The Hindu Business Line : New patent regime a bad medicine?

THE Indian pharma sector to a very large extent succeeded in the past because of the "reverse engineering" manufacturing culture which resulted in the production of several "generic" drugs, which are cheap variants of the original. The challenge now before the Indian pharma sector, in the product patent regime, is to become "discovery based". It can take up to 15 years for a pharmaceutical company to develop a new drug. Besides the time factor, huge investments are involved and this may constrain most Indian companies.

Indian companies has so far succeeded on the development of generics, but that route seems sealed now because the MNCs are turning to production of generics via the "evergreening" technique or manufacture of variations of the same drug with different chemicals and thus extending the period of the patent beyond the 20-year limit set by the TRIPS (Trade-Related Intellectual Property Rights) regime. This would delay the entry of Indian pharma companies into the market with their generics.

The issue is of concern because often the profits from the generics are used for drug discovery that is yet to make money. This could even push Indian pharma firms out of the market altogether as the MNCs would hold product patent advantage.

The other patent worry is on the price front. The Government is thinking of a pharmaceutical price index system. Currently, the National Pharmaceutical Pricing Authority (NPPA) keeps a check on prices of 74 bulk drugs and revises them periodically.

It is important to remember that, as of now, generic drug companies have been offering trade margins of 500-2000 per cent leading to an increase in drug prices. Governments of Australia, Canada and the US, where the patent regime is already in place, have a pharma price index system in place.

In Australia, for instance, there is a therapeutic group pricing mechanism wherein the lowest price of a brand or drug sets the benchmark price within the same group. Similarly, the US and Canada use market baskets to calculate the price index and these have been changed to include generic drugs as and when patented drugs come off patent. In a country like India, where there are many seepages, such measures of price control would be impossible to enforce. This is a difficult question, loaded with uncertainties. The task of opening the "mail box" for product patent applications and scrutinising their validity will be complete only March end. And the post-grant opposition scenario is still hazy.

One issue of worry is: Successive governments have been dragging their feet on the TRIPS issue with no clear goal. Unfortunately, there has been no serious public debate on the issue, except sporadic news stories that gave only a hazy idea of what the TRIPS issue means to the economic welfare of the nation.

It is important to point out that the fallout of the TRIPS agreement is only beginning to show. First is the pharma sector and soon agriculture will follow. Monsanto is already into the Bt cotton "second generation" and no Indian public funded or private funded institution can come up with a Bt version as it will be a violation of the original. In other words, the Indian cotton sector will slowly, but surely, come under the hold of the US agri-business giant.

With Mr Robert Zoellick, recently the conscientious US WTO negotiator, now holding the key position of Assistant Secretary of State, the political clout of the US will only expand and not contract in all these areas. Pharma and the IT industry have emerged the brightest rays of the sunrise sector and the patents ordinance must be used as an enabler for India to grow and consolidate. Right now the pharma sector's future is rather clouded.

What New Delhi must do is attract as many MNCs as possible to outsource their research and development activities to Indian firms and replicate a success a la the IT industry. The Indian pharma sector failed to make a real dent in the "discovery route" and got bogged down in the "generic culture". With the expertise that it has gained in this area, the country must now forge into the discovery route.

One of the most significant features of public funded Indian research is the all-pervasive dictum "No accolades for achievement neither boot for the sloppy". The Microsoft Chief, Mr Bill Gates, once famously said: "Our primary assets, which are our software-development skills, do not show up on the balance sheet at all". Obviously he was referring to the intangible assets of his software empire — the human skill, which, does not show up in rounded figures but surely runs into billions of dollars that keeps Microsoft at the top.

Extending the same logic, can it be said that if India were to draw up a balance-sheet of the pharma sector, juxtaposing public R&D investments and the pay offs, a statement similar to what Mr Gates said would be the result? Simply put, India's intangible assets in the pharma sector spreads very thin. This leads to the inevitable question: How to buy better people so that the intangible assets in the R&D sector, primarily public funded, increases to a level that can be globally competitive?

Clearly there is an urgent need to take a serious re-look at the entire pharma sector, involving all the ministries concerned. It may also be a good idea to have a semi-statutory body, a sort of an Empowered Committee to handle all matters connected with the life and death question of drug prices under the new TRIPS regime.

It is still not too late to initiate steps in this direction, failing which, ad hoc policies such as the Exclusive Marketing Rights/product patent grants could cause irreparable damage in so vital a sector as national health.

A fundamental question India must face squarely is how to harmonise its national developmental strategies and global processes and disciplines and bring about a synergy among and within the different sectors.

The absence of an informed public debate on the question is, indeed, disturbing. Any haste by the government, as for example the promulgation of the ordinance, could cost the nation very dearly.

The fact that an ordinance has been passed by the UPA Government amending the Patents Bill to comply with the TRIPS mandate does not necessarily mean that it has to become law.

That only Parliament will be able to decide. In case the Bill falls through, the next course open to New Delhi is to persuade the President to sign a decree bringing about far-reaching changes in patent law without Parliamentary debate. This will amount to an "Emergency Law".

(The author, a former National Science Foundation Professor, Royal Society, Belgium, can be contacted at nair_kpp @yahoo.com)

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