The patent puzzle

Indian licensing of patented drugs is a win-win

Most of the policy issues discussed to take forward the "Make in India" campaign centre around removing domestic roadblocks that hamper manufacturing. In the case of pharmaceuticals, however, the hurdles are unusual. India has an advantage in making drugs - both generic and under patent - cheaply, and this has resulted in their widespread global use through both regular exports and smuggling. Particularly sought after are newer products for treating non-communicable diseases like cancer that make an enormous difference in the quality of care. However, significant barriers to the manufacture and trade in pharmaceuticals still constrict the sector's growth.

Around a decade ago, then United States president George W Bush's emergency plan for AIDS relief procured and delivered antiretroviral drugs (virtually all generics and many made in India) to several African countries cheaply. Today, buyers' clubs have sprung up all over the world to smuggle in cheap copies of new cures manufactured mostly in India. Some of those involved have been prosecuted, including in China, as those drugs have not been certified by the respective country regulators. In India, the pharma company NATCO, after a celebrated court battle, secured the compulsory licence to manufacture a drug for the treatment of a type of cancer. On the other hand, drug consignments of Indian firms headed for South America have been seized in the past in the Netherlands during transshipment. Meanwhile, the proportion of counterfeits in Indian-made drugs in Africa has been abnormally and worryingly high, a continuing indication of holes in Indian companies' quality control.

Indian law has been designed to address the practice of "evergreening", extending the life of a patent by coming up with a new form of a known substance that does not improve efficacy. The right to allow the manufacture of a patented drug through compulsory licensing on public health grounds involves the payment of royalty, though far less than what a manufacturer can earn elsewhere. In the United States, prices are 50 per cent higher than what even European governments are able to negotiate for procurement for their public health services. United States manufacturers blame the high prices on the complexities of modern chemistry and high cost of securing regulatory approval; naturally, firms charge what they can and must. But if a patented drug that is too expensive for developing countries can be licensed to low-cost competent firms, then that, after all, adds to the global revenue of patent-holders through royalties. Developed economies have competent policing, so that the entry of such low-cost products meant for the global poor can be stopped at their borders. There is, of course, the fear among patent-holders that such practices, if permitted in one country, will set a bad example (countries like India, Brazil and Thailand will learn from each other) and soon there will be a demand for cutting prices in the United States also.