[Ip-health] Wall Street Journal editorial: Drug Patents in India

[Thiru Balasubramaniam]

http://online.wsj.com/article/SB118703922624596339.html

Drug Patents in India
August 14, 2007

The war on drug patents has now moved to India, where a court last week
denied Novartis a patent for its cancer drug, Gleevec. Indian patients
will be the losers, as will Indian drug makers, whose incentive to
innovate will be stunted by weaker patent laws.

Blame the country's small drug producers for the setback. When India
passed its first major patent law in 2005, a last-minute loophole was
added to block patents for "incremental" innovations. The local
business lobby sold the clause, called Section 3(d), as a protection
against companies serially patenting drugs to block competition.

Now we're seeing the consequences of that protectionism. India's patent
office rejected Novartis's application for Gleevec last year -- even
though the drug already was patented in 35 other countries. Novartis
challenged the constitutionality of the patent law in court, and last
week the Chennai High Court rejected the lawsuit, suggesting instead
that the issue be taken up at the World Trade Organization.

That's a fine idea. Section 3(d) may well be shot down in a WTO appeal
if Switzerland, where Novartis is based, decides to challenge India's
law. (As a company, not a sovereign nation, Novartis can't take India
to the WTO.) India's patent law allows companies to patent only
improvements in a drug's "efficacy." But what about small inventions,
such as improving a drug's stability when exposed to heat or figuring
out better methods of delivery? These are the most common kinds of
innovations.

Delhi would be well served to close the Section 3(d) loophole itself,
though that's unlikely to happen with leftist parties in the Congress
Party's ruling coalition. Stronger patent protections strengthen
India's standing as a safe place for international drug companies to
invest. There's a good reason why major pharmaceutical companies have
set up shop in Singapore and China rather than on the Subcontinent.

Strong patent laws help Indian industry, too. In a country where only a
third of some 20,000 domestic pharmaceutical companies are licensed by
the government, an airtight patent law would incentivize more drug
producers to participate in the formal market. A stronger domestic drug
industry would also likely develop products for India's large and
growing home market.

The know-how is certainly there: Ranbaxy Laboratories, for instance,
figured out a new formula for Bayer's Cipro, a popular antibiotic, that
allows patients to take only one pill, rather than five. That not only
cut down on costs but ensured more patients would take the medicine
correctly, leading to better health outcomes. Ranbaxy sold the patent
to Bayer and gained a new source of revenue to invest in other drug
research.

This is the kind of positive cycle of innovation that India -- and the
rest of the world -- should want to encourage. Researching and
developing new drugs is a hugely expensive proposition. Drug companies
won't invest if they're unsure they will be rewarded for their efforts.
The same incentive applies to Indian companies as well as big producers
like Novartis.

Nongovernmental organizations such as Oxfam don't see it that way. They
claim that the court's decision protects India's role as a "pharmacy to
the world" by virtue of its generic drug industry. Setting aside the
insulting insinuation that India's drug makers cannot or should not
innovate, this implies a grave misunderstanding of how markets work.
Generic companies operate under the same profit motive that motivates
pharmaceutical giants. The largest export market for India's biggest
generic drug maker, Dr. Reddy's, is the U.S. Many other Indian drug
companies would like to follow suit.

What the NGOs are really advocating is a system where governments
decide which companies should exist, what they should research, and to
whom they should give the drugs. Such a system would be disastrous for
the world's poor. The profit motive incentivizes drug companies to use
their sales in the developed world to subsidize volume sales, at
cheaper prices, in the developing world. Novartis already does this; it
provides Gleevec free of charge to 99% of its patients in India.

Drug patents are already under threat in Thailand and Brazil -- where
both governments have seized foreign drug company patents -- and now,
India has undermined its patent law. This is happening despite the
WTO's ostensible protections of intellectual property for drug makers
and despite the dangers to the health of the world's poor.

URL for this article:
http://online.wsj.com/article/SB118703922624596339.html

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org