On November 5, President Obama will begin a four day trip to India. This will begin with a Business and Entrepreneurship Summit that has been carefully organized with big U.S. and European business interests.
A number of NGOs working on public health issues are concerned that the President may push India to adopt more strict intellectual property protections on pharmaceutical drugs. They have reasons to be concerned.
And, as is discussed below, there is also an emerging argument that current U.S. trade policies on medicines and intellectual property have an overall negative impact on our own domestic interests.
India has a population of more than a billion persons. Following more than a century of occupation by the British and years of questionable domestic policies, annual per capita income was just $450 in 2000, or $1.23 per day. From 2000 to 2009, per capita incomes have increased by 162 percent. India is now home to an estimated 46 billionaires, and has a growing middle class that is the subject of considerable interest by the pharmaceutical industry.
As impressive and encouraging is the recent growth, India incomes are only a small fraction of the United States and other developed countries. India's 2009 per capita income of $1,180 was 1/40th of the U.S. level of $47,307. Like many developing countries, expenditures on health lag even more than incomes. In 2007, India spent only $40 per capita on health care. In the United States, the figure was $7,285. These are averages. For the millions living at the bottom of the distribution curve, conditions are extraordinarily difficult. The official poverty line in India is just 11.4 rupees for the rural population, and 17.2 for urban areas. Converted to U.S currency, this is 26 and 39 cents per day.
India, like most developing countries, is a member of the World Trade Organization (WTO), and is bound by its tough rules on intellectual property. Among other obligations, the WTO requires India to grant patents on pharmaceutical products - a rule designed in large measure to reverse India's decision in 1970 to abolish such patents.
India enacted legislation in 2005 to implement its WTO obligation to grant patents on pharmaceutical products. The legislation included a number of legitimate safeguards to limit the negative consequences on consumers. These safeguards, which were allowed by the WTO rules, were highly praised by public health and development groups, but condemned by big drug companies like Pfizer, Merck, Abbott, Norvartis or GSK.
Trade Policy and the Domestic India Pharmaceutical Industry
As candidates, both President Obama and Secretary of State Clinton told health and development groups they would change the Bush Administration policy of pressuring developing countries over the issue of drug patents and other intellectual property concerns involving medicines. So far, this has not happened.
Not content with holding India to the WTO rules, the Obama presidency has called upon the US Patent and Trade Organization (USPTO), the White House office of the United States Trade Representative (USTR), and the Departments of State and Commerce to push India hard to do more.
One of the top priorities of the Obama Administration is a demand that India prevent generic drug companies from relying upon known scientific evidence that drug are safe and effective, unless they obtain the commercial rights to rely upon such studies. So called "data exclusivity" rules are designed to create monopolies even in cases where patents have expired, or were never granted.
The Obama Administration also wants India to lower its standards for obtaining patents, so that patent monopolies will be more ubiquitous. For example, the Obama Administration wants India to grant patents on new uses of older medicines, something not possible under the current India patent law.
The Obama Administration participates with large international pharmaceutical companies in an extensive public relations campaign to present such policies as necessary to promote India's development as an innovation powerhouse. But when subject to analysis, it is evident that the changes sought by the Obama Administration are designed to benefit European, Japanese and U.S. Pharmaceutical companies, the most, while presenting a growing threat to the efforts to promote more equal access to medicines, not only in India, but throughout the developing world.
Taken together, the policies (often quietly) advocated by the Obama Administration are designed to raise drug prices in India, and make it harder for India to export low cost generic drugs to other countries. The latter point is quite important, because today India is the leading source of high quality generic medicines for the world, a role that is being threatened by the pressures on India from the European Union and the United States to embrace even tougher intellectual property rules for medicines, and a wave of recent acquisitions of leading Indian generic companies by large Japanese, U.S. and European pharmaceutical firms.
The Obama Administration is not alone in its advocacy of higher intellectual property right (IPR) norms for the Indian biomedical sector. The European Union is currently engaged in negotiations over a controversial intellectual property chapter in a proposed trade agreement with India that covers these same topics.
Are public health groups naïve in objecting to the Obama Administration and European Union efforts to push higher IPR norms for the Indian biomedical industry? Are the U.S. President and the EU trade negotiators simply protecting domestic incomes and jobs by forcing India to pay for its fair share of medical R&D? Looking only from a U.S. (or European) perspective it may seem that calling for higher IPR on medicines is a simple matter of looking out for number one. But there are considerations to weigh that suggest otherwise.
