[Untitled]

Item

extracted text
RF_ST_1_SUDHA

K.A.S. MAIN

BHINDU

BRAIN TREE offers study material in
■ Psychology
■ Geography
■ Sociology
■ Anthropology
■ Public Administration
Orer 35 qualified ante I AS. '97 Exam, including Ur. S Ravi, I.P.S. from Karnataka. •
Write to:

nal Newspaper

Level-3, 3'5-432, Hiniayatnagar, Hyderabad-SOO 029. Tel:040-7644110 1 7636928

BRAIN TREE

d, Madurai, Delhi, Visakhapatnam and Thiruvananthapuram

*DAY, DECEMBER 23, 1998

ISSN 0971 - 751X

Vol. 121. No. 302

Internet: www.hinduonline.com & www.the-hindu.com

Patents Bill gets RS approval
By Our Special Correspondent

NEW DELHI, Dec. 22.
With a determined shove from the Congress
(I), the Vajpayee Government late tonight se­
cured the Rajya Sabha's approval for the Patents
Bill, the first step towards meeting the April
1999 deadline of fulfilling commitments to the
WTO. The victory for the Treasury Benches did
not come before the Congress(I) was able to un­
derscore the Vajpayee Government’s precarious­
ness and the coalition regime’s dependence
upon the Congress(I) goodwill. At the same
time, some incidents at the time of protracted
clause by clause voting exposed the unease
nursed by some in BJP and Congress(I) ranks.
The Rajya Sabha's approval became immi­
nent, pnee the Government agreed to accept a
Congress(I) amendment to Section 24 (A)(3) to
read: "provided that an exclusive right to sell or
distribute will not be granted for an article or
substance which is based on Indian system of
medicine and already in the public domain.”
Under pressure from a determined non-Congress(I) Opposition, the Bill and earlier a few
amendments were put to vote. For the Bill prop­
er. the voting machine recorded 43 votes against
and 8.3 in favour. Some votes were unaccounted
for because of the members’ unfamiliarity with
the procedure. But the die was cast earlier, as
soon as the first amendment by the Left for send­
ing the Bill to a select committee was put to vote.
In this case voting slips were also counted and
the total read 47 in' favour of moving the
amendment and 99 against.
The passage of the Bill was not without a few
embarrassing moments for both the Congress (I)
and the BJP. Apprehending a break in ranks, Mr.
Pranab Mukherjee interrupted his party col­
league. Mr. Vyalar Ravi, who was in the process
of withdrawing his amendments. “You are not
moving anything," he curtly ordered. After the
inNdtable protests by the Left, Mr. Ravi later

explained that all he was saying that since the
Union Industry Minister. Mr. Sikandar Bakht,
had acquiesced, he was withdrawing a certain
amendment.
Similarly the BJP’s Mr. K. R. Malkani was un­
decided till the last moment and sought Mr.
Bakht's direction on the issue.' With Mr. Bakht
declining to get involved. Mr. Malkani read the
writing on the wall and withdrew the proposed
change. At the end. the only change allowed
was the one which secured Congress(I) support
for the Patents Bill.
In the morning, under the explicit "direction
and initiative" of the Congress® president. Mrs.
Sonia Gandhi, the party found a way of making
an omelette without breaking the'egg in the
matter of the controversial Patents Bill. It made
its support conditional upon the Vajpayee Gov­
ernment agreeing to incorporate an amend­
ment that would protect the "Indian system of
medicine", thereby denying the Sangh Parivar
even the satisfaction of claiming credit for-doing
its swadeshi USP.
The Congress® hit upon- the "Indian system
of medicine" prescription after a 90-minute dis­
cussion this morning by the party's Legislative
Affairs Committee, with Mrs. Sonia Gandhl-presiding over.
The two seniormost members of the last Con­
gressfl) government — Dr. Manmohan Singh
and Mr. Pranab Mukherjee — were most vocal
in asserting that the party had no option but to
help carry the process they began during the
P.VNarasimha Rao regime to its logical conclu­
sion: the two were dismissive of the dissenters
and their argument of protecting the “Indian
interests".
However, the two gentlemen fell in line with
the “Indian system of medicine" prescription
once it dawned upon them that the party presi­
dent was inclined to steal the Sangh Parivar’s
"swadeshi clothes”. Promptly Mr. PJ.Kurlen was

asked to draft an appropriate amendment, and
he along with Dr. Manmohan Singh were asked
to present a kind of demarche to the Industries
Minister. Mr. Sikander Bakht. Mr. Bakht prompt­
ly agreed to incorporate the Congress® amend­
ment as his amendment.
After committing himself to incorporating the
Congress® amendment. Mr. Bakht informed
the BJP’s parliamentary wing of his commit­
ment; the Prime Minister who was presiding
over the meeting was relieved to be presented
with a fait accompli. Later, the Minister for Par­
liamentary Affairs. Mr. Madan Lal Khurana, al­
so supported Mr. Bakht's commitment, paving
the way for the eventual passage of the Patents
Bill — courtesy the Congress®.
The Congress® spokesman. Mr. Ajit Jogi. ex­
plained that the party was guided by two principles: first, it wanted to uphold India's "long,
glorious” tradition of honouring international
commitments: and second, the present bill is
"almost the same" as was drafted by the Con­
gress® government in 1994-95.
The proceedings began with the non-Congress Opposition, chiefly the Left, protesting
vehemently that its member had not received
copies of the proposed amendments to the Bill
while the Congress® and the BJP members on
the other hand claimed to have received copies
of the amendments. Some order could be re­
stored only after the Chairman of the House
promised to investigate the matter.
The debate could begin only in the post-lunch
session which saw amendments being moved by
the non-Congress® members. The Opposition's
case was summed up by the veteran CPI(M)
leader, Dr. Ashok Mitra, who appealed for a con­
sensus particularly in view of the letter to the
Prime Minister.written by six Chief Ministers
requesting, for a discussion on the issue as it
impinged upon the states’ jurisdiction.
’Ss.
Debate details on Page.-S

