Differences over intellectual property rights (IPRs) have emerged as a strong undercurrent in India’s economic relations with the U.S. The attempt by the influential pharmaceutical lobby to stymie India’s efforts to ensure the supply of medicines at affordable rates without violating existing treaty commitments, requires a principled response from New Delhi. At the core of the issue is what Columbia University Professor Arvind Panagariya calls “the hijacking of the economic policy dialogue between the U.S. and India by pharmaceutical lobbies in the U.S.” Piqued by India’s decision to use the flexibilities that are available in the existing TRIPS (Trade Related Aspects of Intellectual Property Rights) Agreement, big pharma in the U.S., along with other influential business groups, is using its considerable clout to pressure the U.S. Trade Representative into designating India as a “priority foreign country” in its 2014 Special 301 Report, due on April 30. That label is reserved for the worst offenders of IPRs, and as a follow-up the U.S. could impose trade sanctions such as withdrawing tariff preferences for Indian exports. In an election year, India will most likely retaliate through anti-dumping duties or tariff hikes on U.S. imports.
The genesis of this issue goes back to 1994 when at the Uruguay Round of trade talks India, while not being wholly successful in resisting U.S. attempts to have a 20-year product patent on medicines and chemicals, managed to incorporate certain flexibilities in the TRIPS agreement. However, since 2005 when India incorporated patent protection into domestic laws, it has used the flexibilities only twice. In March 2012, it issued a compulsory licence to an Indian firm for a cancer drug, whose patent-holder, the German multinational Bayer, had priced it well beyond the reach of a majority of Indian patients. Under another provision, countries have the option to deny a patent to a drug that involved only incremental innovation over an existing drug. In April 2013 the Supreme Court upheld the 2006 decision of the Indian patent office denying the Swiss multinational Novartis patent on a drug that involved only incremental innovation. Clearly, not just these two instances but the prospect of other countries emulating India has rattled big pharma. India, which has not violated the treaty obligations, can challenge any prospective action by the U.S. by taking it before the WTO, whose dispute settlement mechanism has a good record of impartiality. Developing countries as also a few developed ones expect India to act effectively to safeguard its domestic commitment to public health.