There is much more to Prime Minister Narendra Modi's visit to the United States (26-30 September, 2014) than the fanfare at the Madison Square Garden in New York where he spoke to the Indian diaspora on 28 September, 2014.
Modi’s visit has been seen by BJP supporters as a major victory since the diplomatic visa ban imposed on him on 18 March, 2005 when he was set to visit Florida. The US Department of State also revoked his existing business/tourist visa during that time. The US cautiously approached the situation when Nancy Powell (then US Ambassador to India) met him in February this year ahead of the 16th Parliamentary election. He became eligible for an A-1 visa after becoming the Prime Minister of India.
Although the erstwhile PM Manmohan Singh personally enjoyed a warm and friendly relationship with the US President Barack Obama, ties between the two countries turned frosty lately on account of the Khobragade diplomatic standoff in December 2013 and India's concern over food security at the WTO meet in Geneva during July 2014, shortly after the new Government assumed office at the Centre. The new Prime Minister’s recent US visit had thus been seen as critical to kick-starting a renewed and vibrant association between the two nations.
As was revealed in the Joint Statement issued during Modi’s visit to the US on 1 October, the key areas identified where both countries shall work together in the future are: Defense and Homeland Security; Economic Growth; Trade and Investment; Infrastructure Development; Intellectual Property Rights (IPRs); Higher Education; Technology and Manufacturing; Insurance; Health Cooperation; Global Issues and Regional Consultations; and Energy and Climate Change.
On IPRs in particular, a sentence from the Joint Statement read: "Agreeing on the need to foster innovation in a manner that promotes economic growth and job creation, the leaders committed to establish an annual high-level Intellectual Property (IP) Working Group with appropriate decision-making and technical-level meetings as part of the Trade Policy Forum".
The above-mentioned sentence in the Joint Statement provoked many social activists and health policy experts (including Médecins Sans Frontières) to believe that India had succumbed to the US pressure to change its existing IPR policy, which had the provision of compulsory licensing in accordance with World Trade Organization's (WTO) Trade-Related Intellectual Property Rights (TRIPS) Agreement – a health safeguard to protect the interests of patients/ consumers.
Ironically, the Indian middle class that enjoyed Modi's glitz on their television sets, anticipated very little or nothing about the impact which his US visit could bring in their own lives in the area of health expenditure. However, media reports and opinion pieces expressed by health and legal experts regarding US interference in influencing Indian IPR laws compelled the Government to elucidate its own stand.
On 3 October, 2014, as the PM greeted the entire nation on the occasion of Vijaya Dashami, a press release issued via the Press Information Bureau (PIB) by the Ministry of Commerce and Industry clarified that “there already exists the Innovation and Creativity Focus Group in the Trade Policy Forum since 2010 to consult each other no less than twice a year on ‘Improving intellectual property rights protection and enforcement, enhancing awareness of intellectual property rights, fostering innovation and creativity, and increasing collaboration between US and Indian innovators’. The statement on US-India Trade Policy Forum was signed by the then Commerce and Industries Minister in March 2010 with his US counterpart”.
The press release further added:
"The joint statement issued now merely reiterates whatever has existed in the earlier Trade Policy Forum. IPR issues are critical for both the countries and India has been repeatedly raising the issue of copyright piracy and misappropriation of traditional knowledge with the US.
India has consistently pointed out that the IPR legal regime in India is fully TRIPS compliant and that any issues to be discussed have to be discussed in bilateral forums like Trade Policy Forum. India has refused to be subjected to unilateral action proposed by US under the Special 301 report, an annual report on IPR under US Trade Act.
USA agreeing to discuss IPR issues through the bilateral mechanism of the Trade Policy forum is in fact a re-affirmation of India’s stand that issues need bilateral discussion and not unilateral action. The statement on the IPR issue will only strengthen the bilateral institutional mechanism".
A plain and simple reading of the above text in italics shows that although the Joint Statement by PM Modi and President Obama exhibited enthusiasm in building economic ties with a special emphasis on IPRs, seeing the negative apprehensions among scholars and experts, the Indian Government resorted to clarification. One can perhaps say that the Government came back one step after taking two steps forward.
Initially, it tried to win appreciation from the corporate sector for promoting Indo-US business ties, but when critical reviews were presented in the print media, it passed the buck to the previous UPA-2 regime.
