Dear Sirs/Friend,

Not a tail piece anyway!

Economic Times dated Nov 2,2005 reported that “The government has given emergency marketing approval for Swiss drug maker Roche’s anti-viral drug Tamiflu used in treating Avian influenza, which has so far claimed 62 lives in Asia.To remain battle-ready in the “remote event” of a rapid outbreak of the killer disease in India, the government on Wednesday decided to buy huge quantities of anti-viral medicines from multinationals — ‘Tamiflu’ from Roche and oral inhaler ‘Relenza’ from Anglo American drug maker GlaxoSmithKline. The decision was taken at high-level meeting of officials from the departments of health, chemicals, animal husbandry and industrial policy and promotion. A senior official who attended the meeting told ET that there is
no reason to panic at the moment, since no single case of bird flu has been reported in India yet. Besides, the viral strain found in Pakistan is not the virulent one termed as H5N1. The virus travels from migratory birds to poultry and reaches humans”.
In spite of requests from majors such as CIPLA and Ranbaxy, the Union Government is shirking to use its ‘supposedly strong powers on Compulsory Licensing in times of national emergency’. Why?

Dear Friend/Sirs,

Sub: Foreword November,2005, www.patentmatics.org

1.November is regularly remembered as the birth month of our first Prime Minister, late Jawaharlal Nehru. The 2004 November Foreword had the reading thus:
“It is certainly worthwhile in this connection to recapitulate the history of IPR laws in our country, specifically when in another fortnight the nation will be celebrating the Birth Anniversary of the first Indian Prime Minister, late Jawahar Lal Nehru. One of the very early administrative steps taken by the newly independent government under Nehru was to review the then valid Patents Act integral with the S&T and Industrial Policies themselves. It was quite crystal clear to the then political authorities that the 1911 Indian Patents and designs Act was basically meant to protect the interests of the foreign interests. Hence the reason that “the need for a comprehensive revision of the law relating to patents in India to suit our country’s developing economy was recognized soon after independence”. Accordingly based on the First Enquiry Committee (1948-50) recommendation, for which CSIR played a very significant role at that time, a notable amendment was made in 1952 itself for compulsory licensing in the field of food and medicine at any time after the sealing of the patent. The major amendments were of course to await the report of Justice Rajagopal Ayyangar in 1958, which eventually led to the celebrated 1970 Act.The question obviously to be raised most emphatically, more so when soon the nation will be celebrating this month the birth day of the first and perhaps the foremost Prime Minister late Jawaharlal Nehru, is: will not the arguments of the 1958 Justice Rajagopal Ayyangar Committee in championing the cause of “Licenses of Rights” after three years for drugs continue to haunt the conscience of the nation hurrying towards the New IPR Regime, more so in absence of a relevant constitutional authority which could order that judiciary must deliver its judgements within a stipulated time schedule on at least life-saving drugs! And that too under a government headed by the proclaimed successors of the Grand Old Party itself? Well, we await with great expectations so that our country will not become the dumping ground of the neo-liberal brand of fortune hunters, the worst victims being the poor and ordinary citizens of this vast land. The chance of such developments could be real since there are reports that European Union is proposing to introduce Compulsory Licensing provisions in their Patent Acts ostensibly for “export to poor countries” to help them under the so-called Doha discussions.”

Along with taking necessary steps to amend the 1911 Act, a beginning was made to initiate drug R&D under the CSIR of which he was the President.Inaugurating the CSIR Central Drug Research Institute at Lucknow on February 17, 1951, late Jawaharlal Nehru said: “I think that it is quite essential, especially from the national point of view, to promote drug research and the manufacture of important drugs to improve the general public health… we are importing drugs from all other places and foreign countries very expensive things and very necessary things in the life of to-day. We should not do that. We should produce them ourselves.”
The nation had to wait for the late sixties to see that it could have the first major drug manufacturing unit IDPL through Soviet Union’s collaboration at Hyderabad, ably followed by the establishment of a number of units in the private sector elsewhere, all those made possible through the 1970 Act only.

