It would have been wonderful if at this stage of the golden jubilee of India’s independence, an example could have been cited of how through basic research conducted . . . on a widespread tropical disease endemic to India, . . . a novel concept for treatment of the disease was taken up by the Indian pharmaceutical industry, and a novel product was discovered, adequately secured through product, process, and use patents, . . . resulting in a cure for patients having the disease.  It would have been a shining example . . . of industry’s willingness to venture into areas unlikely to be highly remunerative, as long as there is government support of the endeavor to provide benefits to the nation’s people. [1]

As the above quote from a prominent Indian researcher indicates, protecting innovation is far from a zero-sum North/South game.   Technological advances flow between states that protect the intellectual capital of their citizens, and so all countries that respect the right of the individual to profit from creativity and innovation can benefit from the full breadth of their human capital.   Intellectual property protection is an increasingly important development tool for countries at every stage of development, and nations that fail to protect intellectual property will be left behind.  The U.S. Government has documented protection of intellectual property as a launching pad for domestic and foreign investment, technology transfer, economic growth, and high-paying jobs in every region and area of technology. [2]   Unfortunately India cannot be counted among the large number of developing countries that have recognized the economic and social benefits of IP protection for pharmaceutical products. [3]  

India provides a pungent example of the high opportunity costs associated with the conscious decision not to provide adequate and effective protection for pharmaceutical products and the confidential, commercially valuable data that is produced in the course of product development and marketing.  As has often been stated, India had no domestic constituency to oppose copyright protection, and so has developed a thriving information technology and software sector employing in excess of 250,000 in India, and tens of thousands overseas.  In the patent area, however, entrenched domestic interest groups lobbied hard in 1970 against patent protection for pharmaceuticals.  As the New York Times noted recently, “In fact, India recognizes Western-style intellectual property rights on most products, including computer software, in which it has a thriving industry.  But it does not recognize them on chemicals for medicine or agriculture, a position that dates back to its Patents Act of 1970, for which Mr. Hamied (managing director of CIPLA, one of India’s leading pharma producers) heavily lobbied Prime Minister Indira Gandhi.” [4]  

Protecting only the process of manufacture for pharmaceutical products, rather than the chemical entities themselves, India has created perverse incentives for local Indian manufacturers to reinvent the wheel.  Indian pharmaceutical companies have perfected the art of copying existing products developed by foreign firms and developing different processes to for making these compounds.  Some 20,000 manufacturers operate in India, producing multiple copies of the same products (e.g. 202 copies of Ciprofloxacin, 117 copies of Norfloxacin). [5]   This produces little or no social benefit to Indian consumers.  As the Indian Government and Industry alike recognize, “Spurious, substandard and irrational products have become plentiful.”(emphasis in original) [6] .  As with most protectionist trade policies, this policy has been very beneficial for a few larger Indian drug producers, but has shown no benefit for the vast majority of the Indian population, discussed below.

Absence of Basic Research Equals Massive Brain Drain

India is the fourth leading supplier of bulk pharmaceutical products and active ingredients, [7] but expends precious little of its profits on basic research and/or original product development.  As noted by the Organization of Pharmaceutical Producers of India (OPPI), “The R&D investment in India’s Pharmaceutical Industry is just 0.001% of world’s pharmaceutical R&D.” [8]   Further, limited R&D resources are diverted to a search for yet another equally or less efficient means of producing an already available product. [9]   Lack of patent protection has eliminated any incentive for India’s best scientific minds to develop cures for tropical diseases endemic to India, or even to remain in India to work in the domestic industry.  “[T]he high-caliber scientific and technological brains that have drained into the laboratories of companies in the United States, Europe, and elsewhere” [10] constitute a loss of incalculable proportions to India. [11]   The Organization of Pharmaceutical Producers in India estimates that more than 15% of the scientists engaged in Pharmaceutical R&D in the U.S. are of Indian origin.  One of these, Dr. Ananda Chakrabarty, born and educated in Calcutta, emigrated from India to the United States to make his mark in the area of biotech, becoming the first inventor to receive a patent for a novel bioengineered microorganism, [12] and continues to work on groundbreaking research towards a cure for cystic fibrosis. [13]   