Wider public dtebate on
Patents Bill sought
NEW DELHI. Dec. 22.
Uproar and acrimony preceded debate on the
controversial but crucial Patent Amendment
Bill in the Rajya Sabha today with the ruling BJP
and main Opposition Congress backing it and
the Left parties pressing for amendments to refer
the measure to a select committee.
Discussion on the Bill had to wait for over I 50
minutes which was lost in numerous points of
order and lengthy procedural wrangles over
members’ right to speak on their amendments
first.
The Bill, which was moved by the Industry
Minister. Mr. Sikandcr Bakht. after the question
hour, soon ran into rough weather when the
Left members joined by some JD, RJD and Con­
gress members quoted rules and conventions to
demand that amendment movers could make
brief observations before start of discussion.
During the heated exchanges, a remark by a
ruling party member sparked off an uproar with
the Left party members claiming it was directed
against a particular State. The matter was final­
ly set to rest when the Chairman. Mr. Krishan
Kant, said he apologised as custodian of the
House for any "unfortunate" remark and ad­
journed the House for lunch.
five amendments were moved suggesting the
Bill be referred to a joint parliament select com­
mittee as there was time till April to fulfil the
WTO obligations. The amendments, moved by
Mr. Gurudas Dasgupta (CPI). Mr. Biplab Dasgupta. Mr. Ashok Mitra (CPI-M). Ms. Kamala
Sinha (JD) and Mr. Ramashankar Kaushik (SP)
also suggested a wider public debate on the Bill.
The Chairman turned down the Left parties'
demand for a vote on referring the legislation to
a select committee after a 90-minute polemics
on the amendments in the post-Lunch session.
Earlier, he also rejected the contention that
the Bill could not be taken up for discussion as it
had once been referred to a select committee of
the House. He ruled it was an old Bill of 1995
which automatically lapsed with the dissolution
of the Lok Sabha. Initiating the discussion, Mr.
Kapil Sibal (Cong) said contrary to the Left par­
ties' campaign, the Bill provided for adequate
safeguards for national interest and security. It
would be better for the country to be inside the
WTO and negotiate to derive benefits. However,
he said his party was opposed to either patent or
EMRs for Indian system of medicines.
Mr. Arun Shourie (BJP) said Trips prohibited
patenting of animals and plants and pointed out

|

that even in the case of a patent derived by a U.S.
company on "healing properties of turmeric"
India had succeeded in getting the patent can­
celled. Referring to the Basmati patent got by
Rice Tec Inc of the U.S., he said it was on a
germplasm taken from Pakistan and crossed
with a long grain Texan variety. None of the
250 essential drugs shortlisted by WHO would
come under the Patents Act amendment, he
said and charged those opposing the amend­
ment with being “irrational".

Mr. Ashok Mitra (CPI-M) said. "Even if we do
not meet the April 19. 1999 deadline on allow­
ing EMRs there is no question of somebody
throwing India out of WTO." The purpose of the
Bill was to demolish the safeguards in the Pat­
ents Act of 1970.
Stating that the Chief Ministers of Andhra
Pradesh. Tamil Nadu. Kerala. Assam, West.Bcngal and Tripura had written to the Centre not to
pass the Patents Bill in a hurry, he said, “You
cannot ignore the States." Dr. Rttja Ramanna
(nominated), supporting the Bill, said there was
no need to be afraid of multinational corpora­
tions. He regretted that efforts made by Indian
scientists were not being appreciated by policy­
makers. Mr. Vayalar Ravi (Congress) said it
would have been better if the Bill had been
moved after getting public opinion. — PTI

City

j

‘People should be informed of global treaties’
“For the last 43 years there
were seven rounds of talks on
Bangalore, March 13: The Na­ GATT, but none of them have
tional Law School Director Dr been made public. What is in
N L Mitra said that the Constit­ store for the Indians in the lat­
ution has to be suitably amen­ est ‘Patent Bill’ is also not
ded, so that people are infor­ made public. While a set of bur­
med about the International eaucrats signed these treaties,
treaties signed by the Govern­ no information was passed to
ment
Parliament. It is sad that dur­
Delivering a lecture on ‘Post­ ing the last 43 years, there was
GATT Situation and Constitut­ not even one page debate on
ional Governance in India’ at various issues of GATT,”
Chinmaya Hall here on Satur­ Mitra regretted.
day, Mitra said India had
Stating that Indian Govern­
signed many International tre­ ment always followed a dual
aties for the last 50 years, but policy on economic issues,
the people were kept in the Mitra said “the Government re­
dark. The Constitution also tained the National policies
had made provisions so that and suitably amended whene­
the treaties were to be made ver international policies dem­
i public in Parliament, only if anded for a change. During the
there was a necessity to amend negotiations also, India never
| the law.
had a proper bargaining.
Express News Service

While India succeeded in
many political diplomatic
issues, it failed miserably in
guarding the economic intere­
sts,” Mitra lamented.
Coming down heavily on the
Intelligence Property Protect­
ion, Mitra said it was ‘Investm­
ent Property Protection ’. “The
monopoly for 20 years over
any invention is not given to
the scientist, but it is given to
the investor who wants to com­
mercially exploit the scient­
ist’s invention. So it is not the
protection to intelligent prope­
rty but it is protection for inv­
estor’s property,” Mitra said.
Terming that Indian econ­
omy was on cross roads during
post-GATT scenario, Mitra
said the Indian Government
has failed in tackling many of
the international economic iss­

ues. “The parliament has pas­
sed the ‘Process Patent Bill’,
while there is time till the year
2005 to Pfiss the ‘Product Pat­
ent Bill’.; However, the Parlia­
ment has' passed ‘Exclusive
Marketing: Rights’ (EMR) Bill,
which will be effective from
April 19,: this year
WOuld
shoot up die prices of at least
27 drugs, including life saving
drugs used to treat heart pati­
ents,” he said.
“India, also is not ready with
the ‘Sui:Generi’ laws, though
the last date to present the law
is Dec 31, 1999. Some NGOs
have taken interest in this reg­
ard. Over! 270 Indian medicine
herbs are in US and most of
them are getting patented
However,! India is just watch­
ing as a.'mute spectator,” Mitra
lamented!

