The Hindu Business Line : Developing world relies on Indian ARVs: LSE Update

PRIOR to January 2005, India was the last country in the world with an advanced pharmaceutical sector that did not offer product patents on drugs. Indian firms served as principal suppliers of affordable antiretrovirals (ARVs) to developing countries, and their competition encouraged brand name producers to lower the prices of their patented drugs. Thus, India's patent system contributed to the growth of a pharmaceutical sector whose active presence in the global ARV market brought treatment within the reach of many. Of the roughly seven lakh people in the developing world receiving ARV therapy, it is estimated that more than half are treated with Indian ARVs.

An April 2005 Update from the London School of Economics (LSE) reviews the implications for AIDS treatment of the amended Indian Patent Act. Now that product patents are available in India, all new drugs will eventually be patented here. (According to the Update, `even where patents are available and sought, drugs that were already on the market prior to a country changing its patent laws cannot typically be patented.')

This will mean that Indian firms will face legal obstacles to producing generic versions of new drugs for export.

Under certain conditions, governments can issue `compulsory licences' which allow local firms to produce patented goods without the patent-owner's permission. However, according to TRIPS (Trade-Related Aspects of Intellectual Property Rights), goods produced under a compulsory licence must be `predominantly' for domestic use.

In August 2003, says the LSE Update, WTO members agreed on a waiver to this clause that could facilitate export of generic drugs to countries lacking domestic manufacturing capacity. Though a formal amendment to TRIPS is still being negotiated, a number of export-capable countries have since revised their patent laws in response to the waiver. Canada was the first to do so, and the EU is in the process of doing so. India's amended Patent Act too permits compulsory licensing for export.

The trouble is that though the problems that TRIPS poses for the access of poor countries to affordable ARVs have been recognised and addressed in principle, significant practical obstacles remain.

The terms of the waiver permitted by WTO and introduced in subsequent national legislation are complex, and impractical.

Exporting generic drugs to poor countries is, according to the Update, a low-margin activity. To the extent that the amended patent law raises the transaction costs of producing and exporting generic versions of existing drugs, and the future generations of drugs that will come into use as ARV resistance develops, they may cause Indian pharmaceutical firms to abandon this line of business. In the absence of competition, brand name firms would have few incentives to lower their prices.

The developing world relies on India for ARVs, the Update concludes. But, Indian firms do lots of things besides producing generic ARVs for the developing world.

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