Much water has flown down the Ganges during the past one year. The 1970 Act has been made by and large TRIPS compliant with some minor additions in favour of national interests. The situation arising out of the above are explained through two case examples:
(a)“Pfizer’s success in the UK High Court of Justice against Ranbaxy’s challenge to its patent on the world’s largest-selling drug, the $11 billion Lipitor, raises issues much beyond the MNC’s victory. At the heart of the dispute is patent ‘evergreening,’ or artificially prolonging patent protection. Evergreening allows successive patent extensions beyond the initial 20 years of monopoly pricing. …cases of ‘evergreening’ are typically fought on grounds like a new drug delivery process or using the same molecule to treat a different illness. Its most common form is by combining the original molecule with an ingredient unrelated to the drug’s efficacy, as with Atorvastatin and Atorvastatin Calcium. The patent on Pfizer’s atorvastatin-based anti-cholesterol drug, Lipitor, for instance, came in 1987 and is due to expire in 2006. However, the then patent owner, Warner-Lambert, secured an extension till 2011. Lipitor came to Pfizer after it acquired Warner-Lambert in 2000.

Courts around the world have wrestled with evergreening, without much success. For instance, AstraZeneca got an extension for Omeprazole from July 1999 till April 2003. SmithKline Beecham got an extension on Paroxetine from Oct-ober 1999 till April 2003. Courts have to tread a fine line between genuine cases for extension, where the new discovery does qualify as novel enough to warrant an extension, and tactics to delay launch of the generic drug. Also, courts have to go by the law of the land and patent laws, though bound by TRIPs, vary widely across countries. While some countries are quite strict in defining what constitutes a new discovery and, is worthy of patent-protection, others—notably the US, where patents are routinely given on fairly frivolous grounds—are much less stringent.

Suggestions range from one extension of 24 months to not allowing any extension to existing molecules. Patients, national healthcare authorities and insurance firms pay a heavy price for every patent extension beyond the monopoly-pricing period. It is imperative, therefore, that countries work together to find a solution. One solution is to extend the scope of the Patent Co-operation Treaty (which allows global search, though patents are granted nationally) to harmonise patent laws across countries and hopefully reduce, if not eliminate, costly litigation” to quote from FE on the recent case in which the loser was Ranbaxy. The extensive quotation has been given for the following reasons: (i)The efforts of major Indian Pharma companies to go for rigorous ‘patent-fighting strategies’, obtain ‘limited monopoly successes’ through ANDAa in the Western markets and enhance their over all commercial performance is becoming tougher steadily (ii)“Ever greening” of patents is not permitted in the amended 2005 patent act. Nor is there any indication yet from government quarters of any plan for harmonizing patent laws as envisaged in TRIPS.(iii)In absence of adequate proven capabilities in New Drug Discovery yet among Indian R&D units (public and private sectors included), the TRIPS dictated conditionalities are going to pose un-surmountable challenges and the earlier the Union government realizes the seriousness of the matter the better. In this connection, the recommendation of the Dr Proneb Sen Task Force “for a more liberal fiscal regime for domestic R&D” needs urgent attention.

(b) The case related to bird flu vaccine IP protected by Roche is getting increasingly more and more curious in our country. According to reports, the union government was contemplating to resort to Compulsory Licensing the said vaccine, but later the officialdom has reportedly developed cold feet on the matter due to the ambiguous nature of the extant patent law itself, leave alone the difficulty in handling reportedly the case in time. There are again reports the patent application of the said product is still only under processing, thanks to the highly insufficient operational efficiency of the IPR machinery itself. Meanwhile majors such as Ranbaxy and Cipla are again reportedly threatening to go ahead with vaccine manufacture as a generic item, come what may. All this muddle happening around, when many countries are already stockpiling their needs to meet their emergency requirements!

(c) Thanks to the continued campaigns by all concerned with the health issues including the need to have drugs made available at affordable prices, the union government has recently come forward with a set of recommendations by its Task Force headed by Dr Proneb Sen. Among its many recommendations for price control of life-saving drugs are – (a) PSEs involved in the manufacture of drugs should be revived where possible and used as key strategic interventions for addressing both price and availability issues. Arrangements may be made to ensure their continuing viability. (b) A National Authority on Drugs and Therapeutics (NADT) be constituted to integrate the offices of Drugs Controller General of India and all such related offices in the field as the independent apex body and as an Independent Regulator. (c) In the case of new and patented products, they should be compulsorily brought under price negotiation prior to grant of marketing approval. Failure of such negotiations should then invite either price control or compulsory licensing. The reference prices to be used for such negotiations should be based on the premium enjoyed by the drug in the lowest priced market abroad compared to its closest therapeutic equivalent in that country. This premium can then be applied to the corresponding price of the same therapeutic equivalent prevailing in the domestic market to determine the reasonable price in the Indian conditions. IN OTHER WORDS, WHAT IS BEING SUGGESTED IS THAT PATENTED DRUGS SHOULD BE ALLOWED THE PREMIUM IT COMMANDS ELSEWHERE, BUT APPLIED TO THE PRICES PREVAILING IN INDIA. Even though this appears theoretically logical and reasonable, it is not clear how the same can be enforced when patent validity is not conditional to local manufacture and the product is being made available only through import of the same manufactured elsewhere.