Lok Sabha okays Patents Bill
ENS Economic Bureau

New Delhi, Mar 10: The Pate­
nts (Amendment) Bill to allow
, exclusive marketing rights
I (EMRs) for foreign pharmaceu­
ticals
and
agro-chemicals
firms was passed in the Lok
| Sabha on Wednesday with the
1 Congress support. The Bill was
i passed by a voice vote after the
, Left parties, Janata Dal and
I Loktantrik Morcha walked out
I in protest.
,
The Bill’s passage puts the
I Government in the clear with
' the World Trade Organisa­

tion’s (WTO) April 19 deadline
for amending the patents legis­
lation to allow EMRs in phar­
maceuticals and agro-chemic­
als.
Industries Minister Sikhandar Bakht, who piloted the Bill
through the Lower House, ass­
ured members that all necess­
ary safeguards had been incor­
porated and the Bill would not
harm the national interest in
any way.
The Rajya Sabha had passed
the Patents Bill during the last
Parliament session, but the
Government could not move

the Bill in the Lok Sabha due
to a last-minute flip-flop by the
Congress which suddenly cha­
nged its stance on the Bill.
The Government then deci­
ded not to take any chances
and issued an Ordinance inst­
ead to meet the WTO deadline
of April 19, lest the Bill failed
to be passed even in the Budget
(current) session of Parliam­
ent.
The Government has been
heavily criticised in the last
two days for issuing an Ordin­
ance when the Rajya Sabha
had already passed the Bill.

Parliament approves Patents Bill
New Delhi, March 13: The
controversial Patents (Amend­
ment) Bill was on Saturday
approved by Parliament after
it was passed by the Rajya
Sabha through a voice vote
amidst protest walk out by the
non-Congress Opposition.
The Bill was approved after
.rejecting the statutory resolut­
ion moved by senior CPI mem­
ber Gurudas Dasgupta seeking
disapproval of the Presidential
Ordinance of January 8. The
Bill replacing the Presidential
Ordnance was passed by the
' Lok Sabha on Sunday.
The Bill amending the Pate­
nts Act was earlier passed by

the Rajya Sabha on December
22 last year. However, it could
not be passed in the Lok
Sabha. In the meantime, the
government amended the Bill
further through an Ordinance.
Replying to a four-hour disc­
ussion, Industry Minister Sikander Bakht rejected the Opposi­
tion charge that the Bill was
against national interest and
said it was mandatory to get it
passed before the April 19 dead­
line to fulfill the World Trade
Organisation commitment.
He discounted the Opposit­
ion contention that governm­
ent had not taken into conside­
ration recommendations of the

Law Commission report say­
ing they pertained mostly to
product patents while this Bill
was on bio-diversity.
The Opposition alleged that
the government had kept the
House in dark about the reco­
mmendations of the Law Com­
mission which said that the
provisions of the Bill were det­
rimental to national interests.
In his reply, Bakht said the
government had to secure the
passage of the Bill to meet its
obligations under the World Tr­
ade Organisation. However, he
made it clear that the Govern­
ment was committed to protect­
ing national interests.

“We know we may have to
face problems but we have to
meet our international obligat­
ions,” he added.
Bakht said Indian pharmace­
utical companies would have
to restructure themselves but
they have time till 2005 when a
new legislation would have to
be brought forward to give eff­
ect to the country’s internati­
onal obligations in the pharma­
ceutical sector.
He said he had received the
objections of the Law Commis­
sion to the Bill from the Prime
Minister and had already writt­
en to the Commission, reply
ing to doubts raised by it.

po prugs Cost Less in India?
\^SenGupta
'■^Zpar^‘''e analysis of drug prices in India and other countries
/^that the average cost of older drugs is highest in India, while
tfrZ pharmaceutical products still under patent protection globally, or
out of its purview, are cheapest in India.
v UOR element of the campaign against
I '■ he India's patent laws, in order to
with requirements of the GATT
‘ -ment. has focused on the alleged fact
jni1' prices are lower in India than other
Hence, it has been argued that a
"■,.e in India’s patent system would lead
jussive increase in the prices of drugs.
th claim has been voiced both by Indian
frptny associations as well as public interest
—oups campaigning against the GATT
jpanenl.
While a lot of rhetoric has been used by
sides in this debate, the claims and
,-c.:cr-claims have not always been based
cohard facts. In order to put this debate in
,r proper perspective, an analysis of
(Bnparative prices of drugs in different
sentries is presented here. The countries
chosen include four developing countries
from South Asia-India, Bangladesh,
Wistan and Sri Lanka, and two countries
fem the developed world - Canada and the
MCThecountriesofSouth Asia were chosen
• they, broadly, are at similar stages of
4'dopment and their economies function
Bder familiar constraints. Thelwo countries
vt'-hdeveloped market economies aresimilar
* the extent that both retain strong state
*PPort to health care and have mechanisms
* regulate cost of health care including
of drugs. India with its liberal process
*"tngsystem as regard to pharmaceuticals

(now under suspended animation) is the
only country in this study not to have a
product patent regime as yet (if one discounts
the recent amendment which could not by­
passed by parliament).
Drugs chosen for analysis fall under two
groups. The first group comprises of six drugs
- amoxycillin, co-trimoxazole, diazepam,
■ erythromycin, frusemide and propanolol which have been in the market for a long
time and are not under patent protection
(processor product) in the countries analysed.
While an analysis based on these six drugs
cannot be termed as exhaustive, they are
fairly representativeofthedrugs in the Indian
market. Of the five top selling products in

the Indian market, formulations of these
drugs account for three, and of the top 20
these account for seven, viz, Althrocin,
Septran, Roscillin, Novamox, Mox,
Ampoxin and Voveran. Althrocin, a
formulation of erythromycin, is the top
selling brand with an annual turnover of Rs
4.24 crore. The second group comprises
three newer drugs, Ranitidine, Diclofenac
and Nifedipin, which are still under product
patent outside India or have come off patents
only recently. These drugs too are fairly
representative with formulations based on
two of them, Zinctac containing ranitidine
and Voveran containing diclofenac, being
listed at the sixth and 20th places respectively
among top selling products (ORG Retail
Audit, December 1994).
The retail prices of these drugs have been
compared in the six countries. Where
different brands have varying prices, the
lowest price has been taken for purposes
of comparison. In order to show the
relative position in different countries,
average cost of each basket of drugs
(comprising six drugs in the basket of
older drugs and three drugs in the case of
newer.drugs) has been computed. This

Table 2: Comparative Costs of Newer Drugs
(Patent Protected or Recently Off Patents)

Cost in $ of 100 Units
(Tablets/Capsules)

India
Bangladesh
Pakistan
Sri Lanka
Canada
UK

Ranitidine

Diclofenac

Nifedipin

3.00
5.00
14.00
63.00
31.00
73.00

2.00
2.00
7.00
2.00
30.00
16.00

2.00
20.00
2.00
9.00
28.00
11.00

Average
Real
GPD Per
Cost for
Basket
Capita
in Dollars
of Three
Drugs
(1991)
Where Cost
• in India= I

1.00
4 09
3.06
8.83
13.11
12.61

1510.00
1160.00
1970.00
2650.00
19320.00
16340.00

Adjusted
Cost of
Basket of
Three Drugs
(According
to GPD
Per Capita)

■

1.00
5.49
2.35
5.03
1.02
1.17

Source: Same as in Table 1.

