The Hindu : Opinion / Leader Page Articles : Amending the Patents Act

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Tuesday, Dec 21, 2004

Opinion

Opinion - Leader Page Articles

Amending the Patents Act

By R. Gopalakrishnan

For India, the task now is to debate openly how to deal with a possible rise in the prices of newly patented drugs.

THE LATEST amendments to the Patents Act 1970, expected to be introduced in Parliament shortly to comply with India's commitments under the TRIPS (Trade-Related Intellectual Property Rights) Agreement of the World Trade Organisation (WTO), have invoked almost unanimous criticism. This centres especially on the re-introduction of product patents for foods, drugs and chemicals.

A substantial part of the criticism is based on misconceptions. This is particularly true of claims that the Indian drug industry has been able to "bring down the price of medicines" as a result of the Act, which deleted the provision for grant of product patent in the case of foods, drugs and chemicals alone. How was such a capability achieved and is it a sustainable strategy for a crucial sector such as health?

No doubt the 1970 Act, granting only process patent for drugs, enabled even small and medium Indian companies to produce indigenous versions of drugs developed abroad, especially in the United States and Europe, and even export them.

The low price of Indian drugs was because the material cost of the final product was very low, compared to the costs involved in the development of drugs. Development costs include not just the wages of medical and scientific manpower involved in research, but also the infrastructure required for experimentation on animals and humans over a long period before a new drug is ready. This is followed by a lengthy and rigorous process of approval by the regulatory authorities.

It is in the nature of chemical products that their composition can be easily known and they can then be made through alternative processes. Any company that makes a drug developed and patented by somebody else but uses another process avoids the bulk of the development costs and is thus able to produce and sell it at a low cost.

The 1970 Patents Act reflected the experience of the colonial era. The British rulers had used the Indian Patents and Designs Act, 1911, to force products (including drugs) on this country — encouraging import from Britain and discouraging manufacture in India.

To persist with the rationale behind that law now is anomalous. At present, there is enormous scope for investment of capital, both indigenous and foreign, for manufacturing within India. What is more, India's vast scientific manpower can be harnessed to make the industry an innovator of new drugs at low cost. This will help the Indian drug industry take advantage of product patents, instead of making it dependent on the development of drugs abroad for producing copies. The latter option, encouraged by the 1970 Act, is economic tailism, which a nation can embrace only at the risk of undermining its own technological potential.

Among the objections to the restoration of product patents for drugs are allegations that drug multinationals indulge in monopoly practices and that they exaggerate the cost of product development. In this argument, there is a tendency to confuse the monopoly of big companies that inevitably emerge in the course of development of capitalism and the limited monopoly granted by a patent.

The power of monopolistic companies is controlled by governments through anti-trust legislation, price regulation, etc. The limited monopoly that a patent entails is a grant from the state to any innovator — individual or business or institution. The patentee is entitled to compensation from anyone, including a big company or multinational that puts his or her innovation to commercial use. Thus the patent monopoly granted by the intellectual property rights (IPRs) system is not only different from but also in a sense a counterweight to the power of big firms, especially in a developing country. Also, if, as alleged, the cost of research and development is exaggerated as a ground for product patents, there is no reason for drug companies to rely on copying drugs developed by others. They can as well develop new drugs at non-exaggerated costs and capture markets.

However, one valid objection to the reform of the Indian patent law, already effected, is the introduction of exclusive marketing rights (EMRs) in the period of transition (10 years from 1995) to the product patent regime in tune with the TRIPS agreement.

The EMR ran counter to the very objective of the transition period. What is more, it linked the grant of EMRs by a member-country of the WTO to grant of a patent to the applicant in any other member-country, undermining the philosophy of national sovereignty that to this day covers decisions on the grant of patents.

The task now before the nation is to debate openly how to deal with a possible rise in the prices of newly patented drugs. It would be unwise either to skirt parliamentary approval for reintroduction of product patents for drugs by issuing an ordinance or to adopt a delaying tactic by not honouring the country's obligation and leaving the consequences to the WTO dispute settlement mechanism.

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