- Trade-offs will be needed on both sides. Polices that drive up the prices of medicines in India are bitterly opposed by the general population, and unpopular with many Indian political leaders. In order to get India to implement policies that reduce access to medicines, the U.S. and the EU will have to give something in return. India may want changes in agricultural policies that reduce incomes of U.S. or European farmers, increase its allocation of H1B visas, the elimination of the ban on outsourcing of government contracts by the state of Ohio, or countless other things that may be raised or linked to a negotiation. These issues are often not obvious. For example, it is widely rumored that in the past, the U.S. Government made concessions regarding India's implementation of treaties obligations regarding nonproliferation of nuclear weapons, in return for changes in its intellectual property laws. People need to ask, what will be the "cost" to us of getting India to make changes in its intellectual property laws?'
- The US benefits from low cost generic medicines. The United States is now the single largest purchaser of generic AIDS medicine in the developing world. There is simply no way that the United States can meet its global obligations to treat poor persons who have AIDS unless we can obtain inexpensive generic version of second and third generation AIDS drugs. The policies we are advocating in India will make that more difficult. The U.S. also depends upon India to provide inexpensive generic medicines for our domestic market. If India is forced into managing a complex patent system that is constantly gamed to extend patent protections forever, we will lose an important supplier of inexpensive medicines.
- Higher drug prices make it more difficult to transfer global health programs to national governments. When medicine prices are high, the United States, European and other high income countries are increasingly asked to pick up the tab, not only for AIDS drugs, but for new vaccines involving cervical cancer, for malaria treatments, and other public health problems. If we want developing countries to shoulder these costs themselves, and increase national outlays on health, we can't at the same time be making them too expensive for their own taxpayers.
- Loss of exports. In the developing world, higher medicine prices often lead to reduced access and worse health outcomes. Poor health lowers economic growth, and reduces purchasing power. This in turn leads to fewer U.S. exports of goods and services in developing countries.
- Harsh policies on medicines hurt the U.S. Brand. News media coverage of U.S. trade policy is often non-existent in the U.S. But in developing countries, efforts by the United States to raise the prices of medicine are often reported on the front pages of newspapers in developing countries, and becomes the subject of extensive discussion among academic experts and policy elites, generating unwelcome anti-American sentiment. It is no accident that one of the most dramatic concessions the U.S. Government has made in terms of trade policy was the November 2001 Doha Declaration on TRIPS and Public Health, where the WTO agreed that members "should" implement IPR rules in way that promotes "access to medicine for all." At that moment, the U.S. was coming to grips with the realization that there is a much resentment and even hatred toward the United States.
- Reputations for not honoring promises erode trust in future promises. In 2001, the US and European countries agreed at a Doha Ministerial meeting that developing countries would be able to implement their WTO obligations on intellectual property rights in a manner that promotes access to medicine for all. The US has agreed to similar text in a more recent negotiation at the World Health Assembly. In order to get the US to approve that language, developing countries made concessions in other areas. By reneging on these promises, the U.S. makes it clear that it won't keep its word. Whatever short term benefits we may achieve, there should be more appreciation for the longer term consequences of reduced trust in our promises.
In a number of respects, the current demands on India, which are so inappropriate given the consequences for poor people all over the world, are a product of the larger failures of the U.S. political system.
The top companies shaping U.S. Policy toward India on IPR and medicine are Pfizer, Merck and Abbott. The CEOs of these same three companies had direct access to Obama immediately after the inauguration, where they traded money for an ad campaign to support the health care bill for a promise to gut the legislation of any cost controls involving the pharmaceutical sector. Democratic Party leaders like Howard Dean and Joe Trippi were hired to lobby for BIO, the industry trade group. There is also a revolving door between the pharmaceutical industry and the government. This is particularly true for officials working in the area of trade policy.
Given the private incentives politicians have to raise cash from drug companies, or government officials have to seek high paying industry jobs after they leave the government, there is no reason to believe that the public interest is in fact first and foremost in everyone's minds in Washington, DC.
We hope that President Obama takes some time in his trip to India to think hard about the hundreds of millions of persons who are poor, not only in India, but throughout the world, and ask himself, as a Christian, as an ambassador of hope, as a former community organizer for poor people, as a winner of the Nobel peace prize, as the President of the United States of America, and the face of our country, what is the right thing to do?
It is not unreasonable to ask the President to truly honor the 2001 Doha promise that countries will have the freedom to implement intellectual property laws in a manner that promotes access to medicine for all. In the end, an announcement along these lines, backed up with deeds, would do more to protect U.S. interests abroad than any of the suggestions he is getting from big pharma CEOs these days.
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