Associated Press - December 26, 2004
Rajesh Mahapatra, Associated Press Writer

The building houses India's pharmaceuticals ministry. The foreign visitors are representatives of multinational drug firms and the people in black are their lawyers - all lobbying for new patent laws that could mean enormous changes to India's $5 billion pharmaceutical industry.

On Jan. 1, India faces a deadline set by the World Trade Organization to overhaul its patent laws, ending decades of policies that allowed Indian firms - from pharmaceutical giants to tiny technology companies - to make cheap versions of expensive Western products.

It's unclear if the Indian government can meet the WTO deadline - as it has repeatedly promised - amid intense pressure from its leftist allies and segments of the manufacturing industry.

Differences within the ruling coalition prevented Commerce and Industry Minister Kamal Nath from introducing the new legislation in Parliament, which closed Thursday for the holidays until mid-February.

The only way a new law can still be enacted is through an ordinance promulgated by the Indian president, who largely holds ceremonial powers, said Manoj Pillai, partner at Lex Orbis, a law firm specializing in intellectual property rights. But under the Indian Constitution, the ordinance will lapse after six months if it is not ratified by lawmakers within that period.

Nath told reporters this week a special meeting of the Cabinet will be called to discuss the issue.

"It is our belief that the deadline will be met," said Ranjit Shahani, of the Indian arm of Swiss drug maker Novartis. "The question is whether these (the changes) will be in conformation with world-class intellectual property rights."

It's a question both sides and their lobbyists wrestle with here, with everyone worried that hurriedly drafted legislation would create loopholes and legal ambiguities.

Much will depend on how the government reaches a patent consensus among manufacturers, activists and political parties.

The communist parties, whose support is crucial to the government's survival, have always insisted on a Parliament debate on the issue. "If there is an ordinance that fails to address our concerns, the government will be in trouble," warned Nilotpal Basu, a Communist politician.

While the new laws would affect thousands of Indian companies, the overwhelming focus here is on pharmaceuticals. Drug manufacturing generates enormous profits in India, employs tens of thousands of people and, perhaps most importantly, is a powerful symbol because of its health care implications.

Critics say the new law would dramatically raise India's drug prices, now among the world's cheapest, and help foreign companies regain dominance. They worry that smaller domestic firms would go under, overwhelmed by new requirements.

But proponents say the time has come for India, with its booming economy and growing middle class, to accept international trade standards. Global drug makers and economists say changes would encourage innovation in India, help it attract foreign investment and improve overall access to quality health care. It could also encourage multinational drug firms to outsource research and development work to India.

"The impact would be dramatic; some good, some bad," said Ram Upendra Das, an international trade economist. "But changes won't occur overnight."

Despite the worries in India, overall drug prices wouldn't jump quickly. Patented drugs now account for just 5 percent of medicines sold here, Das said. The vast majority are generic versions of brands with expired patents.

Still, Indian drug companies want the new laws to include several clauses anathema to Western firms.

Most Western laws, for instance, allow new patents to be issued even if only tiny changes are made on the molecular level to existing drugs. So one drug can spawn dozens more, each with its own 20-year patent.

Indian manufacturers, however, want patents issued only for basic molecular structures. That gives a company just 20 years to make its profits before the initial drug - and any spinoff - could be legally copied.

Indian drug firms also want the new law to allow patents to be challenged even before they are granted - a move opposed by multinationals.

Finally, powerful leftist political blocs in India want assurance that the government can override patents on medicines used to fight epidemics, such as HIV/AIDS, or in national emergencies.

The changes being debated are rooted in India's membership in the World Trade Organization, which dramatically increases India's access to the global markets but also requires adherence to a list of fair-trade regulations - including strict patent laws.

For more than 30 years, India's 1970 Patent Act - which does not recognize patents on products, only the techniques used to create them - has allowed domestic manufacturers to make virtual copies of drugs, high-tech goods and other products patented in the United States and Europe.

The law helped dozens of Indian firms grow.

Today, India is the world's fourth-largest drug market in volume, and drugs often cost 7 percent to 10 percent of what they do in the West. That's been a boon to the country's poor - some 400 million Indians live on less than $1 a day - but it has kept many foreign companies from investing in new medicines here.

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