines’.³⁵ According to Professor Brook K. Baker from the Northeastern University School of Law, investment protection agreements are a genuine ‘booby-trap for access to medicine’.³⁶