In today’s Finshots, we discuss the economics of Risdiplam and why a pharma battle around the drug raises concerns about the industry’s ethics.

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The Story

Let’s start today’s story with a sensitive hypothetical situation. Imagine someone in India suffering from a rare genetic disease. And for years, there’s been no cure. But one day, like magic, a foreign pharmaceutical company develops a breakthrough treatment. It patents the drug and begins selling it in India.

But here’s the catch. The medicine costs a bomb. Unable to afford it, the patient slowly suffers and, eventually, passes away.

What you just read, dear folks, isn’t an imaginary example or an isolated one. It’s the reality for 1 in 7,700 people born in India. In fact, as you read this, around 4,000 Indians are battling Spinal Muscular Atrophy (SMA), a rare genetic disorder that affects the nerves. For the uninitiated, the normal human body needs a protein called SMN (survival motor neuron) to perform basic functions like moving, swallowing and even breathing. But in SMA patients, the body doesn’t produce enough of it, leading to a lifetime of struggle.

And since diseases don’t discriminate based on financial status, many patients never get the treatment they need. That said, SMA is the leading genetic cause of infant deaths in India. What’s even worse is that 1 in 38 people unknowingly carry the faulty gene responsible for it.

In 2021 though, a ray of hope emerged ― a drug called Risdiplam, sold as Evrysdi by Swiss pharma giant F. Hoffmann-La Roche AG (we’ll just call it Roche from here on). It helped SMA patients produce more of the SMN protein, allowing them to manage their condition better, even if it wasn’t a complete cure.

The only problem? A year’s supply of Evrysdi costs anywhere between ₹20 lakhs and ₹70 lakhs. That’s because each bottle is priced at around ₹2 lakhs, and patients need at least 30 bottles annually to efficiently manage their condition. While that’s cheaper than alternatives like Zolgensma, a gene therapy which costs a staggering ₹17 crores, or even Nusinersen, a drug priced at ₹87 lakhs, Evrysdi is still the most affordable option yet out of reach for most.

That’s what Natco Pharma, an Indian company, wanted to change. It wanted to manufacture Risdiplam at a fraction of the cost to make it accessible.

But maybe you’ve already guessed that this didn’t sit well with Roche. After all, its patent for Risdiplam is valid until May 2035, meaning no one else can manufacture it commercially without permission. Natco, however, went ahead anyway. So Roche dragged it to court, asking to block what it saw as a patent violation.

But here’s the twist. A few days ago, the Delhi High Court refused to block Natco from launching its version of the drug. In the court’s own words:

The approved drug, i.e., Risdiplam, which is marketed under the name Evrysdi, is not available at reasonably affordable prices in India. Thus, if a party is able to manufacture the drug and make it available at an affordable price, in such a case, the public interest would have to outweigh the need for grant of injunction.

At this point, you’re probably thinking, “But hey, isn’t this unfair to companies that invest millions in researching and developing life saving drugs?”

And you wouldn’t be wrong.

But then you have to understand why Roche couldn’t fully stop Natco from breaking into the market.

See, pharma companies spend years researching and developing new treatments, pouring in enormous sums of money to find a cure. So when they finally succeed, they safeguard their innovation fiercely and price their drugs high to recover those massive R&D costs. That’s exactly why Evrysdi comes with such a hefty price tag.

On top of that, the market for the drug is tiny. Only a handful of people need it. So Roche prices it steeply, trying to maximise profits before its patent expires. Because once a generic drug maker steps in, the monopoly vanishes, and so do the sky high profits.

But look at the economics of Risdiplam, and you’ll see why Roche’s case isn’t as strong. The actual cost of producing a bottle of Evrysdi including active ingredients, packaging and even a 20% profit margin could be as low as ₹3,000. Even if Roche added a whopping 1,000% profit margin, it could still sell the drug in India at a 99% discount to its US price ($11,170 or roughly ₹9.5 lakh per bottle). And that actually raises ethical concerns. Is Roche making a fair profit, or is it exploiting desperate patients?

Then, there’s the larger debate about patent laws and access to medicines in India. Before 1970, India only granted patents on the process of making a drug, not the drug itself. This allowed Indian pharma companies to reverse engineer and produce affordable generic (copied versions) medicines. That’s also how India became the “Pharmacy of the World”, supplying low cost medicines globally.

But things changed in 1995 when India signed the TRIPS Agreement (Trade Related Aspects of Intellectual Property Rights) under the WTO (World Trade Organization). By 2005, Indian patent laws were put at par with global standards, meaning companies could no longer manufacture or sell patented drugs for 20 years without the patent holder’s consent.

But then TRIPS also included exceptions known as TRIPS flexibilities. These ensure that public health isn’t compromised, especially when it comes to affordable medicines. And here are three key ones that matter:

1. Compulsory licensing: In cases where a patented drug is either too expensive or fails to meet public demand, pharma companies can legally manufacture a generic version without the patent holder’s consent. This was seen in the 2013 Natco Pharma vs. Bayer Corporation case, where Natco was granted permission to produce a more affordable version of Bayer’s cancer drug.
2. No patent evergreening: Pharma giants can’t extend a patent’s life by making minor tweaks to a drug unless they prove that the changes significantly improve its efficacy. This prevents companies from holding onto patents indefinitely and blocking generic alternatives. A good example is the 2013 Novartis case, where the company tried to extend its patent on Glivec, an anti-cancer drug, but was denied.
3. Parallel imports: If a drug costs $100 in Sweden but sells for $200 in India, Indian pharma companies (or even the government) can import the cheaper version without the patent holder’s approval. This ensures that life saving drugs aren’t priced out of reach simply because of geography.

These flexibilities exist to strike a balance so that pharma companies get due credit for their innovation, but life saving treatments don’t remain exclusive only to those who can afford them.

And as we’ve explained earlier, the court weighed these factors in the Roche vs. Natco case and sided with public interest. It acknowledged that Evrysdi was financially out of reach for most SMA patients and also caught Roche trying to unfairly extend its monopoly by using an unfair tactic called “evergreening”. Evergreening, or forever patenting, is when companies extend their patent rights by filing a new patent on an existing drug after making minor tweaks without actually improving its effectiveness. The court saw through this because Roche’s own patent filings in the US, Australia and Canada suggested that Risdiplam was already part of an earlier patent. And if Roche had filed for the original patent in India, it would have expired much sooner.

And finally, there’s India’s Patents Act (of 2005), which gives the government the power to step in and allow generic drug production when it’s in the public’s best interest.

So, when the court refused to rule in Roche’s favour, it wasn’t about India undervaluing patents. It was about ethics. It was about whether foreign pharma giants should be allowed to squeeze Indian markets dry while leaving little room for Indian companies to step in.

Of course, global pharma firms don’t see it that way. Companies like Novartis have already voiced concerns over India’s patent laws, even shifting research centres to Singapore and China, fearing their intellectual property isn’t safe here. They argue that India isn’t letting them innovate.

But here’s the real question. Are they innovating for the greater good, or are they just running businesses designed to squeeze abnormal profits out of vulnerable people?

We’ll leave you with that thought.

Until next time…

But before you go you should also know that Roche isn’t out of options yet. It can still appeal the Delhi High Court’s decision, and if it wins, it could claim damages too. So until the case reaches a final verdict, the court has put the brakes on Natco’s plans to roll out its generic version of Risdiplam.

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