Table 1: Comparative Costs of Older Drugs
(Not Patent Protected)
Average
Cost for
Basket of
Six Drugs
When: Cost
in India= I *

Cost in $ of 100 Units (Tablets/Capsulcs)

Amoxycillin Cotrimoxazole

Diazepam

Erythromycin

Frusemide

Propanolol

3.00

12.00
10.00
5.00
5.00
6.00
6.00

1.00
1.00
0.60
0.60
0.50
-

3.00
1.00
1.00 ‘
.0.60

BL,_____

' bfcfah
■ /‘’-On

8

9.00
6.00
5.00 '
4.00
8.00
7.00

’

,

3.00
3.00
3.00
1.00
6.00
5.00

3.00
0.14
0.50
1.00

’

-

’

1.00
0.77
0.65
0.34
0.81
0.82

Real
Adjusted
GDP Per
Capita
Basket of
in Dollars Six Drugs
(1991)
(According
to GPD Per
Capita)**
1510.00
1160.00
1970.00
2650.00
19320.00
16340.00

1.00
1.00
0.50
0.19
0.06
0.08

^u|at«l by taking cost of each drug in Indians I unit and computing the relative cost in other countries Then the average of thp basket of drugs has
** <<r ’j'lten. Where data for all drugs not available, average computed on the basis of number of drugs on which data is available.
r^_-IJ|ated by multiplying average cost with the ratio of GDP per capita in India, with the corresponding figure for each country. This gives a rough
°f the financial impact of buying drugs in each country.
' K Balasubramaniam, ‘Retail Drug Prices in Asia-Pacific Region', HAI News, December 1995.

and Political Weekly

January 27, 1996

computation was done by taking the price
of each drug as one unit in the case of
India. Based on this the relative cost of
each of the drugs in the countries studied
have then been calculated, and a mean
value for each basket calculated from this.
To show the real impact of drug prices the
relative cost and mean cost adjusted
against the GDP per capita has also been
shown.
The analysis is shown in Tables 1 and 2.
We see from Table 1 that the average cost
of older drugs is the highest in India. The
cost is three times that in Sri Lanka and
even higher than tn UK and Canada.
Adjusted against GDP per capita, cost of
these drugs works out to be five times that
in Sri Lanka and 12 to 16 times that in UK
and Canada, The position is the complete
reverse in the case of newer (patent
protected) drugs. Table 2 shows that in the
case of these drugs, prices are lowest in
India. These drugs are three to 13 times
more expensive in the other countries
studied. Even when adjusted against GDP
per capita the costs of these drugs work
out to be the cheapest in India,
This interesting outcome lays bare the
half-truths and lies resorted to by the two
contending industry associations in the
pharmaceutical sector in India, the Indian
Drug Manufacturers Association (IDMA)
(representing Indian companies) and the
Organisation of Pharmaceutical Producers
of India (OPPI) (representing multinational
companies). The IDMA has consistently
argued that drug prices are the lowest in
India and a change in patent laws would
reverse this position. The above analysis
clearly shows that drug prices are lower in
India only in the case of patent protected
drugs. We find from our study that in the
case of other drugs, prices are higher in
India than even developed industrialised
countries. Given the fact that drugs in the
Indian market, which are under product
patents globally, account for only 10-12
per cent of total pharmaceutical safes, this
means that by and large Indian drugs are
costlier.
This is indeed a strange situation as
logically India should have an edge over
almost any country in the world in this
respect. Unlike Pakistan, Bangladesh and ,
Sri Lanka. India has the indigenous
capability to manufacture most drugs.
Further economies of scale should favour :
Indian manufacturers in comparison to these
south Asian countries, given the larger size
of the Indian market. Compared to UK and
Canada, Indian manufacturers enjoy the
advantage of lower infrastructural and
labour costs. A conclusion one can draw
is that the industry in India is either
unwilling or incapable of passing on the

196

results of these gratuitous circumstances to
the consumer. In fact, to the contrary,
companies in India (both Indian and MNC)
have received a further bonus in 1995 in the
form of the new Drug Price Control Order,
where price control mechanisms have been
further relaxed by drastically reducing the
Span of control and by increasing the
profitability allowed in drugs still under
price control. If the industry still wishes
to claim that the new DPCO is fair, it would
lay itself open to the charge that Indian
industry is not globally competitive. This
is a factor worth exploring and would point
to a high degree of technology obsolescence
in the industry.
Table 2 exposes the claims of the OPPI,
which argues that a change in Indian patent
laws will not affect drug prices significantly.
The OPPI has consistently claimed that drug
prices for patent protected drugs will be kept
incheck by India’s drug price control system.
What our study shows is that in fact India's
price control system has been incapable of
pegging drug prices even at the level of
prices in some developed countries. The
comparatively low prices of newer drugs
have been in spite of the lax control
mechanisms, solely as a result of India’s
liberal patent laws. Scrapping of the 1970

Indian Patent Act would do aw-

to be ineffective in keepingdown drus
■
The benefits of the advantage that the I•
pharmaceutical industrycnjoysovera|| **
third world nations, in terms oftheavaii.s,.*
of indigenous technology and a7
domestic market, have not been passed i

to the consumers. The second
concern is the tacit support that the in$J;
has received, regarding its claim ihjft?'’
prices in Indiaare comparatively lower f-I
some public interest groups oppojin’* j
change in India’s patent laws. WhifeJl
tactical necessity of aligning with li^Zl
industry associations like the IDMA isd&^
the reasons for adopting their rhetoric ios I
measure are obscure. It probably points' ^
the need forexercisingpropcr vigilance
such short-term alliances are worked aJ
lest the charge of co-option be laid at
door of public interest bodies. It also pc-_ >.
to the need for such bodies to critical

examine arguments put forward by
industry, before puttingthestampofappn>i,:
in joint platforms.

