A bitter pill

The recent US decision to continue keeping India on the Special 301 watch list by raising the bogey of extensive public healthcare safety risks and inadequate copyright legislation, appears to be with the aim of arm-twisting India to toe the US line in the forthcoming World Trade Organisation round at Cancun.

But it is equally important for India to ponder on other reasons that are making the American administration take such a tough stand for the third year in a row.

The US pharma lobby, which has been enjoying an extended honeymoon till recently, is beginning to come under sustained pressure from three quarters.

To start with, many NGOs are challenging multinationals' huge research and development figures, accusing them of profiteering, bribing and unethical marketing. The multi-billion dollar marketing budgets of multinationals is  forcing Americans to pay for these life-saving drugs through their noses.

A similar campaign by NGOs had made the US tobacco industry shell out over $20 billion in settlement payments.

Secondly, Canada is fast emerging as an alternate source of cheaper drugs. While the Internet has made procurement from across the border even simpler, strong bilateral ties between the two countries make it difficult for the US to take any stringent action against its strategic partner.

Not only is this beginning to cause the balance sheets of the multinationals to tilt southwards, it is also making retailers see red owing to diminishing returns.

Third, the US pharmaceutical manufacturers have realised the real potential of the Indian and Brazilian generic industry. Over 80 per cent of drugs are likely to go off patent by 2005, which in turn will throw the field open for the generic giants to flood the US market with competitively priced high quality drugs.

Having become used to huge profit margins, these multinationals are beginning to lose their sleep over this scenario and are therefore lobbying hard with Washington, DC.

Americans consume more drugs than most Europeans put together and spend over $150 billion in doing so. The US pharma industry also carries home about $25 billion in royalties from the developing countries.

However, sustained pressures from NGOs, cheaper drugs from Canada together with the post-2005 scenario is not likely to guarantee such returns to the US multinationals. India, on the other hand, is sitting pretty doing what it can, having brought into force necessary laws and copyright acts deemed necessary for becoming WTO-compliant.

The Trade Related Intellectual Property Rights agreement in its present form is a one-sided document loaded in favour of multinationals and protects only their commercial interests and investments and not public interests.

Professor John Barton, head of Commission of Intellectual Property Rights and Stanford law faculty has stated that "it is almost impossible to conceive of any social institution (the patent system) so faulty in so many ways. It survives because there seems nothing better to do".

The Doha Declaration, through its compulsory licensing route, tried to provide a small window of opportunity for developing nations. By vetoing, the US has practically alienated itself from the collective stand taken by the rest of the WTO members.

While the US hopes to bulldoze its way, it may yet be a difficult task, especially since the European Union is not in a mood to oblige. The simmering discontent in sub-Saharan Africa over the highly priced branded life saving drugs too is beginning to boil.

By keeping the lid tight, the US administration is, at best, taking a short-sighted approach. It will not be long before the pharma multinationals will face issues like the ones that drastically brought down the anti-AIDS drug prices. It would, therefore, be in mutual interest to look for a viable solution that could bring an end to this impasse.

Differential pricing is one such viable route. A mechanism could be created whereby low prices in developing nations could coexist with higher prices in developed nations.  This system has been time-tested in India in the areas of agriculture, telecom and power. It is also prevalent in many countries in housing and other sectors.

The multinational concern for the counterfeit, parallel and black markets can be resolved by adopting special packaging system and stricter laws.

While it may be difficult in the beginning for developing countries to create foolproof systems,  it is easier for developed countries to evolve stronger screening procedures that could resolve the issue and keep their markets protected from reverse exports.

Multinationals earn over 80 per cent of their revenue from the US and Europe since high costs of their drugs essentially need insurance backing. Their apprehensions against India are founded on "ifs and buts" and can be addressed across the table.

One way that could be productive in the long run would be to assist developing countries that are economically poor but intellectually rich in bringing up their R&D centres.

By encouraging them to utilise existing public institutions that have a successful track record would not only bolster the developing nations towards self sufficiency, it would also allay fears, mistrust and ill-will.

To make this approach feasible, it is mandatory to share global knowledge, establish partnership between public and private and open access to scientific database.

Ironically, as of now, even public-funding research is not available to all.  Over 90 per cent of research goes into inventing drugs related to developed markets.

Developing countries consequently are left to struggle researching for vaccines and cures for malaria, TB and other tropical diseases that till date account for more deaths than all other diseases put together. Since the developed world is bereft of these issues, it is not keen to spare funds for projects that are not economically viable.

This holier-than-thou approach by the US pharma lobby is making a mockery of the whole situation. it hints that American lives and interests are more important than anything else. The US administration would do well to appreciate the fact that such an approach may not go well even with a common US citizen who would not want to be seen in such a light.

Besides, it is an established fact that the US pharma majors have no interest in the low-end generic market. While taking a rigid stand it has much to lose; a tactical retreat could go a long way in building many bridges.

At the same time, India too needs to go all out to allay fears of US Trade Representatives by taking stringent measures against counterfeit and spurious dealers as well as providing data exclusivity, which would greatly benefit Indian research.

The recently appointed Mashelkar Committee would bring about the necessary recommendations which if implemented shall not only bring relief to the Indian public, it will also go a long way in providing necessary confidence building measures in the developed countries.

In the meantime, one hopes that the US administration appreciates the developing countries' concerns and not jump into conclusions that could hurt the masses.

The author is senior president, corporate affairs, Nicholas Piramal India Ltd