Surrender to Multinationals
This article is reproduced
here with the author’s consent. It is also featured in the February 23rd
edition of The Economic Times.
Representing the interests of its
ultra-powerful pharmaceutical multinationals, the United States had pushed for
a very high level of patent protection for medicines during the Uruguay Round
negotiations. India, which had witnessed its poor benefit greatly from the low-cost
generic-drugs industry that grew around its relatively weak patent regime for
medicines, had led the fight against this U.S. push. In the end, though the
United State was largely successful in achieving its objectives, India managed
to push a set of flexibilities into the Uruguay Round Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPS) that could be used to protect
the interests of the consumers against those of the multinationals.
It now appears, however, that India
too has capitulated to pharmaceutical multinationals, both foreign and domestic.
In the recent Patent (Amendment) Ordinance, 2004 that implements the TRIPS Agreement
in full in India and that must be replaced by an Act of the Parliament within
six months under the Indian Constitution, India has failed to take advantage
of the very flexibilities for which it had fought so hard more than ten years
ago. This means cheaper generic versions of the newly patented drugs will be
slower and harder to appear on the market than the TRIPS Agreement would permit.
Ironically, this surrender has taken
place under a government that prides itself in championing the cause of the
poor and with the aid of the domestic pharmaceutical lobby that had stridently
opposed the TRIPS Agreement during the Uruguay Round negotiations. It has also
happened relatively quietly—in contrast to the hundreds of demonstrations
by hundreds of thousands of Indians during the Uruguay Round negotiations, few
Indians have come out to protest in New Delhi this time around.
The Ordinance fails on a number of
fronts but most importantly in the area of compulsory licensing. The TRIPS Agreement
allows countries to issue compulsory licenses for the manufacture of patented
drugs without the patent holder’s permission in case of public-health
emergencies. It also gives the country the sole right to determine whether a
particular situation represents a public-health emergency.
The Ordinance takes no advantage
of this provision. Instead, it leaves in place just the old provision for compulsory
license in the Patent Act, 1970. Under that provision, the Controller of Patents
must take into account such matters as the time elapsed since the issuance of
the patent, efforts made by the patentee to make full use of the invention and
the ability of the applicant for the compulsory license to work the invention
to public advantage.
In so far as public health emergencies
are concerned, India can scarcely afford the bureaucratic delays that these
requirements imply. For example, they effectively give the patent holder the
right to object to the compulsory license even prior to the issuance of the
compulsory license. Under the TRIPS Agreement, it would be perfectly legitimate
to issue a compulsory license expeditiously, postponing any representations
against it till after production has begun. Can India, with the AIDS public-health
emergency virtually at its door steps, afford to go slow on allowing the manufacture
of generic versions of the future, more effective AIDS drugs?
Closely connected is the issue of
exports of generic versions of patented drugs produced under compulsory license
to third countries that lack the capacity to produce their own generic versions.
The Ordinance provides for the issuance of compulsory licenses for such exports
but gives the Controller of Patents the power to specify any criteria that he
sees fit. Such blanket bureaucratic discretion within the Indian system can
only delay the beginning of production and exports of the drugs. The WTO Decision
of August 30, 2003 provides a clear statement of the conditions to be satisfied
for a license for exports to third countries. These conditions are relatively
straightforward and there is no rationale for India to go further by placing
additional conditions on the license. The exports of generics by the Indian
firms have been responsible for bringing the prices of antiretroviral therapy
from $12,000 to $140 per year and the value of such restraints on drug prices
to the world’s poor can be scarcely underestimated.
The Ordinance is also vague on the
extension of patents beyond the normal 20-year period. There should be no room
for so-called practice of “evergreening” whereby firms manage to
extend patent by switching from capsule to tablet or finding new uses. The practice,
endemic in the United States, has been known to extend the monopoly power of
the patent holder and to discourage innovations around the patent. The 20-years
patent required under the TRIPS Agreement is already excessively long and there
should be no room for extension under any circumstances.
Also puzzling is the weakening of
the provisions for pre-grant opposition to patent applications that had existed
in the original Patents Act, 1970. The TRIPS Agreement imposes no such requirement
and if the interests of the public rather than multinationals are to be safeguarded,
there is little excuse for this weakening. Even many developed countries such
as Canada and UK, which give priority to public interest, have much tougher
The silver lining on this otherwise
bleak horizon is that India will have the opportunity to correct its mistakes
when the government places the Patent (Amendment) Bill, 2005 before the Parliament
to replace the Ordinance prior to Jun 30 as required by the Indian Constitution.
If Prime Minister Manmohan Singh truly wishes to protect the interest of the
public and, indeed, India as a whole, he must ensure that this Bill makes the
fullest use of the flexibilities in the TRIPS Agreement that he himself probably
helped negotiate as the Finance Minister of India in the first half of the 1990s.
A patent law that tests the boundaries of the flexibilities even at the risk
of being challenged in the WTO is a far superior option than the one that subjects
India to “TRIPS plus” regime and benefits the multinationals manufacturing
Arvind Panagariya is
the Jagdish Bhagwati Professor of Indian Political Economy & Professor of
Economics at Columbia University. Prof.Panagariya has spoken at various Young
India panels on Capitol Hill. In the past, he has been a Professor of Economics
and Co-director, Center for International Economics, University of Maryland
at College Park and the Chief Economist of the Asian Development Bank. He has
also advised the World Bank, IMF, WTO, and UNCTAD in various capacities. He
holds a Ph.D. degree in Economics from Princeton University.