Drugs and Emerging Markets (WTO’s TRIPS provision)

The Economist on 08SEP12 reported on the ongoing conflict between developing countries and Big Pharma and how both must be willing to compromise in order to grow. Looking at India, the article addresses how corporations seek above all to protect their IPR and achieve higher ROI while developing countries  focus on expanding access to life-saving drugs.

Before addressing the main points, the article rightly points out India, the so-called “pharmacy to the world,” has recently become the third-largest drug producer, by volume. With increasing domestic demand, PwC’s aggressive estimate puts the market at $74 billion by 2020, six times its value in 2010, a possible outcome making India increasing attractive for Big Pharma.

The article points out two important cases currently in dispute where India has put restrictions on Pharma companies operating in the country. In case one, India refused to provide a patent on Glivec, a cancer-fighting drug, to Swiss firm Novartis. In the second case, India required a compulsory license, its first, on Bayer, a German giant, for its kidney cancer drug, Nexavar.

Why hasn’t this been an issue before now? Well as the Economist article succinctly puts it:

India’s drug industry has a unique history. For more than 30 years, the country did not recognise pharmaceutical patents. Domestic firms became masters at copying medicine and making it cheaply. After joining the World Trade Organisation (WTO) in 1995, India had to change its patent policy. But its new system, in place since 2005, includes special protections for both patients and generic manufacturers.

For example, the law bars patents of minor changes to existing drugs, a practice known as “evergreening”. Drug reformulations are often used to extend patents elsewhere; they get no protection in India. The country also has broad criteria for “compulsory licensing”. A WTO agreement allows countries, in some instances, to force a firm to license a patented drug to a generic company. India’s rules give officials broad powers to do this.

While the article goes on to flesh out the various positions of the parties, the decisions reached in these two cases may have ramifications for the growth of India’s pharma market. Beyond the domestic impact, it could certainly set an interesting example for other developing countries to follow as they look for ways to gain access to drugs without breaking the bank.

Despite the years that have passed since the WTOs inception, many developing countries still don’t 1) understand how to exercise their rights at home or 2) lack the human capital on how best to approach disputes and make their case.

Certainly working out issues with a home court advantage is a lot cheaper than having to use the dispute settlement mechanism setup by the WTO in Geneva. As suggested by some scholars, fighting court battles in Switzerland can, in some cases, prevent developing countries from bringing their case to court as the expense indirectly acts as a tax.

Thankfully TRIPS has allowed enough industrial policy space for those countries capable of exercising their rights to protect their local economies.

Economist 8SEP12

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