-SANSKRITI BAHUGUNA, SVKM’s Pravin Gandhi College of Law, Mumbai University.

Valued at a staggering USD$33 Billion as the world’s largest supplier of generic drugs and control of over 18% of the global market, the Indian pharmaceutical industry is a behemoth to behold[1]. It has emerged as a generic drug haven for all the global pharma key players in the world. But how exactly did it earn its generic repute and is this repute covertly hurting India? Unlike other third world countries, patent rights were introduced in India as early as 1856. It even had a product patent regime for all inventions under the Patents and Designs Act, 1911[2]. However, in 1970, the government introduced the new Patents Act of 1970, (“the Patents Act”). It wasn’t until the Uruguay round trade negotiations of the General Agreement on Tariffs and Trade (GATT)[3] that an International agreement on Trade-Related (Aspects of) Intellectual Property Rights (TRIPS) with an important provision of incorporating intellectual property issues was met. India signed the GATT on 15 April 1994. However, it was evident that GATT was more inclined towards developed countries rather than the developing ones. Therefore, India decided to join the nascent World Trade Organization. On January 1, 1995, the TRIPS Agreement went into force under WTO, which meant that India as a member was required to comply with its provisions. As a developing country, India obtained a 5-year transition period and an additional 5 years to amend patent laws on patent protection of pharmaceuticals.

Now, the period between the Patent Act of 1970 and the TRIPS agreement accorded Patents (Amendment) Act of 2005[4], proved imperative in cementing India’s position as a generic drug haven. Section 5 of the Patents Act, 1970[5], provided that no patent would be granted for food, medicine, drug, relating to substances prepared or produced by chemical processes. This provision was omitted in the 2005 amendment. Meaning for a period of more than thirty years, India did not recognize patents with regard to medicines and drugs. This provided a great stimulus for the Indian pharmaceutical industry to develop expertise in reverse- engineering of novelty drugs due to absence of international patent recognition in medicine. The domestic industry grew rapidly by developing cheaper versions of a number of drugs patented for the domestic market and eventually aggressively shifted to the international market with generic drugs, after the expiration of international patents. For reference, the market share of multinational companies has fallen from 75% in 1971 to around 35% in the Indian pharmaceuticals market at present.[6]

This generic growth came at the price of hostility from Global industry. Foreign firms started following a trend, a trend which may be easily observed with the example of Takeda pharmaceuticals. It is a Japanese pharma company with its key R&D efforts focused on Oncology and Rare Diseases, areas commanding novel cancer drugs such as Bortezomib and Brentuximab vedotin[7]. It is disconcerting to find that these drugs are not open to the Indian market. Moreover, their Indian subsidiary merely manufactures generic drugs rather than the company’s core oncology focused business[8]. A similar pattern can be found in almost all the other MNCs; Novartis and Pfizer to name a few.

This hostility cannot be completely categorized as unwarranted. India has a tendency of denying patents and issuing compulsory licenses against foreign novelty drugs. The landmark Novartis v Union of India case[9] provides a better understanding of India’s malafide perception on the global stage. In the year 2006, Novartis applied to the Indian Patent Office seeking a patent for its formulation “Glivec”, used in the treatment of blood cancer. Novartis challenged the decision in the Supreme Court of India. The court rejected Novartis’ appeal for a patent in 2013. The major accepted argument was dismissing the appeal under the infamous section 3(d) of the patent’s act in order to ensure that expensive drugs are available at affordable rates to the poor. An argument which has been recycled time and time again to deny patents for novelty drugs. However, the flaw in this argument becomes profound when one understands that Novartis already provided “Glivec” free of charge to roughly 95% of afflicted patients under one of its patient support schemes”. The remaining 5% were reimbursed, insured, or covered under a very generous co-pay program[10].

As no patent for “Glivec” was provided in India, domestic generic drug manufacturers usurped the entire R&D that Novartis put into the discovery and development of “Glivec”. Unfortunately the “Glivec” situation is not an isolated incident. India has granted compulsory licenses to other cancer drugs, including Bayer’s “Nexavar”, Roche’s “Tarceva”, and Pfizer’s “Sutent”[11]. These licenses allow India generic drug manufacturers to make these drugs with impunity rendering the original producers uncompensated in the process.

It is hard to feel sympathetic towards multi-billion corporations for losing out on some money. But the issue at hand is much bigger. Not only do these continued instances quip mistrust in foreign firms, but they also strip the companies of their incentive to invest in years of expensive R&D to create new drugs; effectively putting an end to innovation. This is egregiously dangerous for public welfare as well as the generic drug industry; which depends upon reverse engineering of these novelty drugs.

