Trade tensions between the US and India are on the rise. Multiple trade organisations have asked the US Trade Representative to designate India a Priority Foreign Country in its annual review of countries that “deny adequate and effective protection of intellectual property rights.” This would trigger an investigation under the Trade Act that could ultimately lead to sanctions.

Additionally, the US International Trade Commission has been instructed by Congressional leaders to investigate “Indian industrial policies that discriminate against US imports and investment for the sake of supporting Indian domestic industries”.

Much of the controversy surrounds flexibilities in Indian patent law designed to promote access to generic medicines.

The medicines at issue tend to be expensive cancer treatments priced far out of reach for most of the Indians.

The policy pill

Health advocates argue that the policies — including a strict standard for patentable subject matter and the availability of compulsory patent licenses — are precisely the types of policies protected by flexibilities in the WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).

These flexibilities are emphasised by the Doha Declaration, signed by all WTO members in 2001, which reaffirms all countries’ right to structure their intellectual property rights laws in a way that promotes “access to medicines for all.”

American pharmaceutical companies have opposed the use of these flexibilities when countries have used them in the past. They currently claim that weak intellectual property protection in India is hurting their business interests. However, data on exports by U.S. pharmaceutical firms to India tell a different story. Overall pharmaceutical exports increased from $39 million to $225 million during the period 2000-2012 — an increase of 470 per cent.

Furthermore, US pharmaceutical exports to India are growing at a faster rate than US pharmaceutical exports to the world as a whole.

At a hearing held by the International Trade Commission last week, some of the witnesses discussed positive experiences enjoyed by particular American branded drug companies doing business in India.

Ron Somers from the US-India Business Council testified that “many pharma companies are thriving in India: Abbott, GSK, Gilead, to name just a few” and he noted that Indian courts have also ruled in favour of Western pharmaceutical companies, just as they have ruled against them.

DG Shah from the Indian Pharmaceutical Alliance testified that “there is a long list of granted patents” for new uses of known products that meet India’s rules for patentable subject matter.

The debate over compulsory licensing is the most dramatic example of the disconnect between the industry’s rhetoric and its experience as observed through data. To date, there has not been a single compulsory license granted on an American medicine patent.

There was an application for a compulsory licence for Bristol Myers-Squibb’s drug Sprycel, but it was rejected by the courts. Many patents have been granted: the Indian Patent office reports it granted 3,520 pharmaceutical patents from 2007 to 2012. But to date, there has been one compulsory license issued for a patent held by Bayer, a German pharma company.

Their concerns

Why then, do the American drug companies argue so strongly against India’s intellectual property policies?

The most likely reason is that they are afraid that India will establish a global norm for countries seeking to maximise the flexibilities in TRIPS to promoting access to generic medicines.

A recent report published jointly by the World Trade Organisation, World Health Organisation, and World Intellectual Property Organisation highlighted both strict standards for patentable subject matter and the use of compulsory licensing as measures that countries can take to maximise the provision of medicines.

Emerging markets such as Brazil and South Africa are considering these measures as they debate reform to their patent laws.

US industry representatives have begun to call this a “contagion” of weakening intellectual property. It is this perceived threat of future loosening of intellectual property norms that has companies worried, and has led them to petition the US government to exert pressure India in order to change its drug patent policies.

On the other hand, the inaccessibility of important medicines is an immediate health problem. The one compulsory licence issued on Bayer’s product — Nexavar, a medicine used to treat late stage cancers of the kidney and liver — illustrates this.

Representatives from Bayer and PhRMA have noted that Bayer was making the drug available at a lower “access price” in India.

However, if one converts the full price and access price to US dollars (based on a January 2013 exchange rate) and compares them to the average annual income-by-quintile as reported by the World Bank, the data shows that both prices exceed annual income of even the top 20 per cent of Indian earners.

It drives home the point that the current trade dispute between the US and India is about more than bland-sounding global norms regarding patents. It is about whether or not people in India (and elsewhere) will be able to access important new medicines as they enter the market.

The author is a researcher at the American University Washington College of Law