The trouble with India is ...

India is front and center stage these days - the world is keeping a close eye on developments in India, on the economic front and also on the political front (as it relates to the economy). Last month, The Economist had a cover story feature about India's overheating economy, and now Businessweek is following that up with its own cover feature on India titled The Trouble with India. The article calls attention to one major drawback - inadequate infrastructure, including crumbling roads, jammed airports, and power blackouts. There is of course plenty of bureaucracy and red tape - getting things done is not easy. It cites examples of investments lost to China, Vietnam and other emerging countries. And add to all of that - corruption siphoning away large chunks of government budgetary allocations before they reach their intended goals.

A cover story like that is certainly unwanted publicity for the Indian economy .... but a reality check against the sugar coated stories of India Shining. The fact however remains that the Indian economy continues its march - the Indian Economy Blog has an excellent summary on whether the economy is sizzling or just right ...

The power of expat money

India received $23.4B (yes billion!!) in remittances last year, the single largest player now - and the amount has more than doubled in the last five years.

Some staggering statistics:

• Remittances account for 3% of India's GDP
• Remittances are more than both FDI ($4.7B in 2005-06) and FII ($12.5B in 2005-06) combined!!
• Source of all this money - about 111million migrants from India worldwide! (and to think that we still have more than 1 billion people still left over in India ...)
• Fate of these dollars: about 54% spent on family, 20% in bank accounts and about 13% invested in land and property

To put that in perspective - thats about $2.5B invested in real estate - no wonder that property prices are just not coming under control. The endless supply of liquidity into the system is pushing up prices to no end ... and about $5B in bank accounts - no wonder everyone's screaming inflation inflation ... and all this without even considering the increase in the purchasing power of the people as a result of local economic growth!!

No wonder the RBI is having fits trying to curb inflation ...

Section 3(d) - Indian Patent Act

In the previous post, I mentioned about the court case Novartis has filed challenging the provision of the Indian Patent Act under which its patent application for Glivec was rejected. This provision is precisely Section 3(d) of the Indian Patent Act (2005). This provision is quite unique to Indian law - similar rules are absent in the laws of most countries. It was created primarily in the interest of public health, and refuses patent protection to new forms, uses or minor modifications of existing drugs unless they differ significantly with regard to efficacy.

The Economic Times has an interesting editorial comparing two opposing points of view on this issue - one by D.G. Shah, Secy-General of the Indian Pharmaceutical Assn., who supports Section 3(d) and the other by Prabuddha Ganguli, CEO, VISION-IPR, Mumbai who thinks that a change should be made. Both make good well-reasoned arguments, making the case a lot more grey than I initially reasoned. But given how the situation in India is, my socialist side seems to dictate policy in my head, and side with Shah intead of Ganguli! The Indian law disallows the following:

Changes in the physical properties (shape and size) of a drug substance, without any significant change in its efficacy; change of dosage form (tablet to syrup) for ease of administration among children; development of a tablet containing three drug substances (triple therapy) for better compliance among the AIDS patients.

Ganguli makes a strong stand against these being able to patent these incremental inventions:

1. Inability to meet the patentability requirement of newness - because the changes are obvious to any chemist. It is precisely this point that Shah challenges.
   
2. Confers monopoly for what cannot be considered an invention.
3. Allows patent protection beyond the stipulated 20-year period.
4. The incremental changes (he even refuses to recognize them as inventions!) present a very attractive proposition to pharmaceutical companies in terms of their risk-reward valuation - which will cause big pharma to turn to them instead of trying to focus research resources on real innovation and core drug discovery research. It seems like a stretch - but the point is very well taken.
5. Eliminating Section 3(d) would allow companies to patent molecules that were discovered before 1995. As per its TRIPS agreement, India has no obligation to provide patent protection to these molecules. A very compelling point - Novartis's fight to eliminate this provision seems more like a strategy to try and do an end run around this.
   
6. Deleterious impact on prices of drugs in India, their access to the population and the impact on healthcare costs and public health as a whole.
   

On the other hand, Shah clearly defines the requirements to be classified as a patentable invention: should be novel (new), the inventive step should be non-obvious to a person skilled in the art, and be useful (capable of industrial application). He argues that the so-called incremental changes are in fact not obvious even to the trained professional - such as the exploitation of the differing properties of derivatives (eg salts) or different crystalline structures of drug molecules for effective drug delivery, production of stable formulations, etc. As a result, the incremental looking inventions are far more than that. He says that such changes do make far-reaching impact and should be patentable so that companies are encouraged to pursue them. He makes the same argument as Novartis - that Section 3(d) stifles innovation, reduces competitiveness of industry and is a step in the wrong direction.