This mistrust has resulted in International companies not launching their drugs in the Indian market. This not only proves detrimental to patient health but directly creates demand for illegal counterfeits of these drugs. Bangladesh, a fellow signatory of the TRIPS agreement is infamous for its illegal supply of internationally patented drugs in the Indian market. Bangladesh falls under least developed countries (LDCs); as a result, it enjoys Agreement on Trade-Related Aspects of International Property Rights (TRIPS) waiver allowing LDCs to produce patented drugs until 2033[12]. Thus, it may legally export generic versions of patented drugs to any country where those drugs aren’t covered by patents such as Vietnam, Myanmar and Kenya. The Indian market doesn’t qualify for this export but due to abundant output and locational advantage, such firms illegally sneak their potentially unregulated and dangerous drugs under personal consumption category circumventing customs authority’s scrutiny.

Now, having a dedicated generic drug industry is not inherently wrong. But Katherine Eban paints a scary picture of the Indian generic drug industry dominated by key players such as Lupin, Glenmark, Cadila and Aurobindo, in her book “Bottle of lies”[13]. The book uses the Ranbaxy scandal of 2013 as an example. To combat the blazing massive HIV/AIDS crisis, the Bush administration introduced the President’s Emergency Program for AIDS Relief. Ranbaxy was chosen as one of the beneficiaries. In its rush to introduce generic drugs to the markets, Ranbaxy blatantly falsified data. Data that proved their drugs were safe and therapeutic. They did so by essentially taking patented drugs, breaking them down, and passing off the results as their own. No regulatory actions were taken against the company during this process for clear IP violations.

The same author, a veteran investigative journalist in the field of public health commented that during her time reporting in India, she observed that the Indian plants don’t fear being shut down by regulators due to negative findings[14]. On paper the patent laws of India readily provide for various injunctions, along with grave criminal and civil liability for IP contraventions for pharmaceuticals. But in practice, much like the Ranbaxy scandal, the guilty corporate executives usually get away unscathed.

Additionally, the pharmaceutical industry has not been sheltered from corruption allegations and administration deficiencies, Good laws solely do not merit protection of patents; rather it is the stringent implementation of such laws that accomplishes this goal. The widespread corruption can be combated through increased accountability and transparency between citizens and the concerned government regulatory organizations with regard to information about the drug regulatory processes. This transparency must also be coupled with a decrease in political funding by big pharma corporations. Currently, the fines for IP mishaps, ranging in lakhs and crores fail to curb such violations in the industry. Simply because the profits made from such activities are far superior to the value of the fines imposed. Moreover, sanctions for pharmaceutical companies that violate patents must be severe and exemplary enough to command retributive results to further discourage such actions. This could involve an escalation pyramid of sanctions where regular offenders are treated with increased severity in proportion to the violations they commit.

To put it bluntly, Indian pharmaceutical companies have grown to accept being reduced to a generic market. Our lack of adequate funding towards R&D has made it too incredulous for an Indian company to independently manufacture novel drugs. Although the recent Bloomberg report concurred that the top 5 Indian Pharma giants Sun, Lupin, Glenmark, Cipla and Dr. Reddy’s spent a record Rs.8025 crore in R&D for FY 17 in line with their global competitors[15]. It must be noted that the majority of these investments were under traditional generic systems. It is nonetheless a start for it serves to exhibit that healthily investing in R&D is a possibility. Going forward, a mere shift in the streamline of resources towards novelty and specialized drugs can help revitalize India’s lost innovation potential.

It is irrational to expect pharmaceutical companies; profit oriented businesses to function as humanitarian mercenaries for public welfare and allow for cheap generics of their arduously expensive and labour-intensive novelty drugs. This onus must be instead shouldered by the government of the country. How can it do so? By simply integrating a better healthcare system. Although India did establish a semi- universal healthcare in the form of Ayushman Bharat scheme, it isn’t very effective in cases of rare diseases where novelty drugs are required. It has a low financial coverage cap and covers less than half of the country’s population. Arguing for the sacrosanct of human life over “greedy patents practices” but failing at proper implementation of the national patent laws to provide patent security, resulting in distrust and loss of potential novel market for global pharma firms; thereby risking the lives of citizens due to unavailability of those novel drugs is irresponsible. Secondly, India has systematically failed at investing in healthcare. As per the Global Health Expenditure database 2016 of WHO, India ranks 170 out of 188 countries in domestic general government health expenditure as a percentage of GDP. Spending a measly 1.28% of its GDP as public expenditure on health for FY 2017-18. In contrast, the US spent 16.9%, China 5%, Germany 11.2% and Japan spent 10.9%., India must simply invest more in public healthcare[16].

