U.S. and India Clash over IP in the Pharmaceutical Industry

July 4, 2013 Posted by India Briefing Reading Time: 3 minutes

By Nathan Barlow

Jul. 4 – The Indian Supreme Court’s rejection of U.S.-based Novartis AG’s patent request for a new cancer drug has caused uproar in the American pharmaceutical community, with the ruling coming at a time when many other foreign pharmaceutical companies are experiencing patent challenges in India.

In sum, Indian patent laws do not consider new forms or alterations of existing substances to be “innovative” unless it improves efficiency. As such, the Indian Supreme Court ruled that Novartis’ reformulated version of the anti-cancer drug failed to warrant a patent because it was insufficiently innovative.

India has these measures in place to prevent the “evergreening” of patents, which refers to granting monopoly rights to companies that only make minor tweaks to the composition of a medicine. India has fervently stood by its patent regulations despite a strong response from the U.S. pharmaceutical industry and increased pressure from the U.S. government.

Nirupama Rao, the Indian Ambassador to the United States, defended the intellectual property (IP) policy.

“The three main pillars of [the IP] regime are comprehensive laws, detailed rules to back them up and strong enforcement mechanisms,” she said.

She reinforced her statement by citing that 85 percent of the patents granted for pharmaceutical inventions between 2005 and 2011 were owned by foreign companies, with the U.S. accounting for 20-30 percent.

In a letter to U.S. lawmakers, Rao offered an opportunity to discuss the IP policy issues.

“My senior colleagues at the Embassy stand prepared to come and meet with your key officials or your constituents to engage in a friendly and substantive exchange of views so as to promote deeper understanding,” she said.

However, the U.S. pharmaceutical industry has reacted aggressively, and consider the ruling as a government-wide discriminatory assault against foreign pharmaceutical companies operating in India.

“PhRMA remains concerned about the deteriorating intellectual property environment in India,” said Mark Grayson, spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA).

Roy Waldron, Chief Intellectual Property Officer with Pfizer, had a more visceral response.

“It is important that we view these actions for what they are, industrialist policies to benefit the competitiveness of India’s own domestic industry. India’s actions to undermine the incentives needed to make investment to develop new medicines, a hostile environment to IP will have a devastating impact on R&D investment… This is not only creating significant uncertainty in the market but it also undermines our ability to compete fairly in India, and our willingness to invest there,” he stated.

Lee Terry, chair of the House Energy and Commerce Committee, described India’s IP policies as “unfair and discriminatory” and a “threat” to the trade relationship between the U.S. and India.

The continuation of India’s current IP policy could immensely discourage American companies from investing there in the future. However, despite the threats from American pharmaceutical companies, it will not be easy for them to walk away from the Indian market, which in 2011 spent $14.3 billion in the pharmaceuticals industry, and is growing at an estimated 14 percent annually.

Due to its tremendous growth potential, American pharmaceutical companies cannot afford to neglect the Indian market. Rather than continually resisting and fighting the system, which is radically different from that of the U.S., pharmaceutical companies must embrace India’s business environment.

Companies that are willing to localize their operations, and develop local business models, will thrive. Proper corporate strategies will enable foreign firms to succeed not only in the Indian market, but also in similar emerging markets, which are increasingly central to global corporate strategies.

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