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Issues in Patents (Second Amendment) Bill

The passing of The Patents (Second Amendment) Bill 1999 by Parliament last month has ushered in the new Intellectual Property Rights (IPR) regime. While it was expected to act as an incentive to induce and develop a strong innovative culture in the country, the bill has drawn criticism from a number of quarters who claim that it does not do enough and failed to address the issue of product patents particularly in the pharma industry.

India's generic drugs industry includes 8,000 companies with 22,000 manufacturing plants. Only 113 factories meet global standards. Ranjit Shahani, CEO, Healthcare, Novartis India, and President, Organisation of Pharmaceutical Producers of India (OPPI), spoke to Ramnath Subbu about the new bill and other issues facing the Indian pharmaceutical industry.

The size of the Indian pharmaceutical industry is $3.8 billion making it the 12th largest in the world. The challenge is really huge because India has 20 per cent of the worldwide mortality and morbidity and one per cent of the worldwide healthcare investment.

Today, 70 per cent of the population has no access to managed healthcare or medicines. So it is not about prices only but access and availability. Pharmaceuticals form only 12-15 per cent of the cost of healthcare, the rest being prescription fee, hospitalisation and the like but yet the focus is only on drug prices.

New law

In 1970 we had process patents and the object is to go to product patents. The second amendment bill was awaited for two and a half years and its being passed through is a first positive step, but it is inconsistent with the minimum standards laid down by TRIPS (Trade Related Intellectual Property Rights).

Patents benefit everybody. There are leading global and domestic pharma companies doing research and benefiting from it, but the size, shape and investment in research and development is large and unless the patent holder is benefited from his research, research cannot continue.

Over a five year period, companies like Novartis or Glaxo, spend between $2.5-5 billion on R&D and that is the size of the Indian pharma industry. On the other hand, Dr. Reddy's or Ranbaxy have already leveraged research with tie-ups. So the benefits of research flow to all — national and global companies — and the patient is the largest beneficiary.

Doha Declaration

The bill has extended the definition of compulsory licensing beyond `national emergency', which is inconsistent with the minimum international standards, and broadened the scope of CL to include circumstances of extreme emergency, commercial use, public opinion. If these are not used judiciously, there would be problems.

The intention and bona fide of the bill has to say that we are going to accept product patents, which finds no mention. The bill is the single largest element — the feel-good factor so to speak. The world was watching and we are signatories to the World Trade Organisation (WTO) and should have conformed to the framework. The bill has left too many loopholes, for example, importation and working of patents, and sunset clause. Come January 2005 and product patents will be in place, it could have been mentioned.

Italy crossed over to product patents overnight and prices went up by 6 per cent. It moved from zero protection for patents to total protection in the 1990s and today, it has a flourishing domestic industry.

Around 15 per cent of scientists in global companies are of Indian origin and if the climate is conducive, a lot of them would come back. Companies hesitatingly set up facilities here — Hindustan Ciba-Geigy set up an R&D centre in 1964 but shut it down in 1980. Many companies have invested huge amounts in plants and R&D in Asia Pacific. The largest companies are not in India — Merck, Bristol-Myers Squibb and Roche. They choose China although there are similar problems — low per capita consumption, no health insurance but once they sign up on patents, these countries deliver. Drug prices

In 1970, we had product patents here. Drugs were available and prices did not go through the roof. Many more drugs have come in now and there are many more manufacturers. In those days, MNCs had a major market share and prices were reasonable otherwise how could they have survived? Today, there is enough competition to ensure reasonable price.

Even in the essential list, all the products are not patentable. Over 98 per cent will not be patented so a couple of per cent will not change the whole climate. There is no health insurance — if it was there — people could be covered. It is a discontinuity. If you take Korea, for example, when health insurance came up, immediately, healthcare was available to a wider population, patents were in place, more and better drugs are available to the population.

Obstacles in R&D investment

The total amount invested by Indian companies in R&D is about Rs. 300 crores. Global companies spend about 19-20 per cent of sales on R&D. There is clearly a lot to be done.

An area where policy change could do is price control. Earlier price control was really draconian but was thankfully brought down to 72 drugs and the new policy could halve that. If you allow pharma companies to depend on supply and demand, then they can manage their revenues correctly. But if 40-50 per cent of products are under price control, it does not leave money left to invest in research. Giving some tax benefits to invest in research are only marginal elements and do not help.

Future of pharma cos.

There are many among top ten companies which have been in India for so many years and there is so much scope. All companies have manufacturing set ups here and are thinking of using India as a sourcing base — it is not a trading outpost. The bill was a sterling opportunity but hopefully when the third amendment takes place in 2005, all the changes will be in place.

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