Such an investment is entirely a plausible solution as evidenced by Punjab, a state with 1 million cases of suspected Hepatitis C, which required expensive treatment consisting of injectable peg-interferon. Understanding the economic duress it could put the patients under, the government created a special fund of $2.9 million to cater to patients and the treatment was provided for free[17]. Instead of denying patents over public welfare, it is upon the government to formulate welfare oriented policies and invest in public healthcare. For example; various state or union governments can strike direct deals such as access to medicine schemes with a company holding a patent for an expensive novelty drug required in public interest. Whereby economically vulnerable are furnished with expensive novelty drugs for treatment. Section 135 of India’s Companies Act that makes it mandatory for companies to spend two percent of their average net profit for the past three years on Corporate Social responsibility can be leveraged to arrive at such a deal.

Now more than ever we must act. At the backdrop of the government’s effort to ramp up domestic output after India’s API reliance on China was coldly unveiled during COVID-19. The nation attempts to transform into a self- reliant India. Today, proper implementation of patent laws and investment in novelty drug research and manufacturing becomes all the more necessary. India must shed its conflicting generic drug haven image and its dependency upon foreign firms for novelty drugs to transform into the Global pharmacy of the world.

END NOTES:

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[1] Ibef.org. 2020. Indian Pharmaceuticals Industry Analysis Presentation | IBEF. [online] Available at: <https://www.ibef.org/industry/indian-pharmaceuticals-industry-analysis-presentation&gt; [Accessed 2 July 2020].

[2] Patents and designs Act, 1911

[3] The Uruguay Round was the 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT), spanning from 1986 to 1993 between 123 countries

[4] Indian Patents( amendment)  Act, 2005

[5] Indian Patent Act, 1970

[6] Zacharias, N. and Farias, S., 2020. Patents And The Indian Pharmaceutical Industry. [online] Nishithdesai.com. Available at: <http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Patents_and_the_Indian_Pharmaceutical_Industry.pdf> [Accessed 30 June 2020].

[7] Takeda.com. 2020. Products | Takeda. [online] Available at: <https://www.takeda.com/what-we-do/our-products/&gt; [Accessed 1 July 2020].

[8] Medindia.net. 2020. Zydus Takeda Healthcare Pvt. Ltd. Product Information | Medindia. [online] Available at: <https://www.medindia.net/drugs/manufacturers/zydus-takeda-healthcare-pvt-ltd.htm&gt; [Accessed 1 July 2020].

[9] Novartis AG v. Union of India, A.I.R. 2013 S.C. 1311 (India), available at http://supremeco urtofmdia.nic.in/outtoday/patent.pdf

[10] SHAHANI, R., 2020. Misinformed Campaign Against Glivec. [online] @businessline. Available at: <https://www.thehindubusinessline.com/opinion/misinformed-campaign-against-glivec/article22994863.ece&gt; [Accessed 30 June 2020].

[11] PMLive. 2020. India Revokes Pfizer’s Patent On Sutent. [online] Available at: <http://www.pmlive.com/pharma_news/india_revokes_pfizers_patent_on_sutent_434858&gt; [Accessed 1 July 2020].

[12] Gay, D., 2020. What LDC Graduation Will Mean For Bangladesh’s Drugs Industry | LDC Portal. [online] Un.org. Available at: <https://www.un.org/ldcportal/what-ldc-graduation-will-mean-for-bangladeshs-drugs-industry/&gt; [Accessed 30 June 2020]

[13] EBAN, K., 2020. BOTTLE OF LIES. NEW YORK: ECCO

[14] Porecha, M., 2020. Bottle Of Lies Proves A Bitter Medicine For DCGI. [online] @businessline. Available at: <https://www.thehindubusinessline.com/news/bottle-of-lies-proves-a-bitter-medicine-for-dcgi/article30463171.ece&gt; [Accessed 30 June 2020].

[15] Sharma, S., 2020. India Spending More On Healthcare Now, But Yet Not As Much As Others; Here’S How Much US, China Spend. [online] The Financial Express. Available at: <https://www.financialexpress.com/economy/india-spending-more-on-healthcare-now-but-yet-not-as-much-as-others-heres-how-much-us-china-spend/1922253/&gt; [Accessed 2 July 2020].

[16] Sharma, S., 2020. India Spending More On Healthcare Now, But Yet Not As Much As Others; Here’S How Much US, China Spend. [online] The Financial Express. Available at:

<https://www.financialexpress.com/economy/india-spending-more-on-healthcare-now-but-yet-not-as-much-as-others-heres-how-much-us-china-spend/1922253/&gt; [Accessed 2 July 2020].

[17] ANI News. 2020. Over 18000 Patients In Punjab Receive Free Treatment For Hepatitis C. [online] Available at: <https://www.aninews.in/news/business/over-18000-patients-in-punjab-receive-free-treatment-for-hepatitis-c/&gt; [Accessed 1 July 2020].

Edited by: Vidhi Dugad, Zeel Davda.