1
SCIENCE AND EMPIRE : Essays in Indian Context (1700-1940
Edited by Deepak Kumar
This book is a collection of fourteen well-researched papers focussc i
attention on how,science and technology were used for imperia! purpose ;;
the close links between the two, and what response it elicited from the Indian
These papers help not only in placing scientific and technological worts’’j
British India within colonial parameters but also in understanding the
|

nism of imperialism itself.
ISBN 81-85150-19-2

R*'3*j

SCIENCE, TECHNOLOGY AND COLONISATION
An Indian Experience (1757-1857)
Satpal Sangwan
'
What Place science had in the process of colonisation? What was the tyP * j
scientific development that India experienced under colonial relat^^ i
what way the local people responded to the new descriptions of scier** f.(-1
technology? These questions call for a closer analysis of the
developed between science and imperialism. This book studies S’
development in India during the first century of colonial rule in this PersJ^ ,, •

-t

ISBN 81-85150-11-9

A ANAMIKA PUBLISHERS & DISTRIBUTOR
/

"

whatever little relief Indian con<
could avail.
I n conclusion, the above study raise;
important fundamental issues. It show”" ’"'
India’s drug pricing mechanism has J|

\ 29A, Pocket D, Deep Enclave, Ashok Vihar III. DeU^^, -;

Economic and Political Weekly

J‘in

Drug Prices: Sharp Rise
after Decontrol

Table for full list of products which have
registered a price rise over December 1994
prices in September 1995.)
Over 100 per cent rise is recorded in 41
products and 11 of these are ophthalmic
products of Bell Pharma. The top position
is taken by Gesicaine, a local anaesthetic of
S G Pharma with a rise of 221 per cent and
followed by Glucagon (for hypoglycemic
attack), Torrent, 200 per cent; Hematrine
(iron preparation), Sandoz, 148 per cent;
Daktacort (antifungal), Ethnor, 147 percent;
Epsolin (anticonvulsant). Cadila, 145 per
cent; Depsonil (antidepressant), S G Ph, 144
percent; Scptopal (antibiotic), Merck, 139
per cent; Nutrisan (nutrition supplement),
Sandoz. 121 percent; Alludrox Gel (antacid),
Wyeth, 114 per cent; Myambutol
(antitubercular). Cyanamide. 114 per cent;
Corex (cough mixture), Pfizer, 108 percent;
Testanol-25 (hormone), Infar, 108 percent;
Lanoxin (cardiac drug), B Wellcome, 105
per cent; Dilantin (anticonvulsant), Parke
Davis, 105 per cent; and Endrine (nasal
decongestant), Wyeth, 104 per cent.
Ten products show a rise between 90 and
100 per cent, 7 products between 80 and 90
per cent, 17 products between 70 and 80 per
cent. 10 products between 60 and 70 per
cent, and 33 products between 50 and 60
per cent. In this group the most commonly
used products are Arovit (vitamin),
Neosporin (skin ointment), Incidal
(antiallergic),Zect (cough mixture). Prenatal

VVishvas Rane

The sharp rise in drug prices has been facilitated by the new policy
adopted by the government on drug pricing.
UNDER the 1995 DPCO, drug units are
entitled for 18 per cent post-tax return on
net worth if bulk drugs are manufactured
from the basic stages, as against 16 per cent
in the 1987 "DPCO. This rise the drug
manufacturers can claim justifiably.
The bulk drug units making 6-APA and
7-ADCA intermediates for synthetic
penicillin will now have to source penicillin
G from local manufacturers to the extent
of 70 per cent of their requirement. This
government policy shows a clear shift in
favour of domestic penicillin G
manufacturers. An inevitable outcome of
this is likely to be a price increase of semi­
synthetic penicillins like ampicillin.
amoxycillin and cephalexin.
The drug industry and trade had come
to an agreement to increase the trade
margins for decontrolled drugs in phases,
starting from July I. The government has
decontrolled a total of 67 bulk drugs and
their formulations under DPCO 1995 and
chemists are entitled to a higher margin for
these products. The agreement provides for
a 2 per cent increase in trade margins at 18
per cent to retailers from July 1 for all
formulations of drugs which are outside the
price control under DPCO 1995. The
wholesale trade will get a margin of 9 per
cent for the decontrolled drugs. A further
2 per cent increase in the retail trade margin
and a 1 per cent hike in wholesale margin
will be effected from January 1996 in the
second phase. With these increases the
retail margin will be 20 per cent and
wholesalers' margin will be 10 per cent for
all decontrolled drugs. This makes a total
of 30 per cent for drug retailing and
wholeselling.
According to a comment in Express
Pharma Pulse (June 29, 1995), "A 30 to 40
per cent rise in the prices of most of the
decontrolled drugs is expected from July
1995, with the agreement between the drug
industry associations and pharmaceutical
trade to hike trade margins taking effect. A
further 60 per cent increase in prices of these
drugs is likely from next year. An estimated
Rs 25 crore is expected to be collected by
the All India Organisations of Chemists and
Druggists (AIOCD) from the drug units.”
In short the drug industry and the trade
decide amongst themselves how much should

Economic and Political Weekly

be extracted from the consumers, and the
government lakes the position of a silent
spectator.
Normally I Opercent free scheme is offered
by many drug companies throughout the
year, but Table 1 shows the additional free
schemes offered.
From Table 2 we find that the prices of
nearly 20 per cent of the products and 28
per cent of the products and packs have gone
up. The break-up of the price rise shows that
11.17 per cent have shown a rise of less than
10 per cent. 5.32 per cent a rise of 10 to 20
per cent, 3.83 per cent a rise of 20 to 30 per
cent, 2.30 per cent a rise of 30 to 40 per cent
and 1.28 per cent a rise of 40 to 50 per cent.
But strangely enough 3.80 per cent show a
rise of over 50 per cent. Some of this rise
may be of bigger packings. This has been
the usual practice of the drug companies to
increase the prices of different packings of
products at different times. (See Appendix

Table 1: Free Schemes

Manufacturer

Brand Name

Scheme

Per Cent Free

Amazon

Coldin Tab
Zolgin Tab
Ibunova Tab
Eldopar Cap
Renitab 150
Microflox 250/500
Microdine Oint
Gentamycin 10 ml
Genman 2 ml

10 + 6
10 + 5
10 + 6
10+ 5
10 + 4
10 + 4
10 + 5
7+5
10 + 5

60
50
60
50
40
40
50
71.43
50

Brown and Burk
Micro Labs

Plethico
Mac Labs

Table 2; Productwise Price Rise

Category System

0-10
Alimentary
Cardiovascular
Central nervous
Musculo-skeletal
Hormones
Genito-urinary
Infections
Nutrition
Respiratory
Ear-Nose-Throat
Eye
Allergic
Skin
Others
Total Products (3,607)
Per cent

