Resident Fellow Roger Bate

While many Indians are still upset by their countrymen's premature departure from the Cricket World Cup, those interested in Indian prosperity should be even more upset by the equally recent departure of the head of a technical committee designed to analyse India's patent law. With the resignation of R.A Mashelkar, due to politically motivated personal attacks, the Indian Government has lost a firm defender of intellectual property, which is a key means for increased growth and prosperity for India.

Dr. Mashelkar is both a respected scientist and administrator and his committee was formed to review the 2005 Indian Patent Amendment Act. But from the moment the committee's report was published, and Mashelkar spoke favourably about patents, he has been cast as a villain by leftist activists.

Critics have jumped on mistakes that were made in the drafting of the report. The most damaging to Dr. Mashelkar was that certain sections of the report's recommendations were directly taken from one of the studies submitted to the committee during its deliberations. Dr. Mashelkar immediately apologised to the author whose work was incorporated without due acknowledgement. He also requested that the government withdraw the report and he offered to re-write it. But the damage was done. Under pressure by media and activists, the Indian government forced Dr. Mashelkar to resign. With his departure, perhaps the best hope for India's increasing competitiveness in the pharmaceutical sector is gone.

Indian protectionist interests have historically prevented global competition and innovation in drug manufacturing. Yet in 1995 India signed on to the World Trade Organization's agreement and was given until January 2005 for product patents to be in place. With the new Indian patent law of 2005, protection for innovation seemed assured. But after lobbying from local producers, amendments were made to the law, which are unique to India and in my opinion illegal under the WTO agreement. It is these amendments that Dr. Mashelkar's committee was asked to review.

What is depressing for India watchers is that activist efforts are short-sighted and unfair both to Indian scientists who are more than capable of competing globally, and to Indian consumers who will not receive the best drugs under the current law.

The key amendment to the patent law, Section 3(d), creates additional hurdles for pharmaceutical patents by deeming that derivatives of known substances are not considered patentable unless they can be shown to differ in terms of efficacy. One has to demonstrate more than the usual "novelty, commercial applicability and non-obviousness" criteria under the WTO agreement.

Applying only to drug development, this amendment violates the WTO agreement because the agreement disallows WTO member states from rendering it more difficult to obtain a patent in one technical field over another.

The first impact of this amendment came when drug company Novartis' application for a patent for its cancer drug Gleevec was rejected. Novartis brought an action in the Chennai High Court (the case is still ongoing) claiming that it should have been granted a patent. Indeed, most physicians and patients would agree that the Novartis drug Gleevec represents an innovative anti-cancer breakthrough and deserves a patent. In 1983, Novartis scientist Dr. Alex Matter led the charge for a new drug that would target only cancer cells. As greater genomic knowledge became available, Novartis scientists ultimately were successful, resulting in Gleevec.

First patented in 1994 in Taiwan and then in 1996 in America, Gleevec was first used on leukemia patients in 2001.

Novartis continued to work on the drug, developing another, beta crystal, version. That is the one for which it applied for a patent in India. Ironically, had India had patent laws when Novartis first started filing globally, the company probably would have received a patent. For the Indian government denied Novartis a patent under Section 3(d), claiming that the second version was not sufficiently distinct from the first.

Even under Indian law today, Novartis arguably should qualify for a patent. The beta version performs better in some tests, implying that it is a clinical improvement over the older version, just what Section 3(d) demands.

Far from Novartis keeping the poor from receiving needed drugs, it is India's patent law that limits India's drug market. India's patent hurdles discourage drug companies from operating there, undermine innovation (as many drugs are developed from existing substances), and put off drug companies from working on diseases that may be unique to India.

This case is one of principle. It will not affect Indian patients, for Novartis distributes the drug free to most of those who need it. But if Novartis loses the case, as insiders think is likely now that Mashelkar has been discredited, it will send a signal to drug companies that India is not welcoming. And even Indian drug company, Ranbaxy Laboratories, which has historically copied western drugs, has come out in favor of Novartis.

The stakes are high. About 70% of Indians do not receive modern healthcare treatment, many buy sub-standard drugs and perhaps half of those drugs are counterfeits. No doctor in public sector healthcare can credibly claim that patients' problems are related to patents. But rather than looking into the whole chain of delivery--medical professionals, diagnostic facilities, dispensaries and hospitals--it is easier to wave the national flag, and claim that western drug companies are at fault. The reality is that even if there were no patents, or if medicines were distributed free, many patients would still not benefit. Nothing else can explain the failure to provide oral rehydration therapy to diarrhoea patients, or the failure to vaccinate children against polio.

India is at a crossroads. It can follow the route it has taken in software engineering, with sensible intellectual property protection that spurs growth, or it can travel the opposite route with idiosyncratic rules that limit growth and innovation.

If Novartis loses the case in the next week or so, the Government can still intervene to change the law-it should do so.

Roger Bate is a resident fellow at AEI.