In substance, one does not know for sure whether the union government will ever be able to make available to its citizens even essential drugs like the bird flu vaccine or even the anticancer drug Glivec available to the Indian patients only at the Novartis-dictated price, none knowing the fate of the case in the apex court yet! There are many with sufficient reasons to say: “God save the New IPR Regime”! Certainly not a favourable situation when the nation will ceremoniously pay homage on November 14 to the memory of the great late Jawaharlal Nehru.

2. The recently concluded Indo-US Agreement in civilian nuclear technology continues to be a matter of serious concern for all concerned with the field. The November Issue has reproduced from the official website DAE the Agreement, the speech of the Prime Minister in parliament on the subject and also a recent lecture by Chairman, AEC. A few articles on nuclear power have been reproduced from international literature, indicating the role of nuclear power, its cost vis-à-vis other sources and also related aspects. The article on “Implications of…..Nuclear Materials and Systems” highlights many relevant aspects to nuclear energy including the Indian contours within its 1962 Atomic Energy Act, IPR issues related to ‘dual-use’ products in the post-TRIPS regime, and also possible additional complications if India establishes a parallel set of imported nuclear reactor units, concluding therein, “under the TRIPS dictated new IPR Regime, there are a number of IP related issues to be yet adequately resolved for dual-use materials and systems in order that the on-going DAE programs are continued without legal hurdles in a sustained manner. Added to this, if GOI decides to go for a quick augmentation of nuclear power generation capacity through import of materials and systems vide the normally accepted T/T route, a number of issues (both IPR related ones and others related to regulatory functions) will have to be settled with appropriate amendments to the 1962 Atomic energy Act by the houses of parliament, leave alone the very many difficulties in operating and managing this “Unforgiving Technology” to use the description by none other than Alfred Weinberg himself”. Undoubtedly DAE is subjected to multifold requirements. For its own program, there is increasing requirement of raw material uranium for its continued expansion, unfortunately though much of its plans are getting deeply embedded to environmental issues associated with mining, of which the latest example is in one important site in Andhra Pradesh - Uranium mining was planned at Lambapur-Peddagattu and the processing plant at Mallapurm-Dugyala in the district in Andhra Pradesh. "Keeping in mind the adverse public opinion, Uranium Corporation of India Ltd (UCIL) decided to relocate the plant at Seripally village in the same district. This proposal too was opposed by the Movement Against Uranium Project (MAUP) as reported very recently by Business Line."We came to know that the 32nd meeting of the Reconstituted Expert Committee is meeting in Delhi to discuss the proposals of UCIL and others for environmental clearance," its activist said. Mr Venepalli Panduranga Rao, another MAUP member, said the plant, if cleared, would have adverse impact on about two crore people. They argued that the proposed processing plant at Seripally village was in the vicinity of the Nagarjuna Sagar Reservoir. "There is every likelihood of radio-nuclide contamination of its waters, having long term adverse impacts on almost one-third of the population of the State," the activists argued in a letter addressed to the Union Environment Minister. The letter was handed over to the PCB officials here on Wednesday. They cited a Supreme Court judgment that the right to access safe drinking water was fundamental to life and that it was the duty of the State to provide clean drinking water to its citizens. The proposal also went against the `right to sustainable development' declared by the UN General Assembly, the letter said.

Similar ‘alarm’ campaigns are held at all potential sites all round the country. One wonders whether, if nuclear power is essential for nation’s energy security, is it not expected of the Union and State governments to see that the above issues are settled to optimum requirements, as are routinely done in advanced countries? Is it appropriate to take alternate actions for import of reactors, fuels and accessories under many controversial conditionalities, that too without the detailed discussions and approval of the parliament when there are a number of fundamental issues yet to be resolved? “Intellectual property issues between India and the US have been sorted out with signing of an Indo-US science and technology agreement, paving way for active collaborative research between the two sides” according to a recent statement of the Science and Technology Minister Kapil Sibal. The agreement, signed two weeks ago, aimed at expanding collaboration in basic sciences, space, energy, nanotechnology, health and information technology. Does it include Nuclear Energy through amendment of the 1962 Atomic Energy Act and the relevant clause of the same in the Patent Act, 2005, well one has perhaps to await details.So many disturbing issues when we approach November 14, 2005.

