The patent puzzle

US President Barack Obama, during his visit to India this week, intends to highlight the strategically essential US-India relationship and shore up support for a wide variety of shared policy interests. Perhaps less visible, but at the top of Mr Obama’s agenda is to push Prime Minister Narendra Modi into changing India’s intellectual property rules — to allow longer and broader monopoly patent rights over medicines. What is truly remarkable about this demand is how far it departs from what Mr Obama is trying to achieve at home. Atop his domestic policy agenda is expanding healthcare access, limiting the political power of corporations, lifting the economic well being of middle-class and poor families, and ending the AIDS crisis. Yet, in India, his delegation’s aims would undermine each of these goals — for both Indians and Americans.

India is often called the “pharmacy of the world” for its production of high-quality, low-cost generic medicines that enable millions of people to afford life-saving, health-promoting drugs. Indian pharmaceutical companies produce 90 per cent of the generic HIV/AIDS drugs used around the world as well as much of the medicines used to tackle heart disease, cancer, Hepatitis C, and other life-threatening illness around the world.

This has been made possible, of course, by smartly balanced laws that fully comply with India’s WTO obligations on intellectual property while incorporating protections that support public health. These laws have ensured a strict review of patent applications to avoid spuriously granting monopolies on drugs that are not actually new or innovative or whole new patents on minor changes to existing drugs. India has also focused on its WTO obligations rather than implementing excessive IP rules that undermine health, such as “data exclusivity” which, in the US, makes clinical trial data private to create a whole additional monopoly separate from patents that prevents approval for generic drugs for periods of time.

Needless to say, the major multinational pharmaceutical companies oppose India’s finely balanced intellectual property system and are trying to topple it. What is less understandable is why the Obama administration would be backing their drive.

President Obama has made expanding healthcare access a centrepiece of his presidency. Often referred to as “Obamacare”, the Affordable Care Act is attempting to address major failings in the health system in the US, where national health outcomes lag far behind similarly wealthy countries. The new law also makes coverage for essential medicines one of the 10 health benefits that all insurance companies must now grant to all people. Before the law many insurance plans didn’t cover medicines — and in a recent year 28 per cent of Americans with chronic illness like hypertension, diabetes, heart disease and asthma reported they did not take their drugs for these diseases because they couldn’t afford to pay for the drugs. These policies are not just about improving health, but also about improving the economic situation of poor and middle-class Americans by preventing them from literally going bankrupt trying to pay healthcare costs.

Obamacare will only succeed, however, if there is success in getting healthcare spending under control. For decades the medical sector has taken a larger and larger share of US spending — inexorably growing and undermining families and companies attempts at prosperity. Today it seems US government policy is beginning to work — spending on healthcare in the US grew in 2013 at the lowest rate since the government began tracking it over 40 years ago.

One of the major reasons for this decline is the increased use of affordable generic drugs. About 40 per cent of generic drugs imported to the US come from Indian producers — a portion that is growing.

Not only does US healthcare policy depend on the Indian drug industry, but, of course, so too does India’s. Mr Modi has promised to expand health coverage for Indians. Both Mr Obama and Mr Modi will find their aspirations made impossible if India accedes to the demands of US and European-based pharmaceutical companies. The Obama administration is carrying the water of these companies in pushing Mr Modi to do away with “Section 3(d)” of India’s patent law, which protects against improvidently granted patents. Dropping Section 3(d) and adopting data exclusivity would reward some of the world’s most profitable companies, not for innovation, but simply for having effective lawyers and lobbyists. The new secretive “highlevel US-India Intellectual Property Working Group” has been formed to push these measures.

Last week President Obama made his State of the Union address. His pledges are bold: he promised to improve the lot of middle class. Yet, middle-class Americans, will be significantly weighed down by the cost in tax dollars, insurance premiums, and outof-pocket expenditures for brand-name drugs if Indian generic drugs cease to exist. Indeed, the US should learn from India rather than trying to overturn its patent regime.

Mr Obama also promised to fight the political power of major corporations, yet in India he plans to push the interest of an incredibly narrow, but deep pocketed sector of the American economy. Over and above exerting pressure on India’s patent regime, the US delegation intends to also promote a bilateral investment treaty or BIT with India. The current US model BIT includes provisions that would allow disgruntled intellectual property owning companies to challenge government policies or decisions that may impact their future or expected profits in binding international arbitration instead of domestic courts. These arbitration panels are authorised under the BIT to order governments to pay millions of dollars in compensation if they find for the company. American pharmaceutical MNC Eli Lilly, is using such rules to sue the Canadian government in private arbitration for $500 million for the revocation of its patents by Canadian courts. Similarly, US Tobacco giant Phillip Morris is suing Uruguay for instituting tobacco warnings on cigarette packages claiming this affects, among other things, their trademark rights. These are dangerous provisions, designed to further, not limit, corporate power.

Mr Obama has repeatedly pledged his support for ending the AIDS crisis both at home and globally — a task toward which US taxpayers invest over $6 billion in foreign aid plus countless billions at home. Yet the President’s ability to make this pledge depends almost entirely on Indian generic medicines — which account for the vast majority of AIDS drugs purchased by the US’ President’s Emergency Plan for AIDS Relief (PEPFAR).”

One hopes that Mr Modi, who has been pushing domestic and foreign companies to “Make in India”, is savvy enough to see the conflict in his promise to the Indian people and the American agenda clearly, and to understand that giving in to multinational pharmaceutical companies is neither in the interest of Indians nor Americans.

Americans will be weighed down by

the cost of branded drugs if Indian generic drugs cease to

exist. The US should learn from

India instead of trying to overturn its patent regime

The writer is a senior policy analyst at the Health Global Access Project and a Fellow at the Leonard Davis Institute of Health Economics, University of

Pennsylvania