WTO: Watch This Ordinance

What we are losing sight of is the fact that there is much more to the World Trade Organisation than just rising drug prices

Raghunath Rau Delhi

Of all the sources one could have thought of, it was left to The New York Times (NYT) to take up the cause of Indian consumers of pharmaceutical products, who number among the largest in the world, following the promulgation of the Patents Law Amendment Ordinance after Parliament adjourned last month, leaving no possibility of a reasoned debate on the question. The paper, in effect, accused India of selling out to multinational corporations and big Indian firms.

The government's sleight-of-hand was hardly surprising. Dependent as it is on support from a vociferous Left brigade, Prime Minister Manmohan Singh's Cabinet clearly did not have the stomach for a Parliamentary fight on such a sensitive issue just before the scheduled elections to three state Assemblies. At the same time, the government was bound by a deadline to meet its obligations under the World Trade Organisation (WTO) rules.

So, what better way out than to promulgate an ordinance? True, the ordinance will have to be ratified by Parliament within six months. But, by then, the damage done, or even the benefits gained, could have become irreversible.

After all, the Vajpayee government, under which the WTO deal was struck, should itself have enacted the legislation: but it kept buying time until, on demitting office, it finally had to pass the buck to the Manmohan Singh squad. This was a hot potato which the economist prime minister — who understands the need for reforms better than anyone else but who also, as a politician, is wary of public sentiments — clearly wanted time to cool before shoving it down people's throats.

At the same time, it speaks volumes of the Indian political system and those at its helm that the WTO ordinance did not figure at all in the electioneering campaign. This, despite the fact that the three states going to the polls are among the poorest in the country and where costlier drug prices will hit the people badly and affect public healthcare.

It is in this context that the NYT editorial should be an eye-opener, not just for Indian politicians but for the media, which, with a few honourable exceptions, has tended to shy away from such a complicated issue. The editorial virtually accused the Indian government of playing into the hands of the multinational pharmaceutical lobby. "Heavily influenced by multinational and Indian drug makers eager to sell patented medicines to India's huge middle class, the decree is so tilted that it does not even take advantage of rights countries enjoy under the WTO process to protect public health," the editorial says.

These are harsh words, indeed, but they will have to be faced up to when the debate on the main Bill gets under way. Is it possible that in its eagerness to meet the WTO deadline, the government rushed through with the ordinance, including operative parts but without the detailed safeguards contained in the original agreement? Union Commerce Minister Kamal Nath tends to dismiss such fears. He is, of course, entitled to that view — he will, after all, be piloting the Bill in Parliament.

Where does the truth lie? The basic point is the process patenting system, as against product patenting, which Indian drug firms have enjoyed under the Patents Act of 1970. Process patenting is just a euphemism for copycat imitations by which Indian firms make some "cosmetic" (no pun intended) changes to new drugs brought out by multinational corporations (MNCs) after years of research, and then sell it under slightly different names.

Indians, of course, are famous for this duplicity, either in the field of drugs or book piracy or lifting of film scripts or plots or whatnot. This blatant violation of TRIPS (Trade Regulation for Intellectual Property Rights) has always been a sore point with foreign firms. But until the WTO came into the picture, there was little that they could do about it, except wring their hands even as they greedily eyed the gargantuan Indian market.

Some months ago, there was a television talk show on the subject which featured, among others, Parminder Singh, chairperson of Ranbaxy. He was holding forth at length on the dangers of allowing MNCs to flood the Indian market. But when a participant from the audience asked him what percentage of its resources Ranbaxy, a leading Indian player in the field, spent on research, he had only a smile for an answer.

The truth is that Indian firms spend only one per cent of the entire funds at their disposal on research. Why should they spend more? They have, after all, the finished product on their hands; all the research needed is in reworking the molecules, as it were, and package the product differently. And, in any case, they have the advantage of cheap and skilled labour readily available.

Backed by these advantages, the Indian pharmaceutical industry is now firmly established in a huge market. With more than three decades of such protection, it is now in a position to actually do some more investing of its own, so that Indian firms can develop real product patents of their own.

After all, if Hyderabad's Dr Reddy's Laboratories could gain a toehold in the American market, to the extent of earning patents and being listed on the stockmarkets there, there is no reason why, say, Ranbaxy cannot follow suit. That would be a stronger reply to the MNCs than copycatting, which does the image no good.

Then, there is another flip side to the present ambivalent attitude of the Indian pharmaceutical industry. The NYT editorial says that Indian manufacturers' knockoffs of generic AIDS drugs brought the price of anti-retroviral (ARV) therapy down to US$ 140 a year from US$ 12,000 dollars, benefiting patients in 200 countries. So, post-WTO price rises will definitely hurt Indian firms, too, but AIDS is such a sensitive subject that India as well as other countries affected will see to it that the public health safety clauses in the WTO agreement are rigorously enforced to protect the HIV/AIDS–affected.

This protectiveness will encompass Indian firms, as well. In any case, most AIDS drugs and ARVs that the editorial talked about are pre-1995 drugs, which do not fall under the patent regime.

The fact is that India has become the world's largest supplier of cheap AIDS drugs because it has the necessary raw materials and a thriving and sophisticated copying industry, helped along by laws that grant patents to the process of making medicines rather than to the drugs themselves. It is this section of the market, both domestic and international, that is likely to keep the money rolling, given the sensitive nature of the product. Even MNCs would hate to be accused of ignoring the plight of AIDS–affected for the sake of their own profits.

On the other hand, off-the-shelf medicines gulped down increasingly by the middle class for common ailments could well see a steep price hike. That, however, may not be a huge loss: Indian firms should by now be in a position to develop such products on their own.

There is much more to the WTO agreement than drug prices, an aspect that is lost sight of because of the outcry over the public being flattened by higher drug prices. Leave alone large private firms, even government drug companies have shown little interest in aggressively pursuing research and developing new drugs on their own initiative.

Besides, the WTO agreement, hammered out over months of often acrimonious debate, contains so many fine-print declaimers and exceptions that all that is needed for an intelligent commerce minister (which surely Kamal Nath is) is to put together a mechanism precisely for that purpose. If nothing else, it could buy Indian firms more precious time to get their act together.

It might not be as imprudent as it is made out to be to concentrate on the brighter side of the WTO issue. For example, the threat by American agriculturists to copycat basmati rice and seek patents for what is patently unpatentable, by virtue of being Nature's bounty, was a wake-up call to the government on what concentrating on the drugs front alone could cost us. Which Indian would like to see bar-coded, "Made in USA" basmati rice, along with a whole sheaf of price add-ons, on the kitchen shelves?

Similarly, there are hundreds, if not thousands, of indigenous Indian food products that gained a market in the West thanks largely to the Indian diaspora. We could, if we were perverse or farsighted enough, draw out patents on these items.

Then, again, the agricultural patents issue comes with a whole raft of addenda: the question of American farm subsidies, for instance, is a sore point with the Indian government. There is, though, an argument that says that that should not be of immediate importance for us: we produce and consume much of our agriculture products, and overcoming American subsidies could well be dealt with later.

On the textile front, the WTO now guarantees the export of Indian garments without threat of retaliation of the kind that soured US-India relations over the past years. Moreover, China will be effectively stopped from dumping its own cheap garments on the Indian market.