Until India begins to provide patent protection for pharmaceutical products, and data exclusivity for the commercially valuable and confidential data developed in the research and development process, India will continue to lose many of its most talented minds.  These talented Indian scientists are desperately needed in India to conquer endemic diseases.  As one segment of the Indian pharmaceutical industry recognizes:  “India has now entered the millennium of knowledge.  The Information Technology (IT) Industry has already carved out a place of its own on the global map.  Patenting actually aids the spread of knowledge.  When a “copying culture” prevails there is no incentive to innovate.  The lack of IPR is a double-edged sword.  Our own scientists require protection for the knowledge they create.” (emphasis in original) [14]

Domestic Market, Disease Neglected by Profitable Indian Industry

Given the foregoing, it is not surprising that the Indian pharmaceutical industry has not focused efforts on development of novel treatments for the diseases that most challenge India.  Although the Indian Government and some in the pharmaceutical industry present the Indian industry in the noble role of Robin Hood, stealing patented products from the rich (Western pharmaceutical companies) for the benefit of the poor in India, [15] this does not reflect reality.  Instead, numerous sources confirm that “modern medicine reaches barely 30% of the country’s population.  This means there is no coverage for 600 million people, a number more than the population of United States and all of Europe put together.” [16]   Despite the sophistication and success of the Indian pharmaceutical sector, “[d]iseases like tuberculosis, malaria, leprosy, plague, dengue fever, schistosomiasis, rheumatic fever,  and rheumatic heart continue to pose serious problems and take millions of lives each year.  The concentration of efforts is on developing the world market rather than on meeting the needs of the Indian population.  As returns in the export market are much more than in the domestic area, there has been negligible additional investment in production facilities for the domestic sector in the last 15 years.” [17] (emphasis added)  As if to underscore the benefits of a workable patent system, India’s Council of Scientific and Industrial Research of India filed applications for nearly 200 patents abroad during 1999-2000. [18]   

Ironically, while the Western media touts India’s role as savior to the developing world and potential source of low-cost infringing copies of the West’s own inventions, Indian industry does not even attempt to serve the vast majority of the Indian population, at any price.  Instead, local Indian manufacturers focus efforts on lucrative foreign markets, where they can profit while undercutting the price of the innovators who bear the R&D costs and risks.  The reality is that the Indian industry thrives by leveraging its free-rider advantages in “pariah” markets that don’t respect intellectual property rights, [19] not by providing pharmaceutical products to India’s poor.

Price Remains a Red Herring

India has justified lack of patent protection on the basis that it lowers drug prices.  Indeed, Indian pharmaceutical prices are lower than drugs in neighboring Pakistan and significantly lower than in other world markets.  The introduction of TRIPS-consistent patent protection will in no way require an increase in the price of drugs that are already on the market.  Particularly in the area of essential medicines, as defined by the World Health Organization (WHO) the Organization of Pharmaceutical Producers of India testified to the Indian Parliament’s Joint Committee on Patents in May 2000 that:  “Every single drug in the WHO Essential List is available in India today in Generic Form, and will continue to be available in 2005 in Generic Form.” [20]   As an Indian experts’ review concludes:  “even under the new patent regime (compatible with the TRIPS Agreement), the availability and prices of generic drugs will largely be unaffected.” [21]   Product patent protection will apply to new drugs introduced to the market after the law is enacted; a small percentage of the total market.  Prices for the next generation of drugs are likely to be restrained by lively competition in the large Indian domestic market. [22]

Conclusion

In 1970, India turned its back on Western models for development, and despite the development of a small number of world-class pharmaceutical exporters (out of a total of 20,000 entrants), it has paid a high price.  Unlike Korea and Italy, countries that chose to adopt patent protection for pharmaceutical products in the 1970’s, India has no viable research industry.  India has been unable to meet the public health requirements of its own population, even in such rudimentary areas as provision of potable water, [23] off-patent generic antibiotics, anti-malarial treatments, and or tuberculosis therapies. [24]   Where generic imitations are available, there is little technology transfer to the Indian medical complex.  Pharmaceutical investment is as much about the transfer of medical knowledge as it is about product specific facts.

Further, the absence of protection for pharmaceuticals and other chemical products  has led directly to an exodus of American and other international research-based pharmaceutical firms, [25]    the greatest single example of dis-investment of the 20^th century.  In contrast, virtually all of the largest sixteen research-based pharmaceutical companies in the world maintain a presence in China, which provides product patent protection, despite a difficult political and business environment that includes a significant language barrier.  Western pharmaceutical firms have been followed by the best and brightest scientific minds trained by Indian universities but applying their genius in Western laboratories.