An intellectual property rights (IPR) showdown between the US and India may have been averted for now, but it is still very much in the offing. Despite immense pressure by US lawmakers and industry lobby groups, the US Trade Representative (USTR) has managed to sidestep downgrading India to Priority Foreign Country status — a tag given to the worst IPR offenders that can trigger US sanctions — in its annual Special 301 Report. The US government’s caution is understandable; such a move would inevitably invite retaliation by New Delhi and strain relations at a time when they are already at a low ebb. By citing the ongoing elections and the need for time to assess the incoming government’s policies, the USTR has managed to buy some time. But with US senators already pushing to act against India at the World Trade Organisation (WTO) instead, the reprieve is unlikely to last very long. The new administration in New Delhi will find itself under pressure on this front from the get-go — but it must stand firm.
The tussle over medicine patents and generic drugs is at the heart of the conflict; not surprisingly, US pharmaceutical companies and industry groups are leading the charge in pressuring Washington. The Nexavar and Glivec cases are the primary flashpoints here. In the former case, India issued a compulsory license (CL) to Natco Pharma to manufacture and sell the cancer-treatment generic at a price 30 times lower than that charged by patent-holder Bayer. In the latter, the Supreme Court rejected Novartis’s to patent the cancer drug in 2012, citing evergreening — the practice of pharmaceutical companies making minor charges in the formulation and production of drugs in order to perpetuate their patents. For all the heartburn the two cases have caused big pharma, neither case is exceptionable. Both have followed procedures allowed for in WTO rules; the Nexavar CL is the first one India has issued, in fact, unlike a number of western countries.
The real issue is the precedent India is setting for developing economies. Since the Uruguay Round Agreement of 1994 that birthed the WTO, India and the US have been on opposite sides of the fence when it comes to pharmaceutical patents. While the US succeeded at the time in pushing through a worldwide two-decade monopoly on the sale of new drugs by the firms that innovated them, India was able to push through flexibilities written into the rules. From then until now, there has been a fundamental incompatibility of objectives between a developed economy that is home to many of the big pharmaceutical companies looking to protect their profits and turf, and a developing economy struggling with ensuring access to medication for a vast population, large segments of which lack resources. Given the fact that other middle-income countries like Brazil and South Africa are now looking at incorporating similar flexibilities and protections in their domestic legislation, big pharma is understandably chary. As Bayer admitted, the economic impact of the Nexavar decision would be marginal; it was the risk of other countries regarding India as a role model that was the danger.
This is why New Delhi must not cave. Indian generics play a crucial role in providing affordable treatment for AIDS, cancer and hepatitis not just within the country but all over the developing world, particularly in Africa. The profit motive must not be allowed to dilute this.