November 25, 1995

No of Products Showing Per Cent Price Rise of_____
30-40
40-50 Over 50
20-30
10-20

28
27
49
17
31
13
110
65
20

10
23
30

10

6
2
12
14
192
5.32

27
[
403
11.17

13
9
22
29
12

12
11
13
6
22
19
9
2
4
4
15
10
138
3.83

1
10
13 .
- 4

2
6
2
2

12
12
5
2

7
2

3 ’
11
2
83
2.30

2
46
1.28

2
9
20
9
17
18
9
6
17 ’
2
11
1]
137
3.80

2977

(nutritional supplement). Cardinal
(anticonvulsant). Sodium antimony
gluconate (for Kala azar), Algipan (pain
balm), Xylocaine (anaesthetic). Efcorlin
(nasal drops). Diabinase (diabetes), Paraxin
(antibiotic), Nebasulph (antiseptic).
Triaminic (cough mixture), Arovit (vitamin).
Pfizer has hiked the price of its tetracycline
by going generic. The price otTjardinal. the

most effective and the cheapest of
anticonvulsants, has gone up by 50 per cent.
In June 1993, the prices were marginally
reduced, but were increased in December
1993 reaching a maximum by June 1995.
The comparative figures presented here are
from Monthly Index ofMedical Specialities
(MIMS) December 1993 to September 1995:
5.32 per cent of the products have shown
marginal decline in prices and the maximum
decline is for norfloxacin, ciprofloxacin,
famotidine, omeprazol. rifampicin, etc. The
real price rise began from June 1995 and
henceforth more and more products will
raise the prices.
In September 1994. the government of
India, ministry of chemicals and fertilisers.
department ofchemicals and petrochemicals
announced modifications in the Drug Policy.
1986. Under clause 22.7 2(iv) ‘Span of
Control’ it says "Government will keep a
close watch on the prices of medicines which
are taken out of price control. In case, the
prices of these medicines rise unreasonably,
the government would take appropriate
measures, including reclamping of price
control.” Now that 67 drugs have been
decontrolled, it becomes the responsibility
of voluntary organisations to keep track of
price rise and force the government to take
appropriate action.
Under clause 22.7.3 ‘Ceiling Prices' it
says "Ceiling prices would be fixed for
commonly marketed standard pack sizes of
price-controlled formulations and it would
be obligatory for all. including small scale
units, to follow the price so fixed." Now in
this category we will look at the prices of
two most commonly used drugs, paracetamol
and aspirin. The ceiling prices fixed and
notified by the government of India under
DPCO 1987 and continued to be in operation
under DPCO 1995 are as follows (Order
No 672(E). September 14, 1992).
Paracetamol 500 mg/tab strip (10 T)
(s> Rs 2.74; 125 mg/5 mJ syrup (60 ml)
@ Rs 7.04; 150 mg/ml drops (15 ml)
@ Rs 6.58.
The actual prices prevalent today are:
Calpol (Burroughs Wellcome) 500 mg tab
(10 T) Rs 4.12 +50.36 per cent; 125 mg/
5 ml (60 ml) Rs 11.67 +65.77 per cent.
Crocin (Duphar) 500 mg tab (10 T) Rs 3.98
+ 45.26 per cent; 125 mg/5 ml syrup (60
ml) Rs 10.78 +53.13 per cent; 150 mg/ml
drops (15 ml) Rs 7.34 +11.55 per cent.
Metacin (Themis) 500 mg tab (10T) Rs 3.13

2978

Appendix Table: Products Showing Price Rise More Than 50 Per Cent

Product

Company

Packing

Gcsicaine(l percent)
S G Pharma
30 ml
Fristina
MAC
110 ml
Kenalog S
Sarabhai
2.5 gm
Otoflour
Bell Pharma
I0T
Glucagon
Torrent
vial
Sladmed Ehtrozyme
Stadmed
45 ml
Mycodcrm
FDC
100 gm
Fungizone IV
Sarabhai
50 mg
Midarine
Burroughs Wellcome 2 ml
Bell Homatropine
Bell Pharma
10 ml
(2 per cent)
Capsovit forte
Pharmed
30 C
Mac Soralen
Mae
15 ml
Walavjn FP
Wallace
10 T
Bell Diono Resolvant
Bell
3 gm
Bell Resolvant
Bell
3 gm
Hematrine
Sandoz
40 C
Daktacort
Ethnor
5 gm
Epsolin
Cadila
2 ml
Depsonil PM
S G Pharma
IOC
Bell Homa (1 percent)
10 ml
Septopal
Merck
Algipan
Wyeth
20 gm
Broacil dry syp
IDPL
40 ml
Copamide
Deys
10 T
Capto Miotic (2 per cent)Bell
10 ml
Marax Unimed
20 T
Nutrisan
Sandoz
30 C
Bellpino Artnna
Bell
5 ml
Alludrox Gel
Wyeth
350 ml
Myambutol
Cyanamide 400 mg I0T
Gesicaine' (I per cent)
S G Pharma
30 ml
Biomiotic
Bell
10 ml
Tivision
10 ml
Bell
Corex
Pfizer
60 ml
Testanon-25
Infar
1 ml
Lanoxin
Burroughs Wellcome: I0T
Dilantin
I00T
Parke Davis
50 ml
Albudac
Cadila
Endrine
Wyeth
30 ml
Pincort
Bell
5 ml
Citravite
10T
Phanned
Thromycin
45 ml
IDPL
Kinctone
300 ml
Boots
10 T
Cal mod
IDPL 5 mg
Lanixin
Burroughs Wellcome 2 ml
Arovit
Roche drops
7.5 ml
10 ml
Zinco Sulpha
Bell
Neosporin Skin
Burroughs Wellcome 20 mg
Ridinox
10 ml
Bell
Lorvas
10T
Torrent
Pupilleto Forte
5 ml
Bell
Incidal.
I0T
Bayer
Vanmycetin
100
Opticaps
Zcct
110 ml
Alembic
Prenatal
I50C
Cyanamide
Cardinal
2 ml
Rhone Poulenc
Betonin
450 ml
Boots
Licab
JOT
Torrent 300 mg
Sodium Antimony
Gluconate
30 ml
Alb Dav
Oricitral
Phdrm Research
450 ml
Algipan
Wyeth
40 g
Bronkotab 4
Biddle Sawyer
10T
Xylocaine (2 per cent) Astra 1DL
30 ml
Hemocid
Biddle Sawyer
20 ml
Benocide
Burroughs Wellcome I0T

