June 14, 2021
The Pandemic has shaken up all the industries. It has led Companies to re-think on their Business Models and re-work on their short-term and long-term goals. For most Businesses, the Short-term goal is to survive, reduce costs, try and be relevant and weed out non-performing assets.
Companies that are into the FMCG, Healthcare, and Pharmaceutical businesses, have seen a different growth trajectory but also challenges in terms of Operations, Deliveries, and Manpower. Though, these sectors had a good opportunity to be relevant with their offerings, and create a strong Brand Image in these trying times; some Companies just became too desperate in trying to benefit from the situation and get their Brand resonating with the masses.
One such case is that of Patanjali. A Brand that had become a household name once and one of the fastest-growing FMCG Company, giving a tough fight to other Bigger and Older FMCG giants like HUL, PNG, Nestle, Colgate, and the likes. The strategies used by Baba Ramdev led Patanjali proved to be very successful in helping the Brand in shouldering with the MNC giants1.
As per the latest reports2, Patanjali Ayurved alone achieved revenue of INR 3,562 crore in two quarters of the FY 2019-2020 from April to September.
And as a Group, Patanjali collectively expects to achieve the INR 25,000 crores in Revenues in the current FY out of which INR 12,000 crores is expected to be contributed by the Patanjali Group and the remaining INR 13,000 crores may be added from Ruchi Soya which it had acquired recently. Patanjali aims to be a INR 40,000 crore company in 2020-2021.
The above figures might seem promising, but the FMCG giant has been facing losses in revenues and slow growth over the past couple of years. According to a report3 by global consumer research firm Kantar Worldpanel, Patanjali’s sales, in terms of volume, has shrunk in urban areas, whereas its growth has reduced to a third in rural areas.
The firm’s sales volume has declined by 2.7 % in urban areas for the financial year ending April 2019, while its rural sales grew 15.7 %. On the contrary, the year before, the company grew 21.1 % in urban and 45.2 % in rural regions.
A recognized brand is among the most valuable intangible assets a company can own but Patanjali overestimated their brand value and their ability to dominate the market. In 2016, there were about 4,700 exclusive Patanjali stores selling Patanjali products. This has shrunk to about just 1,900 now.
The reason for this could be the unplanned expansion, a poor supply chain, inconsistent product quality, and business practices, combined with the slowdown.
All this has added up to the pressures on the company to break new grounds with its products, show innovation, and demonstrate speed. This perhaps explains why the company jumped the gun with its COVID cure. And, the way it was handled might lead to a further downfall in its brand value and market share.
On 23rd June 2020, Patanjali Ayurved Ltd. launched an Ayurvedic medicine kit that it claimed can treat coronavirus within seven days. The medicines, named "Coronil” and “Swasari" were developed based on research and trials on 280 patients across the country, said Patanjali's co-founder, Baba Ramdev.
"The whole country and the world was waiting for medicine or vaccine for corona. We are proud to announce that the first Ayurvedic, clinically controlled, trial-based evidence and research-based medicine has been prepared by the combined efforts of Patanjali Research Centre and NIMS," Ramdev was quoted as saying by news agency ANI4.
Soon after the launch, the Government of India’s AYUSH Ministry had pulled up Patanjali Ayurved Ltd., saying the company must stop advertising the product and selling it until its claims have been verified.
Such advertisements of drugs including ayurvedic medicines are regulated under the provisions of Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 and Rules made thereunder and the directives issued by the Central Government in the wake of Covid-19 outbreak. A provision in the Act5, makes it clear that misbranding a drug is a legal offense. Part of the misbranding provision is to make any false or misleading claims about the drug. The drug is then liable for confiscation, and the company executives liable for prosecution under the Act.
Perhaps Patanjali wanted to be first off the block in a race that would have meant a significant windfall for Patanjali as the earliest results from other Ayurveda trials done by Dabur India Ltd., Sri Sri Tattva and Shukla Ashar Impex Pvt. Ltd. were not expected before mid-July. But in this race, Patanjali ended up hampering its own Brand image thus affecting its overall Brand Value.
