India, Pharmacy to the Developing World, Must Honor IP Rights

The United States and India are locked in a vitriolic debate over intellectual property rights in the pharmaceutical sector. The tension between pharmaceutical patents and access to affordable medicines took center stage during President Obama’s three-day visit to India in January. For several years the United States has been increasing the pressure on India to adopt intellectual property protections similar to those of the U.S. and the European Union, without avail. According to the 2015 U.S. Chamber of Commerce’s Intellectual Property Index, India ranks 29th among 30 nations in their protection for intellectual property rights. The report scores nations in several IP dimensions, out of a maximum of 30 points. India scored 7.23 points, only Thailand was ranked lower, while the U.S., the highest-ranked country, scored 28.53 points.[1]

Claiming to be the “Pharmacy to the Developing World”, India argues that their lax intellectual property rights regime is critical to their ability to provide low-cost, quality generic drugs. They are wrong on two counts. First, India needs to honor IP rights, because without effective intellectual property rights, new pharmaceuticals will not be developed and the “Pharmacy to the Developing World” won’t have anything to provide to the developing world, or to anyone. Second, given the quality crisis in the Indian pharmaceutical industry, they shouldn’t be the pharmacy to anyone.

In early January 2015, the Indian government rejected Gilead Sciences Inc’s patent application for its Hepatitis C drug Sovaldi. This comes on the heels of numerous other attacks on pharmaceutical patents. As of mid-2014, India had “denied, revoked or otherwise attacked” the patents of 15 of the approximate 45 patented medicines on the Indian market.[2] The result is a regime of protectionism that coddles Indian industry at the cost of U.S. jobs. The pharmaceutical industry is but one of many industries experiencing such treatment. While the United States has welcomed Indian firms, India has shunned innovative U.S. firms. As described in his Pre-Hearing Statement to the U.S. International Trade Commission, Rod Hunter notes that Indian pharmaceutical firms have enjoyed unfettered access to the sizeable U.S. market:

“Approximately 40% of all FDA marketing approvals for generic medicines in 2013 were for Indian products. One of India’s major generic pharmaceutical companies, Wockhardt, has reported generating 52% of sales revenue from the U.S. in the 2012-2013 financial year. Another, Sun Pharma, publicly stated in December 2013 that 70% of Sun’s sales come from the U.S. alone. Dr. Reddy’s Laboratories reported a 76% increase in net profits for the quarter ending September 30, 2013 due to ‘high margin launches in the US market.’ And the Government of India is benefitting from the implementation of this industrial policy – it collects more taxes on pharmaceutical products than it spends on medicines.”[3]

[Kristina]

Indian firms are clearly benefitting from the research and development done by the U.S. pharmaceutical industry. Without the innovation done by U.S. firms, the generic industry would cease to exist. It is the tremendous investment of time, talent and financial resources that facilitates the development of new treatments and cures. It is the protection offered by effective intellectual property rights regimes that incentivizes these investments. Without IP the investments evaporate and the innovations disappear. Intellectual property rights and patent protection are not solely the best way to advance drug discovery and development, they are the only way. It is imperative that India recognize this and honor that IP rights that, in essence, deliver prosperity to their generic firms.

The stakes are particularly high in this case: for India and the U.S., for consumers as well as industry. According to the IMS Institute for Healthcare Informatics, 86 percent of US prescriptions filled in 2014 were for generics, and 40 percent of U.S. generic drug imports are from India. In 2013, Indian pharmaceutical exports to the U.S. totaled $4.5 billion, more than a tenth of the $41.8 billion in goods India exported to the U.S. that year. However, as U.S. patients consume a growing number of Indian generics, their quality is increasingly in question. In 2014, the U.S. Food and Drug Administration banned imports from 21 Indian manufacturing plants, more than in any previous year. [4]

According to the April 2014 U.S. Trade Representative ‘Special 301 Report’, India is “the largest source of counterfeit pharmaceuticals shipped to the United States”. The report went on to state that “reports indicate 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”.[5] Wockhardt, the same firm mentioned above, is now banned from exporting drugs to the United States following F.D.A. inspections at two plants that uncovered serious problems.[6] Ranbaxy Laboratories Ltd, and Sun Pharmaceutical Industries Ltd. have also been subject to F.D.A. import bans, for reasons ranging from quality control problems to data manipulation to sanitation.[7] The result is that some U.S. doctors are recommending that their patients seek out generic manufacturers outside India. According to one U.S. cardiologist, “I’m tending to stay away from India. There’s something wrong. Too many things are happening.”[8]

While all of the energies of the Indian pharmaceutical industry seem to be focused on undermining U.S. requests for effective intellectual property protection in India, arguing that weak, ineffective IP rights are critical for supplying inexpensive generic drugs, they have clearly missed the forest for the trees. If they are to sustain the growth of the Indian generics industry, it is critical that they honor the patents that provide them with the innovative drugs that become their generics, and that they refocus on producing quality products, products that consumers the world over can be confident are genuine, effective and high quality.

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[1] Global Intellectual Property Center, U.S. Chamber of Commerce. GIPC International IP Index, Third Edition, February 2015.

[2] Hunter, Rod. India’s Attack on Innovation: New Delhi’s discrimination against U.S. firms harms jobs and intellectual property, The Wall Street Journal, September 25, 2013.

[3] Hunter, Rod. Statement of Rod Hunter, Senior Vice President, Pharmaceutical Research and Manufacturers of America (PhRMA), Before the U.S. International Trade Commission Investigation No. 332-543, February 13, 2014. Public Comment.

[4] Silverman, Ed. Why More Indian Generic Drugs Will Make Their Way to the U.S., The Wall Street Journal, May 14, 2014.

[5] Malik, Aman. Can Obama And Modi Settle The US-India Feud In The Pharmaceuticals Sector?, International Business Times, January 19, 2015.

[6] Thomas, Katie. Generic Versions of Toprol XL, a Heart Drug, Are Recalled, The New York Times, June 23, 2014.

[7] Reuters. Unease Grows Among U.S. Doctors Over Indian Drug Quality, The New York Times, March 18, 2014.

[8] Reuters. Unease Grows Among U.S. Doctors Over Indian Drug Quality, The New York Times, March 18, 2014.