A Lowdown on the Indo-US Tensions due to India’s Patent Regime

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We bring you a guest post by Ratnavel Pandian, a third year student of National University of Juridical Sciences. In this post, he takes us through why the US faces pressure from its lawmakers to take India to the World Trade Organisation (WTO) regarding India’s patent regime and the unfairness of the whole scenario.

Over this past year, relations between multinational pharmaceutical giants and the Indian government have reached an all-time low. Tension levels have been soaring, with the CEO of a particular pharmaceutical company going so far as to declare that their company manufactured drugs for Westerners who could afford it, and not for Indians. This hostile stance of most pharmaceutical giants has emerged as a result of the Indian intellectual property regime, which has continuously favoured safeguarding public health and well-being over fostering an environment conducive for innovation according to Michael Froman of United States Trade Representative (USTR).

In specific context with the pharmaceutical industry, the Indian Patent Office has maintained a more or less restrictive approach with high standards for granting patents to multinational pharmaceutical companies. This position has been achieved by maintaining a relatively high standard for patentability of pharmaceutical products (such as in the Novartis case) and waiving patent rights through compulsory licencing provisions, which are essentially  provisions allowing the government to authorize someone else to produce the patented product or process without the consent of the patent owner.

At the forefront of this battle with the Indian patent regime seems to be the United States government, which is being heavily lobbied by the American pharmaceutical giants as well as its various lawmakers who feel that the Indian IP regime compromises on the interests of American commerce and industry. The lobbyists have particularly taken issue with India’s 2012 decision to grant a compulsory license to Natco Pharma, an Indian drug maker for manufacturing a generic version of Bayer’s patented cancer drug Nexavar to prevent ‘ever-greening’ of the patent (i.e., modifying the patented drugs in order to seek patent protection for the modified drug, thereby prolonging the drug’s patent protection).

India’s stance

India has however maintained that its intellectual property regime is in full compliance with global pacts and is more than adequate. In fact, certain major American companies such as Boeing, Honeywell and Abbott Laboratories have publicly backed the Indian patent regime. Academicians from American universities have submitted reports stating that the Indian patent regime complies with all requirements under Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement.

The Indian stance has been that the WTO Agreement on TRIPS allows a country to issue compulsory licenses as long as certain procedural safeguards are followed. The compulsory licence for the overpriced Bayer cancer medicine was issued for reasons such as excessive pricing, failure to supply the market, and refusal to produce locally, thus bringing it within the ambit of the conditions laid down in TRIPS, as well as the Section 84 of the Patents Act, 1970. As a result of this licence, the cost of the cancer medicine has now significantly dropped, revealing the excessive mark-up that Bayer imposes on patients.

The United States’ perspective

Such justifications however did not seem to appease the United States Trade Representative (USTR). It issued a series of statements over the past few months harshly criticising the Indian intellectual property regime. This culminated in the ultimate threat for India to be included in the USTR’s Priority Foreign Country list, which would entail the triggering of unilateral trade sanctions by the United States. A Priority Foreign Country is a classification given by the United States in its Special 301 Report to a country that, according to the United States denies adequate IP protection to its (United States’) people. The Special 301 Reports are annual reports of the USTR with an analysis of foreign countries’ IP policies and practices each year.

After an extended exchange of hostile communication, with the USTR accusing India of producing results detrimental to ensuring widespread access to medicine, and India preparing to take the United States to the WTO for dispute resolution if included as a Priority Foreign Country, the United States government finally refrained from placing India on the list. India does however find itself on the ‘Priority Watch List’ with 9 other countries, namely China, Russia, Pakistan, Thailand, Indonesia, Venezuela, Algeria, Chile and Argentina.

What now?

Despite India not being downgraded to Priority Foreign Country status in this year’s Special 301 Report, the USTR will be conducting an Out-of-Cycle Review (OCR) within this year. Broadly, the OCR is a mechanism to review the progress of countries in the United States watch list which is further result in upgrading or downgrading a country’s status. The OCR is perceived as an almost coercive measure undertaken in between two Special 301 Reports with an intent to influence the IP policies of various countries.

According to the Special 301 Report released this year, the USTR will conduct OCRs on India, Kuwait and Paraguay.  By adopting a special OCR for India, the USTR is, in essence, attempting to influence the new Indian government that would come to power later this year. With its unilateral approach, the Special 301 Report is offensive to many countries especially ones which commit to promote affordable healthcare such as India.

Logically, the attitude of the United States government in taking liberties to scrutinise and attempt to mould the IP regimes of other countries is unacceptable, and active intervention of the WTO is required in order to ensure that such practices are discontinued. The countries placed in the United States watch lists can challenge Special 301 Reports. It remains to be seen if seeking such drastic measures would help countries from being negatively rated by the United States even after TRIPS compliance.

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