The press release dated 3 October clearly says that the US-India Trade Policy Forum was created in 2010. The dialogue on IPR issues has been kept under the ambit of bilateral forums such as the Trade Policy Forum since then. The NDA has simply followed in the footsteps of the UPA-2, even as it explicitly states that the Government was against the unilateral action proposed by the US under the Special 301 report.
It must be informed that the UPA-2 Government did not cooperate with an investigation led by the US International Trade Commission (USITC) into India's IPR related issues during 2013-14. The investigation was titled 'Trade, Investment and Industrial Policies in India: Effects on the US Economy'.
New norms for drug-pricing?
Prior to PM Modi's US visit, the Commerce and Industry Minister Nirmala Sitharaman hinted on 8 September, 2014 that in order to resolve the weak IPR protection environment in India, her ministry would soon have a policy think-tank. In a press conference, she expressed that a new IPR policy will be brought to deal with issues raised by the developed countries like the United States. This clearly shows how the ground for the PM's historic visit and mission was prepared.
During the same month, the NDA Government denied media reports that it had withdrawn powers of the National Pharmaceuticals Pricing Authority (NPPA) to fix or revise prices under para 19 of Drugs Pricing Control Order (DPCO), 2013. It alleged that media had wrongly reported the direction given to the NPPA for withdrawing the notifications dated 10 July 2014, fixing prices of 108 non-scheduled drugs used to treat diabetes and cardiovascular diseases.
Some experts had opined that the government clampdown on NPPA's power was an attempt to project India as market-friendly just ahead of the PM’s US visit. A report by journalist Iftikhar Gilani published in the DNA dated 1 October, 2014 showed that the Government's decision to decontrol prices of 108 drugs pushed up the price of Glivec (among many others) – an anti-cancer drug/ tablet that was denied patent protection by the Supreme Court of India in April 2013 - from Rs 8,500 to Rs 1.08 lakh. It seemed like a well-orchestrated move on the part of NDA to appease US drug companies who did not like the low-priced “generic” medicines that are manufactured in India.
However, once again, a press release issued via PIB by the Ministry of Chemicals and Fertilizers, dated 25 September, put paid to these reports:
"The Government has clarified that it had not withdrawn powers delegated to the National Pharmaceuticals Pricing Authority (NPPA) on 30th May 2013, within the framework of the National Pharmaceuticals Pricing Policy (NPPP) 2012 and the Drugs Pricing Control Order (DPCO), 2013. It is further stated that the orders dated 10.07.2014 issued by the NPPA, fixing prices of certain drugs in exercise of powers under para 19 of DPCO, 2013 have not been withdrawn.
In the light of some writ petitions filed in Bombay and Delhi High courts, the NPPA withdrew certain internal guidelines that it had earlier issued on 29.05.2014, after a consultation with the Ministry of Law and Justice. It was decided to convey the same to the Hon’ble Courts.
The clarification comes in the wake of some media reports which indicated that the Government had withdrawn powers of the NPPA to fix or revise prices under para 19 of DPCO, 2013. There were also reports that Government has directed the NPPA to withdraw the notifications dated 10.07.2014 fixing prices of 108 non-scheduled drugs. These reports are denied”.
Why are IPRs an important issue for the US?
The institution of patenting, intellectual property rights and copyrights is important so as to give the original inventor the incentive to create new ideas or to undertake R&D. It needs to be mentioned that India is on the "priority watch list” of the US as per the 2014 Special 301 Report. It means that India is unable to provide decent IPR protection environment to patented products sold by US companies here.
The Special 301 Report has identified a wide range of concerns in the case of India, including:
a. reported inadequacies in trade secret protection as well as an increasing incidence of trade secret misappropriation;
b. the continuing challenges of copyright piracy over the Internet; and
c. market access barriers, including non-transparent, discriminatory or otherwise trade-restrictive measures, which hamper access to healthcare.
In what could be a huge blow to “generic” medicines manufactured in India, the same report maintains that "anywhere from 10-40 percent of drugs sold in Indian markets are counterfeit and could represent a serious threat to patient health and safety."
The 2014 Special 301 Report underlines concerns regarding market access barriers affecting pharmaceutical and medical device products in India. It is clearly not appreciative of Section 3(d) of India’s Patent Act, which states in relevant part that “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance” is not considered to be an “invention” under Indian law.