______ Rate on
December
September
1993
1995

Per Cent
Rise

3.48
6.10
2.53
4.00
114.98
7.51
15.25
55.51
3.42
5.62

11.17
19.52
8.03
12.00
330.00
21.30
22.40
150.00
6.93
14.90

220.98
220.00
217 39
200.00
187.01
183.62
181.67
170.22
181.58
165.12

9.20
6.80
8.80
5.90
5.05
16.16
7.93
1.01
6.58
4.20
1534.41
7 43
9.61
1.73
13.80
12.83

6.25
6.90
9.68
211.14
3.35
2.70
10.76
5.09
11.86
5.20
11.70
5.00
2.91
15.01
10.44
36.43
6.80
23.19
5.90

24.00
17.66
22.77
15.00
12.80
40.00
19.60
2.47
16.05
10.15
3672.46
17.70
22.61
4 00
31.80
28.81
30.00
10.00
28.93
12 64
8.83
40.00
10.00
19.55
10 40
4.00
44.41
1420.0019.22
12.75
14.00
19.25
42.00
6.65
5.31
21.15
10.00
22.94
10.00
22.50
9.50
5.50
28.29
19.58
67.99
12.69
43.17
10.90

160 87
159.71
158.75
154.24
153.47
147.52
147.16
144.55
143.92
141.67
139.37
138.22
135.28
131.21
130.43
124.55
121.40
115.05
114.46
113.51
113.22
112.77
112.77
108.20
108.00
105.13
105.13
104.32
104.03
104.00
102.90
98.86
98.68
98.51
96.67
96.56
96.46
93.42
92.31
92.31
9O.(X)
89.00
88.47
87.55
86.63
86.6.2
86.16
84.75 *

43.75
30.65
14.25
2.93
7.30
32.00
11.18

78.65
55.00
25.50
5.18
9.05
56.36
2.01

79.77
79.45
78.95
76.79
76.76
76.13
75.42

4.65
13.49
5.92
4.16
18.80
4.70
9.39
5.00
1.95
21.65
695.00

(Continued)

Economic and Political Weekly

November 25, 1995

ArrENnix Table: Pkobutto Showing Price Rise More. Than 50 Per Cent (Continued)
Product

Packing

Company

Efcorlin
15 ml
Glaxo
Hexavit
IDPL
500 T
Bidurate-L
I0T
Croydon
Methaz.il
10 ml
Bell
Diabinase (100 mg)
Pfizer
I0T
Crotorax HC
S G Pharma
10g
Paraxin (250 mg)
Boerrhinger-M
IOC
Depsonil iortc
S G Pharma
I0T
Nebas sulph powder
Pfizer
10 g
Beetrion
I0T
Francho Indian
Wander
10 T
Triaminic
Kenacoinb
Sarabhai
5g
Sarotena
CFL Pharma
I0T
Arovit
Roche
10 T
Catobcll
Bell
10 ml
Brexic
6C
Woekhardt
Dexona
Cadila
5 ml
Salinex
IDPL
10 T
Maxmox
Max
10 ml
Perfocyn
Bell
5 ml
4C
Terramycin (generic)
Pfizer
Nebasulph skin
Omni protec
15G
Torrent
10 T
Hexidol plus
Derobin
Glaxo
25 g
Altol
Indoco
I0T
Giynase
USV
10 T
Oxytetracyclin skin
Pfizer
5g
Hamycin vag (6 ovules) HAL
Tavist
Wander •
50 ml
Sedonal
East India
Gravol
Wallace
10T
Depsonil DZ
Burroughs Wellcome 10 T
Kay-Ciel
Stadmed
228 ml
Hycibex
Pharmed
110 ml
Lynoral
Infar
I0T
Tcstanon-50
Infar
1 ml
Calpol
Burroughs Wellcome 60 ml
Wockadine
Woekhardt
500 ml
Arachitol (3 lack)
Duphar
3x1 ml
Sarotena
CFL Pharma
10 T
USV
Aquasol
30 C
Subamycin
Dey’s
IOC
Tonoferon
East India
450 ml
PZA
Ciba
10 T
Paraci n
Stadmed
60 ml
Qexosyn ZN
Bell
5 ml
Boots
Eptoin
I00T
Cardinal (60 ml)
Rhone Poulenc
10T
Cardinal (30 ml)
Rhone Poulenc
I0T
Synertab
Pharmed
I0T
Astelong
Torrent
60 ml
Neosporin
Burroughs Wellcome 10 ml
USV
Arlidin
10T

+14.23 percent: 125 mg/5 ml syrup(60 ml)
Rs 8.21 +16.62 per cent, 150 mg/ml drops
(15 ml) Rs 7.42 + 12.77 percent (Metacin
prices have not gone up yet).
The popular brands of paracetamol prices
are 65.77 to 11.55 per cent more than the
ceiling price fixed by the government. The
price of Calpol tablet has gone up by 40 per
cent and syrup by 56 per cent and Crocin
tablet has gone up by 35 per cent and syrup
by 31 per cent.
Another way of circumventing the rules

Economic and Political Weekly

Rate on
December
September
1993
1995

4.82
64.00
3.90
6.35
2.66
7.45
11.67
3 13
7.46
4.06
6.22
4.46
6.72
6.10
4.50
40.71
1.68
8.25
6.55
3.82
9 44
11.39
10.61
5.50
5.07
10 00
20.77
2.61
6.35
3.08
15.01
9.07
6.00
12.00
7.49
122.45
8.00
6.25
23.05
7.60
27.41
17.12
5.25
5.29
27.85
3.28
2.39
6.48
15.83
8.90
8.36

8.40
111.53
6.71
8.50
4.60
12.84
20.00
5.35
12.71
6.91
10.55
7 56
5.41
11.11
10.00
7.32
65.44
2.70
13.24
10.50
6.11
15.07
18.90
18.07
16.80
8.69
8.01
15.76
32.67
4 09
9.95
4.82
23.50
14.12
9.35
18.70
11.67
189.48
12.36
9.65
35.50
11.69
41.94
23.10
8.00
8.05
42.25
4.97
3.62
9.80
23.90
12.97
12.60