3.  Last but not the least, according to a press report of a prominent news paper, MNCs now seem to be taking lessons from their Indian operations, with the latter setting global benchmarks in manufacturing. Indian arms of MNCs in sectors as varied as durables, automobiles, and processed glass are increasing the efficiency standard across manufacturing businesses worldwide. Samsung India Electronics (SIEL), for instance, clocks the highest productivity amongst Samsung subsidiaries worldwide, with productivity at the Indian operations about 40 per cent higher than the closest Samsung subsidiary in Vietnam. Samsung's India operations are being benchmarked by other Samsung subsidiaries, and engineers from the India team this year have gone to Brazil and Slovakia and, closer home, to Malaysia and Iran to help these subsidiaries improve their production systems. Earlier, Samsung subsidiaries in China, Iran, Vietnam, Hungary and Indonesia visited SIEL, and spent 600 benchmarking hours here. "With the help of our R&D centre, the company is focusing on enhancing productivity at its Noida facility through machine software upgradation as well as developing competitive spirit in its people," said Mr Girish Shah, DGM, Manufacturing, SIEL. So, now, while Samsung India has set its eyes on becoming the first Samsung factory, and the first factory in the world to have a tact time of 4.9 seconds, AIS (Asahi India) is charting out its own history. AIS has become the lowest cost producer among Asahi Japan's global network across over 35 countries. "We have achieved operational efficiencies across various parameters and have been able to reduce costs significantly. For instance, equipment that would have cost us $1 million per line to import, has been developed in-house for $200,000,'' said Mr Arvind Singh, COO of AIS. Asahi Japan, in fact, plans to leverage these cost efficiencies, and AIS has recently bagged an export order of $5 million that was routed through the company's global network. This is the company's largest export order in several years and it expects the trend to continue. Even analysts are watching with interest the progress that local arms of MNCs are making. Mr Jayesh Desai, Partner, E&Y India said: "Adoption of better quality control and quality management is leading to reduced costs for a number of firms. While purely on a cost perspective, India may not be the most competitive, in terms of manufacturing efficiency there have been major improvements with companies embracing quality."

Analysts also point out that the advantage that India has is its skills in process, product and capital engineering. Korean majors Hyundai and LG seem to be walking the same path. Hyundai is in the process of developing India as a hub for small cars, and has outlined an investment of about $500 million to set up its second plant in the country. According to Mr B.V.R. Subbu, President, Hyundai Motor India, the Indian subsidiary is the most cost-efficient producer for small cars in Hyundai's global network. LG, meanwhile, has set up its second unit in Pune recently, which is slated to cater to both the domestic and export markets.

Industry officials point out that even auto component giant Delphi, which had recently filed for bankruptcy in the US, could eventually shift a chunk of its production to cost-efficient locales such as India. And the trend is only going to strengthen in the coming years, as India emerges as a benchmark destination for manufacturing, they say. And so on.

This is not at all surprising. After all, the R&D centers of MNCs located in India are also steadily emerging as more or less equal partners with their counter parts located respectively in the countries of their origin. It is often emphasized that what India lacks is not quality R&D manpower, but quality R&D management structures, an issue first highlighted by none other than Homi Bhabha as far back as 1966. Over the past century or so, major multinational companies have learnt how to organize and manage in-house R&D activities and bring out their worthwhile results as commercial products, and the public sector units also learning to work concurrently, so that the two together fulfill the overall national interests. Patentmatics has published earlier a series of articles on this issue extracting out relevant aspects from the pioneering monograph “Science and Corporate Strategy, DuPont R&D 1902-1980”. This, that is, organizing and managing industrial R&D, is perhaps the single largest challenge that Indian private and public corporate bodies will have to learn at fast pace, if they in turn have to become meaningful partners in the game with their foreign counterparts. And as long as this does not happen, the TRIPS dictated new IPR regime will serve only the interests of the clever foreigner entrepreneurs. The articles reproduced from EPW could serve to sharpen the challenge.

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Yours sincerely,

A D Damodaran.