Populism versus the poor

A quick glance at international headlines shows India's poor under assault from litigation by a Swiss pharmaceutical company: A longer look reveals the poor everywhere are in danger from populist campaigns to supply them with unreliable copy-drugs on the pretext that they are cheap.

This Novartis case (due to begin on February 15 in the High Court in Chennai) may decide India's future in research and innovation. It can travel along the route it has taken in software engineering, with intellectual property protection and rapid growth, or the opposite route of limited growth, even stagnation.

Much of the activists' clamour against patents relies on accusations that cheap drugs would be restricted but the law does nothing to hamper the huge Indian generic-medicines industry, legally producing drugs whose patents have expired. Patent laws do, however, restrict companies selling shoddy copies - like Thailand's GPO-vir that has encouraged drug-resistance among HIV-positive patients.

Between 1970 and 2005 there were no patents in India and Indian companies were free to reverse-engineer (copy) patented drugs for domestic consumption. But in 1995 India signed on to the WTO's TRIPS, a treaty on intellectual property, with a cushion of 10 years to comply by January 1, 2005. With the new Indian Patent Law of 2005, protection for innovation seemed assured but, after lobbying from local producers of 'copy-cat' drugs, amendments were introduced, unique to India and almost certainly illegal under TRIPS.

The amendment being challenged by Novartis is Section 3(d), which creates additional hurdles for pharmaceutical patents by deeming that derivatives of known substances are not considered patentable unless they can be shown to differ in terms of efficacy - this might seem vaguely reasonable but efficacy, as opposed to safety, requires a huge new set of clinical trials. To achieve a patent one must demonstrate more than the usual "novelty, commercial applicability and non-obviousness" criteria under TRIPS.

Hence, Section 3(d) is not compliant with Article 27 of TRIPS, which prohibits WTO member states from making it harder to obtain a patent in one field than another. The result of Section 3(d) is to create uncertainty for innovators since many useful drugs are developed from known substances.

In the case of the Novartis cancer treatment Glivec, the Indian Government refused to recognise its new version, patented in some 40 countries. Novartis claims that proper patent laws help patients by giving them the best drugs available and protecting them from poor copies. They would also help Indian pharmaceutical companies by encouraging inward investment and by protecting their innovative research - currently worth more than $10 billion and heading for $25 billion by 2010, according the analysts McKinsey & Co.

Novartis obviously has a wider financial interest in obtaining its patent but Indians should be concerned that if Novartis loses it may undermine innovation in their country.

Since no country has complained to WTO about the Indian law, the only course left for Novartis was to challenge the legality of Section 3(d) under the Indian Constitution, which says that international treaties agreed by India have to be applied fully within India.

International activists are campaigning for drug research to be taken over by Governments and international agencies. In this case they are egged on by local Indian manufacturers who are wary of foreign competition. Campaigns have stopped litigation before, notably in South Africa and Brazil, by embarrassing wealthy American and European corporate plaintiffs into dropping their suits.

These protectionist interests have prevented truly global competition in the pharmaceutical sector by encouraging amendments to Indian Patent Law.

India's judiciary and legislators must decide whether India wants to join the rest of the world in providing sensible intellectual property protection or to keep rules that distort competition. This protectionism benefits only a small segment of local companies while penalising serious Indian businesses.