Intellectual Property Protection

India has a pervasively discriminatory patent regime that makes competition on the basis of innovation virtually impossible. It has used this regime over the past 30 years to establish the world's largest and most aggressive bulk and formulation-oriented pharmaceutical industry, with over 24,000 current participants. The success of the non-research based Indian pharmaceutical industry is directly tied to the absence of effective patent protection for pharmaceutical innovation in India. The Indian patent system was the most direct motivation for U.S. efforts in the Uruguay Round negotiations relating to patents, and the negotiators of the TRIPS Agreement fully expected that India's implementation of its TRIPS obligations would produce the most dramatic level of reform.

As a result of ongoing dialogue with government and industry representatives, the Indian Government is fully aware of its obligations under the TRIPS Agreement. Yet the Indian Government's understanding of its obligations has not motivated it either to meet its current obligations or to take realistic measures to meet its obligations that will take effect on January 1, 2000. India is presently experiencing a surge in patent application filings that will increase dramatically during the latter half of 1999. The Indian Patents Office, based on its size, degree of modernization and past practices, is and will be unable to cope with these filings. Recent statistics indicate a backlog of nearly 30,000 unprocessed applications, which, measured against the average output of the collective Indian Patent Office system, will not be examined or granted well into the latter part of the next decade.

The current Indian patent regime, which includes amendments passed by Government Ordinance in January 1999, is thoroughly inconsistent with the TRIPS Agreement. Generally speaking, the Indian patent system curtails or eliminates rights for foreign-originated technology or importers of patented products in a wide variety of ways including through disqualification to obtain patents, special compulsory licensing conditions for foreign-manufactured patent- protected technology, exclusion of certain technology areas that are not presently exploited in India and in numerous other ways. The Indian patent system also denies eligibility to a wide range of technologies that are within the core of the U.S. industrial base, including not only pharmaceutical and agricultural chemicals, but also other types of chemical products, glass products, semiconductors, and other technologies. The Indian compulsory licensing system, with its infamous practice of "licenses of right" and unbridled Government use authority, targets and penalizes U.S. intellectual property rights owners, particularly those that do not manufacture the invention within India.

The Indian Government is not likely to approve even the most modest changes to the Indian patent system before the year 2000. For over four years, the India Parliament has refused to pass legislation to implement the most basic of the TRIPS obligations, namely, the mailbox and exclusive marketing rights system for certain products. Twice the Indian Government has been forced to promulgate an Ordinance in an attempt to implement India's obligations. These efforts have not yielded the necessary changes, which require action by the Indian Parliament. Without question, the Indian patent regime will continue to be seriously deficient under the TRIPS Agreement until well after the year 2000.

India has also failed to meet its current obligations under the TRIPS Agreement. Because India elected to not make product patents available for pharmaceutical and agricultural chemical inventions, it became subject to Articles 70.8 and 70.9 of the TRIPS Agreement on January 1, 1995. India has passed two Ordinances in an attempt to meet its obligations, but these provisions fall short of India's obligations under Article 70.9. The current ordinance (i.e., the Patents Ordinance (1999)) does not provide exclusive marketing rights as mandated by the TRIPS Agreement. In particular, it permits third parties to obtain "compulsory licenses" of the exclusive marketing right, and permits the Government to essentially ignore those rights if it deems doing so expedient. Other provisions make the concept of exclusivity in marketing a proprietary pharmaceutical an illusion in India.

The damage caused by the inadequate protection of intellectual property rights in India reaches beyond direct losses caused by displaced sales in India. Indian bulk pharmaceutical companies aggressively export their products to third countries where intellectual property laws are similarly lax. The damage caused to U.S. pharmaceutical manufacturers due to the deficiencies of the Indian patent regime thus goes beyond displaced sales in the Indian market, and reaches to the ability of U.S. companies to compete in other significant markets, especially in the Asia-Pacific and Middle East regions. PhRMA estimates the losses attributable to the deficiencies in the Indian intellectual property system to be approximately $500 million per year.

For all the aforementioned reasons, PhRMA believes that India should be listed as a Priority Foreign Country under Special 301 in 1999.