April 10, 2016

BJP Government Surrenders Before The US Trade Department

Amit Sengupta

EVER since the installation of the BJP government, India has gone out of its way to ingratiate itself with the United States. This trend has been particularly prominent in the case of intellectual property rights (patent rights in the case of medicines), an area where India and the US have traditionally held almost diametrically opposite views. The US, upholding the cause of its drug industry, argues that all countries should provide for strong patent protection that provides monopoly rights to large drug companies to sell medicines at exorbitant prices in the absence of competition from domestic companies. India has been a pioneer in promoting a patent regime that shunned patents (and thus monopoly rights) over medicines through its 1970 Patent Act. This allowed Indian companies to sell medicines at one-tenth to one-fiftieth of monopoly prices charged by US and European MNCs. While, as a signatory to the WTO agreement, India was forced to amend its Patent law in 2005 and provide for patents in the case of medicines, the Indian parliament (through primarily the efforts of the CPI(M) and other Left parties) ensured that safeguards remained in the law to allow domestic companies to break the monopoly of MNCs.

Even India’s amended Patent Act has been frowned upon by the US Trade Department and the US drug industry and this has been a persisting area of contestation between the US and India. Narendra Modi’s government set about to mend fences with the US on this count within a few months of assuming office. In the past, almost three years, different statements and actions of the government have been designed to slowly align India’s position on patent protection for medicines with those of the US. It is another matter that such alignment prevents access to new and better treatment for millions of patients in India and abroad (in numerous countries where cheaper Indian generic medicines are exported).

The latest in the long line of concessions offered by the Indian government to US based drug MNCs is an ‘assurance’ that India will not issue a commercial ‘compulsory license’, ie, a license to Indian companies to ignore patents and produce cheaper versions of medicines. The cat was let out of the bag when it was reported that the US-India Business Council (USIBC), in its submission to the  United States Trade Representative (USTR), had commented that the Indian government has "privately assured" industry that it would not use compulsory licenses (CLs) for commercial purposes. While this has subsequently been denied by the government, the wording of the denial (as we shall see later) raises more doubts about the real intent of the current government.




The president of the USIBC, Mukesh Aghi, in his submission to the office of the USTR in February, 2016 waxed eloquent about Prime Minister Narendra Modi, and complimented him for "several public statements reaffirming his commitment to a strong and robust intellectual property regime". His submission also points to the fact that recently several CL applications have been denied in India. The most damning was his claim that "the government of India has privately reassured India would not use Compulsory Licenses for commercial purposes". The same claim was repeated by David Hirschmann, senior vice president, US Chamber of Commerce, in his submission to the USTR. Further the proactive role of the highest levels of government is clearly evident in the deposition by Patrick Kilbride of the US Chamber of Commerce's Global Intellectual Property Center. Kilbride in his deposition to the USTR in March 2016 noted: "The election of Indian Prime Minister Sri Narendra Modi in 2014 provided an important opportunity to re-establish a collaborative and productive working relationship on intellectual property issues between India and the United States".

As we note earlier, India and the US have been traditional antagonists in the global arena, including in numerous multilateral forums, as regards intellectual property rights. So much so that India was placed on the USTR's Special 301 'watch list' every year for almost three decades, primarily for not toeing the US position on Patent rights. Clearly the current government, by providing secret assurances to US industry, is eager to bury the past and declare its willingness to be bullied into submission by the US Trade Department.

When a CL is issued for a new drug being marketed by an MNC, which is under patent production, prices are known to fall by as much as 97 percent, ie, a treatment costing a 1,00,000 rupees could become available for just 3,000 rupees. This is the option available in India’s national law, which is sought to be surrendered by the 'private assurances'. It is like carving the heart out of the safeguards incorporated in India’s Patent Act.




Most new medicines that are current patented by MNCS are directly imported – a 2014 study showed that only 4 out of 92 under patent medicines were being manufactured in India. These drugs, given their monopoly character are exorbitantly priced and well out of the reach of Indian patients. For example one injection of the breast cancer drug Ixempra, marketed by Bristol Myer Squibb (BMS) costs over Rs 70,000. Astra Zeneca’s Zoladex, used for prostate cancer, is priced at over Rs 28,000 for each injection. There is no way to regulate these prices as the drugs are not manufactured in the country and price regulation by the government would be met with the withdrawal of these drugs from India by the manufacturing MNCs. Thus CL is the sole measure available to bring down the prices of these new drugs as a CL breaks the monopoly and allows manufacturing and marketing by domestic companies. The dramatic impact of a CL can be seen from the effect of the only CL granted in India till date. When the Indian generic company NATCO was granted a CL in 2012 for the anti-cancer drug Sorafenib (marketed as Nexavar by Bayer) the cost of a month’s treatment fell from over Rs 2,80,000 to less than Rs 9,000. Yet India has shown extreme timidity in using its own law to safeguard public health, arguably fearing the wrath of the United States. The Sorafenib patent is the only time the CL provision has been used in India.

The government’s assurance that CLs will not be issued also disarms domestic industry and pushes it into the lap of US and European MNCs. The Indian drug industry, the largest in the developing world and the third largest globally, was a product of a liberal patent regime ushered in by the 1970 Patent Act. For domestic industry, the support of the 1970 Act is a thing of the past and it is now faced with the extreme reluctance of the government to use safeguards in the current Patent Act to support public health as well as domestic industry. This also lays bare the true intent behind the much touted ‘Make in India’ campaign. Clearly it is not about building a self-reliant and competitive domestic industry that addresses the needs of the Indian people. Rather, it is about allowing the loot of Indian skills, Indian resources and Indian infrastructure for profit repatriation by US and European MNCs – ‘Loot from India’ rather than ‘Make in India’




Faced with criticisms, the government responded to the charge of providing private assurances to US industry through a PIB press release. The response is confounding to say the least. The standard disclaimer in the PIB release "It is hereby clarified that such reports are factually incorrect" is to be expected as one wouldn't expect the government to acknowledge a private conversation which goes contrary to public policy. The subsequent (non) explanation in the release: "India has a well-established TRIPS compliant legislative, administrative and judicial framework to safeguard IPRs. Under the Doha Declaration on the TRIPS Agreement Public Health, each member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted" does not in any way address the issues raised about 'private assurances' offered to industry regarding non-issuance of CLs. In fact, to the contrary, concerns that are being raised argue that India appears willing to sacrifice the rights of individual countries that were affirmed by the Doha Declaration.

The government's assertion that it is "conscious of the need to spur innovation and protect individual rights" betrays the thinking of the current government which links protection of individual rights to promotion of innovation. It sounds more like a justification of why the government is reluctant to issue CLs, seeing them in the same light as big pharma and votaries of strong IP protection, ie, as an infringement of 'private rights'. Global evidence, in fact, does not support a link between innovation and strong IP protection and in fact indicates that countries attempting to 'catch up' in the arena of technological progress with historically better endowed nations, benefit from low standards of IP protection, support to public innovation systems and the privileging of public good over private rights.

Particularly intriguing is the reference in the PIB release to the fact that "only one" CL has been issued in India and that it was issued "after a well-thought out and laid down process, which was subsequently upheld right up to the highest Court of the land". Such a 'clarification' further confirms that the government views the issuance of a CL as a rare and extreme step. It strengthens apprehensions that even this "clarification" is really tailored to once again assure big pharma and the US government that India will not issue a CL any time soon.