The entire world has been contending with the COVID-19 pandemic for some time now, and efforts are on to find a treatment and a vaccine. Several drugs and treatment therapies are being tried and tested to find a cure for this pandemic. In the middle of this ardent R&D activity, some questions come to mind — what about Intellectual Property (IP) protection? How would companies commercialize a cure — if and when it is finally found? How would the cure be made available to the public at reasonable prices?
At such challenging times, countries should not be afraid of using the powers vested in them by virtue of provisions written in their Intellectual Property Right Laws and save the lives of their people. Many Countries like Israel, Germany, Canada, and France have proactively worked on it and eased their laws, even enacted new laws to favor Compulsory Licenses to be granted in order to effectively use, produce and sell any medicine or vaccine protected by IPR in that country.
A patent grant gives the patentee, all the rights, title and interest in the invention, thereby creating a negative right in rem – a right to restrict the third party from making, using, offering for sale, selling or importing the invention6.
Applying this to the current scenario, if any patented vaccine (post regulatory scrutiny – clinical trials, etc.) is found to be effective in the treatment of patients, no other entity apart from the patentee will be able to manufacture and sell the drug, unless specifically authorized by the patentee.
Invention vs commercial gain vs universal access to economical healthcare has been and continues to be a topic of a lot of debate. In India, patent rights may be withdrawn in exceptional circumstances, to maintain a fine balance between the monopoly rights enjoyed by a patentee and the duty of the Government to provide accessible and reasonable public healthcare services7.
Fortunately, The Patent law in India allows the Central Government to take over any patent that can be of use in a state of national emergency or circumstances of extreme urgency8. The provision of compulsory license can also be availed if a potential IP is of use in a state of a public health crisis or against any epidemic9.
These provisions essentially have consequences that are not in the best interests of the patentee. Therefore, the most suitable option could be that the patentee, looks at deliberate licensing at reasonable terms. This way, a patentee would safeguard its patent from the above, at the same time establishing itself as a bonafide to the world at large. Actions such as challenges, requests for Compulsory Licences, or acquisition of the patent would resultantly be difficult to sustain. Also, this not only ensures that the patentee can negotiate a better deal, but also guarantees that the drug is available to the public at affordable prices.
The real-life example of this could be of ‘Remdesivir’, a direct acting antiviral drug that prevents viral RNA synthesis. The drug is currently being evaluated as a possible treatment protocol for the SARS-Cov2 virus. The USFDA has issued an Emergency Use Authorization (EUA) for emergency use of the drug for the treatment of hospitalized COVID-19 patients10.
Remdesivir is a classic case of the investigation of existing drugs for new therapeutic purposes. The drug was initially developed as a cure for Filovirus infections and has been patented by Gilead Lifesciences in many countries, including India11. News reports suggest that Gilead has entered into voluntary licensing agreements with multiple generic drug makers to allow them to manufacture the drug for distribution in 127 countries12.
Research is underway on many other patented drugs being repurposed for their use in the current pandemic. Desperate times call for desperate measures, it would be interesting to see if the Government will have to resort to using its powers, under the Patents Act, 1970, to successfully balance its responsibility of guarding public health with a patentee’s exclusivity rights.
However, in our view, the interests of the researchers and research organizations should also be safeguarded to maintain a balance between stakeholders. Granting compulsory licenses for a researcher's IP, to help a country, curbs the enthusiasm with which the researcher has made that invention. World organizations and governments, therefore, should ensure that such policies will be reversed when the state of national emergency ends and let the researchers enjoy the IP rights or benefits that they deserve for their efforts, time, and money devoted for the invention of the vaccine.
This research paper is Co-authored by -
1) Mr. Apoorv Arvind Houzwala
2) Mr. Shantanu Arvind Houzwala