Much of India’s strong growth has come from replacing its former socialist economic strictures with secure property rights, fewer regulations and better protections for innovators. Yet, as recent news demonstrates, not all of the old ways are gone.
Munich-based Bayer AG recently lost an appeal to the Delhi high court to prevent an India-based competitor from producing a copy of its cancer-fighting drug Nexavar. Although Nexavar is recognized as a breakthrough in treatments of some cancers, India’s drug licensing authority and courts decided not to protect it against copying, even though it was patented under Indian law.
This isn’t a new problem. India has been reluctant to protect patents for many years, especially in areas where foreign firms have advantages over domestic ones. This reluctance is especially strong in pharmaceuticals. India denied any patent protection for pharma products from 1970 until 2005, allowing its home-grown generic drug industry to copy foreign innovations with impunity.
All that was supposed to change when India passed the Patent Act of 2005, which brought it into compliance with the World Trade Organization’s accord on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and extended patent protection to pharma products. But the Act gave with one hand and took away with the other. The law denies patent protection to drugs made from “known substances”, unless the new combinations are shown to have disease-fighting efficacy that is different from the substances from which they’re derived. This gives Indian patent officials broad discretionary authority to deny patents to novel and useful pharmaceutical inventions that were not obvious from prior inventions and public records, in clear violation of TRIPS. They have since used that discretion to refuse patent protection for drugs such as Glivec, a popular anticancer drug from Novartis, antiretroviral drug Viread and now Bayer’s Nexavar.
Degrading patents has serious side effects. Unauthorized generic copies aren’t always as safe as branded products. India already has to deal with a huge fake drug industry. If foreign firms don’t think their inventions will be protected, they are less incentivized to invest in research and development. Since new drugs cost roughly $1 billion each to develop and bring to market globally, easy and early copying can be devastating for companies, especially in large markets such as India.
Generic makers argue that not every Indian wants or can afford a branded drug. But there are plenty of Indian firms that don’t rely on copying to produce high-quality, cheap drugs for India’s poor. These firms also benefit from patent protection. The government has a list of essential medicines that it provides to poor people, courtesy of the taxpayer. Continuing to favour copying makes it less likely that manufacturers will try to solve problems that afflict India or will bring the latest and best drugs available elsewhere into India.
Activists, generic producers and their allies will applaud trading future gains for access to cheaper drugs now. The government, however, should look at the nation’s long-term interests. Decisions like the high court’s Nexavar ruling will deter investments in innovations that will help secure India’s future—doing more for the nation’s health and economy than copying can. After all, access to copies isn’t worth much when there’s nothing to copy.
The Wall Street Journal
Edited excerpts. Ronald A. Cass is former commissioner and vice-chairman of the US International Trade Commission, dean emeritus of Boston University School of Law and president of Cass and Associates. Comments are welcome at email@example.com