Section 3(d) has certainly become center stage - I for one am all or it - more so from the point of view of the needs of Indian society than for the protection for innovation. Lets see if the Chennai High Court feels the same way

Novartis v/s the Government of India

[Originally posted at Transport Phenomena]

In my freshman year in college, i had a course on "Perspectives in Society, Science and Technology". It was essentially an introduction to the social and ethical ramifications related to the technology as I started on getting a Chemical Engineering education. It dealt with situations such as pollution, plastics, DDT, cleaner pesticides, Rachel Carson's Silent Spring, severe mercury poisoning of Minamata Bay in Japan, the Bhopal disaster, and last, but not the least, the far reaching implications of the Indian Patent Act of 1970. The law had far reaching consequences for the Indian pharmaceutical industry. According to the law:

In the case of inventions-

(a) claiming substances intended for use, or capable of being used, as food or as medicine or drug, or
(b) relating to substances prepared or produced by chemical processes (including alloys, optical glass, semi-conductors and inter-metallic compounds),

no patent shall be granted in respect of claims for the substances themselves, but claims for the methods or processes of manufacture shall be patentable

In other words, this act prevented issuance of product patents in India for pharmaceuticals and drugs, while only processes to make drugs could be patented. This led to the development of India's formidable generics industry, which could reverse engineer manufacturing processes with remarkable efficiency, without having to spend billions to discover the drugs - today, this industry is led by Dr. Reddy's Laboratories, Ranbaxy and Cipla.

While the act ensured that pharma industry in India was sheltered from the fierce competition from big pharma worldwide, India's entry to the WTO has changed all that. The WTO entry has resulted in the adoption of a new Indian Patent Act in 2005 - one which was supposed to spur the generics driven pharma sector from reverse engineering to innovation. While the rise in prices of new drugs was anticipated, it turns out that the new patent act seems to be very carefully designed to take into account the socio-economic situation in india and tries to enforce a lot of protections for the common individual to prevent big bad pharma from coming in and exploiting him. Kudos to the Indian government for ensuring this. I was not aware of this ...

In the aftermath of the new patent act has risen another controversy. Currently in the eye of this storm is the situation with Novartis' drug Glivec, which was denied a patent by the Indian Patent Office. The reason given was that the law does not allow patents for marginally modified drugs, which do not constitute a novel molecule or original invention. In response, Novartis has challenged the ruling and filed litigation against the Govt of India saying that some of the provisions of the new patent act be scrapped, because they violate WTO rules. Indian generic manufacturers are already selling generic versions of the drug at 10% of the price that Novartis was charging for Glivec.

Novartis has certainly stirred up a major situation, given how much the indian generics have managed to impact the availability of low cost drugs in third world economies. In fact - Indian generics companies supply 84% of the AIDS drugs that Doctors without Borders uses to treat 60,000 patients in more than 30 countries. Given this situation, its going to be very interesting (and important) to see how the judgement comes out in this case. The New England Journal of MEdicine has a very good 'Perspective' article on this - its a very good 'plain English' discussion on the situation. This issue has drawn a lot of attention in the pharmaceutical industry and among lawmakers around the world. US Congressman Henry Waxman wrote to the Novartis CEO Dr. Daniel Vasella saying “I do not dispute your right to apply for a patent or appeal a denial. I am concerned, however, that your attempt to influence domestic Indian law could have a severe impact on worldwide access to medicines.” He concluded his letter by urging Vasella, “to reconsider your position in this case.” He highlights the critical role played by the Indian generics industry in providing low cost drugs to the entire developing world, and making health care more affordable to a large number of people.

The case brings to the forefront an important issue - the role of governments in trying to protect the interests of their people seemingly in conflict with their role in driving innovation and development through the protection of intellectual property. Another fact highlighted is the strategy tried by large corporations to ensure that they reach their profit goals even at any cost, irrespective of the consequences. While I have clearly come across as a socialist in this matter, I don't quite disagree with Novartis' right to get appeal their patent denial or even the claim from pharma cos. that IPR protection is needed to spur innovation and improvements in treatments. I am actually quite supportive of the position that Waxman has taken about Novartis' challenge to the Indian law itself. I would however be quite keen to know how folks feel about this issue in general - esp Indians working in the pharma industry in the US.

The progress of the Novartis vs the Govt of India case will be closely watched all over the world, and the outcome will certainly have far reaching consequences on the future availability of low cost pharmaceuticals. I bet this will certainly be discussed in the "Perspectives in Society, Science and Technology" course for several years to come.