India Restricts Generic Drugs

This spring, India's parliament voted to restrict production of low-cost generic medicines. Because India is the primary supplier of inexpensive drugs to the developing world, particularly antibiotics, cancer therapy, and AIDS drugs, the bill may choke off a vital supply of medicines to the global poor.

Under India's 1970 Patent Act, Indian companies have been allowed to produce cheaper versions of a drug as long as they used a different manufacturing process. Competition from Indian generics has slashed the price of some drugs by almost 98 percent. In Africa, Indian generics have reduced the cost of AIDS drugs from $15,000 to $200 per patient per year. Indian companies also combined a cocktail of medicines into one simple pill. Aidsmap, a UK based information resource for AIDS patients and caregivers, estimates that half of all AIDS patients in the Third World rely on Indian generics.

The bill will change Indian patent law to be more like laws in the West. Patents will be granted to products instead of processes, and companies will maintain exclusive rights to any new drug for 20 years. The change has been anticipated since 1995, when India joined the WTO on the condition that it agree to eliminate process patents by January 1, 2005.

The new bill still must be signed by the president to go into effect. The president was the original sponsor of the bill, so Indian and international officials expect the bill to become law soon.

The legislation allows Indian generic drugs currently on the market to be sold, but manufacturers must pay a royalty to the patent holder—usually a Western multinational corporation. The bill says this fee must be “reasonable,” but it does not specify what “reasonable” means. International standards for royalties hover around 3 to 4 percent,
but Doctors Without Borders reports that GlaxoSmithKline charged a 40 percent royalty in South Africa until activists and courts intervened.

Like patent laws in the West, the new bill contains “compulsory licensing” clauses, which allow the government power to break patents in a health emergency. Although 5.1 million Indians are HIV-infected, the Indian government has not designated HIV/AIDS a national health emergency.

Theo Smart from Aidsmap writes that, by making it more profitable for Indian manufacturers to lend their capacities to large Western pharmaceutical companies than to produce their own drugs, the law may encourage further outsourcing from the West. According to the New Delhi-based newspaper Financial Express, more than 30 agreements between Indian and multinational drug companies have already been signed, including deals with Cipla and Ranbaxy, the two largest AIDS drug manufacturers in India.

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