In fact, the report states that the US is worried that section 3(d), as interpreted by the Supreme Court of India, “may have the effect of limiting the patentability of potentially beneficial innovations”, which "would include drugs with fewer side effects, decreased toxicity, improved delivery systems, or temperature or storage stability".
This indicates that the US is unhappy with the Supreme Court decision in the Novartis case (in April 2013) that cleared the way for production of “generic” drugs in India.
As per the same report, Indian laws pose several challenges to the enjoyment of IPR protection even after a product receives a patent. In India, patent applications can get tied up in costly challenge proceedings for years when a person can easily “challenge a patent through both pre-grant and post-grant opposition proceedings on any of eleven enumerated grounds, including by citing the same grounds in both pre- and post-grant challenges” at minimal cost.
It is mentioned in the report that the "United States urges India to provide greater transparency about its ongoing inter-ministerial process that is considering over a dozen patented medicines as candidates for government-initiated compulsory licenses, and urges India to allow opportunities for input by rights holders, as appropriate, with respect to decisions concerning compulsory licenses".
It is well known that prior to TRIPS, the Drug Policy of 1978 and the process patent system that came into being after the enactment of the Patents Act 1970, encouraged the growth of the domestic pharmaceutical industry.
Presently India is free to produce and export life-saving medicines in accordance with the TRIPS Agreement and the Doha Declaration on the TRIPS Agreement and Public Health, notably through compulsory licensing. Compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner. It is one of the flexibilities on patent protection included in the WTO’s TRIPS Agreement usually given to lower prices of life-saving drugs and increase access to them. But developed countries like the US are trying to erode these flexibilities.
Recently, in order to bypass compulsory licensing, US pharmaceutical company Gilead Sciences has authorised seven India-based drug manufacturers, namely, Cipla, Ranbaxy, Mylan, Strides Arcolab, Hetero, Cadila Healthcare and Sequent Scientific to manufacture and sell the generic versions of its Hepatitis C medicine-'Sovaldi' in 91 developing countries. From this deal, Gilead is supposed to receive 7 per cent royalty on sales from the seven partners, and no one can ever blame that 'Sovaldi' is sold at higher prices in the developing nations.
The US pharmaceutical company will also be able to protect its own market (i.e. the US) from "generic" drugs. Although it may appear that generic manufacturers can gain from such deals in the future, Shamnad Basheer, a legal expert on IPRs, cautions in his Indian Express opinion piece (dated 27 September) that such partnerships between global innovators and "generic" manufacturers will reduce patent challenges in the future.
IPR is one area which is presumed to be complicated, which the lay person cannot grasp lucidly. However, the impact of stringent IPR laws in a developing nation, particularly in the health sector, can be crucial as it manifests itself in the form of expensive medicines, including life-saving ones. Excessive IPR protection can restrict dissemination of new knowledge, which in itself could slow down economic growth.
On the other hand, there is ample evidence to suggest that weak IPR protection has actually stimulated R&D activity by encouraging knowledge spillovers from transnational corporations (TNCs) and other domestic firms in many developing nations. It is, therefore, time for India to decide the road it wants to tread on.
PM's visits abroad (2014), Press Information Bureau
DIPP Statement on Bilateral Mechanism for Discussing IPR Issues with USA, Press Information Bureau/ Ministry of Commerce & Industry, 3 October, 2014
Cancer drug price goes up from Rs 8,000 to Rs 1.08 lakh, DNA, 1 October, 2014.
Joint Statement during the visit of Prime Minister to USA, Prime Minister's Office, Press Information Bureau, 1 October, 2014
New drug era, The Indian Express, 27 September, 2014.
Delegation of Powers to National Pharmaceuticals Pricing Authority Stand, Press Information Bureau/ Ministry of Chemicals and Fertilizers, 25 September, 2014
A new order, The Business Standard, 18 September, 2014
Intellectual property rights policy in 6 months, Hindustan Times, 9 September, 2014.
IPR policy in the works, The Telegraph, 8 September, 2014
2014 Special 301 Report, Office of the United States Trade Representative, Executive Office of the President of the US, April 2014
FAQ on Compulsory licensing of pharmaceuticals and TRIPS, WTO website
Intellectual property issues dominate the USITC public hearing on India, Third World Network, 13 February, 2014
The Cost of Drugs: Beyond the Supreme Court Order, Economic and Political Weekly, Vol-XLVIII, No. 17, April 27, 2013