India has seen dramatic economic growth following adoption of free-trade and economic liberalization policies two decades ago, but its current approach to intellectual property protection could suffocate its potential as a future world economic power.
Intellectual property is a cornerstone of prosperity, so much so that the Founding Fathers built legal protections for “Authors and Inventors” into the U.S. Constitution.
But India recently has adopted policies to try to bolster its domestic industries by revoking and violating patent rights of companies that have spent billions of dollars discovering, creating, and developing innovative products.
A particular target of this pirating is biopharmaceuticals. Since early 2012, at least 14 products have had their patent rights violated in India.
For example, the Indian government revoked an existing patent on Sutent, a cancer drug made by Pfizer, citing lack of “inventiveness” even though the drug is patent-protected in 90 countries.
Also last year, the Indian government allowed one of its pharmaceutical companies to copy a kidney cancer medicine, Nexavar, made by Bayer.
The government claimed it did so because the drug was not manufactured in India, a clear violation of World Trade Organization agreements.
The Indian government also has invoked a practice called “compulsory licensing” in which the government decides to take a technology by force, claiming a national emergency.
But India has instead been using this as a means of allowing its generic drug manufacturing companies to copy patented products for profit, taking a free ride on billions of dollars the originating companies have invested in discovering and developing the drugs.
In August, Roche pharmaceuticals announced it would drop plans to patent a breast cancer drug, Herceptin, in India after the Ministry of Health and Family Welfare urged the government to issue a compulsory license instead so a domestic company could copy the drug.
Not surprisingly, India is in last place in the Global Intellectual Property Center’s ranking of countries in terms of protecting patent rights.
Besides the harm to the Indian economy, the real damage is to patients who are denied the drugs when companies are unable to sell their products in the country without losing control of their intellectual property rights.
Meanwhile, the companies that are battling to protect their property rights have set up programs to, in many cases, give their products away free to those in need.
Novartis, for example, provides its cancer medicine Gleevec without charge to 95 percent of patients prescribed the drug in India.
Pfizer provides Sutent at low or no cost to cancer patients who can’t afford the drug. It also runs an educational program to help patients and doctors manage the disease and medicine.
Likewise, Merck provides support for diabetes patients through counseling and patient and physician education.
But free apparently isn’t good enough. The Indian government wants not only the drugs but also the intellectual property rights in which these companies have invested $1 billion and up to 15 years in discovery, clinical trials and regulatory approval.
Clearly, the attempt is to build up India’s domestic generic pharmaceutical manufacturing capabilities, but piracy is the wrong path.
Forty million Americans are employed in jobs that are directly or indirectly in IP businesses — from pharmaceuticals and green energy to telecommunications and entertainment — so India’s policies have a direct impact on U.S. jobs.
The Obama administration could surprise and please many of those in the business community who have been struggling under his economic policies by emphasizing the importance of intellectual property protection and encouraging talks with India to resolve this IP conflict.
Protectionism and theft of property rights are not the path to prosperity. India could well turn back the clock on its emerging economy if it continues to erect barriers to trade and investment by not recognizing international norms of property rights.
Or it could serve as an example for many other emerging economies by respecting patents and by rewarding inventors for their crucial role in economic development.
Grace-Marie Turner is president of the Galen Institute.