Per Cent
Rise
74.27
74.24
73.59
73.47
72.93
72.35
71.38
70.93
70.38
70.20
69.61
69.51
66.46
65.33
63.93
62.67
50.75
60.71
60.48
60.31
59.95
59.64
58.69
58.65
58.34
58.00
57.99
57.60
57.29
56.70
56.69
56.49
56.56
56.45
55.83
55.83
55.81
54.74
54.50
* 54.40
54.01
53.82
53.01
52.45
52.38
52.17
51.71
51.52
51.46
51.23
50.78
50.81
50.72

and regulations is to make drug combinations.
One such example is Fortagesic of WinMedicare. It contains paracetamol 500 mg
and pentazocin 15 mg per tablet. Fortwin
25 mg pentazocin costs Rs 2.73 per tablet
and Crocin 500 mg paracetamol tablets costs
Rs 0.40. So 500 mg paracetamol and 25 mg
pentazocin should cost Rs 3.13. But
Fortagesic with 15 mg pentazocin and 500
mg paracetamol costs Rs 4.95 per tablet.
Similarly Win-Medicare has another
overpriced combination product of

November 25, 1995

paracetamol 450 mg + chlormezanonc 100
mg costing Rs 2.50 per tablet.
The ceiling price of aspirin formulation
(per order No 12(E) of January 4. 1988) is
as follows: Aspirin 300 mg/tablct strip (10
tabs) @ Rs 0.64; Actualpriccsarcasfollows
(for 10 tablet strips): Apidin(IDPL) Aspirin
200 mg +++ (10 T) Rs 2.42; Colsprin
(Reckits) Aspirin 325 mg (10 T) Rs 1.92;
Disprin (Rcckits) 350 mg +++ (10 T)
Rs 2.00; Micropyrin (Nicholas) 350 mg +
(10 T) Rs 2.37; and Winsprin (WinMedicare) 324 mg (10 T) Rs 3.73.
The brand prices are more than lherceiling
prices from 483 per cent to 200 per cent.
Besides none of these products confirm to
the standard formulation of 300 mg aspirin.
This shows the inefficiency of FDA in
allowing irrational formulations.
To top all this the drug companies have
marketed small dose aspirin as ^micoagulants for prophylaxis in cases of
increased risks of blood clotting. The
government notified ceiling price of 300
mg aspirin/tab (I0T) is Rs 0.64, ASA 50
(German Remedies) 50 mg aspirin/tab
(I0T), 6; and Aspicot (Concept) 80 mg
aspirin/tab (10 T), 2.20. How can the
government allow 9.38 times (938 percent)
the ceiling price to ASA 50 and a price rise
of24.08 percent as well? 1 f we can compare
all the ceiling prices and find wide
discrepancies this can be reported to the
government.
Most of the expectorants (Benadryl. Brozedex, Cinaryl, Corex, Deacos, Lupihist.
Mil's linctus. Protussa plus, Solvin,
Soothex. Sovental, Triaminic. Tristina.
Zedex and Zeet) show increase in price.
ranging from 20 per cent to 220 per cent.
Likewise vitamin formulations (AquasolA, Arachitol, Arovit. Bccosules, Beetrion,
Bcplex, Betonin, Bivinal forte, Citravite.
Cobadex forte, Hexavit. Hovite, Hycibcx.
Macroberin. Pedic. Polybion, Stresscaps,
Sukcee, Viscneral. Vitneuron, etc);
minerals (Calcium-Sandoz, Cital.Citralka,
Coslyte, Electral, Elcctrobiob, Filibon,
Macalvit, Nutrisan. Ostocalcium. etc); iron
preparations (Dexorangc plus, Fefol.
Fessovitc. Hematrine. Hepatoglobin,
Tmfcron. Phosphomin, Tonoferon, etc): and
nutritional products (Bayer’s tonic.
Hemiphos. Kinctonc, Livogcn, Ncogadine
elixir, etc) show rise in price.
In the antituberculous products, the
prices of ethambutol, and pyrazinamide
have gone up. Among antibiotics
tetracycline and chloramphenicol rates have
gone up. Prices of hormones have
consistently been raised and this time, we
see the price of Aquaviron (without Bl2)
has gone up by 41.36 per cent, Lynoral by
56 per cent, Orgalutin by 47 per cent and
Tcstanon by 108 per cent. Most of the
anticonvulsants like Dilantin, Epilex,

2979

Epsolin, Eploin, Garoin, Mysolin, Valparan
alkalets. and Cardinal have also shown a
price rise. Prices of sedatives and
antidepressants continue to rise.
Some of the newer entrants in the drug
industry have become intelligent enough to
market only tablets - so that capital
investment is less or one can get the tablets
compounded on a loan licence - for vague
indications, where doctors cannot complain
that there are no results, and at very high
prices so that there is no need to ask for an
increase in rates. One such example is Scrdia
which has introduced the following products.
Rates (Rs)
Convcrsyl
(antihypertensive) 10T
201.47 (1 od)
Daflon-500 (cardiac)
10 T
158.64 (I bd)

Diamicron (antidiabetic)
10 T
Flavcdon-20 (cardiac)
10 T
Isomeride (antiobesity)
10 C
Natrilix
(antihypertensive) 10 T
Ponderax
(antiobesity) IOC
Survector
(antidepressant) 10 T
Tri vast al LA
(anti-parkinson) 10 T

90.40 (I bd)

90.40 (1 ids)

88.81 (1 bd)
37.10(1 od)

77.22 (I od)

119.96 (I bd)

141.55 (1-4 d)

(Od is once daily; bd is twice daily: and tds
thrice daily.)
Are such high introductory rates for such
products justified?

Plight of Child Labourers
Pankaj
Though immediate intervention to alleviate the misery of child
labourers is necessary, any attempt to render them jobless is equally
uncalled for.
DELHI, where maximum number of
organisations work for the welfare of child
labourers and where laws for abolishing
child labour throughout the country are
formulated, has 18 per cent of its 25 lakh
child population employed in various types
of physical labour.
A report by the UNICEF says, the
working conditions for child labourers are
harsh in India. About45,000children work
for almost ten hours a day in the various
industries. In Delhi, a majority of the child
labour is engaged as domestic servants.
Vehicle repair shops and garages employ
a sizeable number of the child labourers.
Children can also be found working in
dhabas. tea stalls and in small hotels to a
large extent.
In UP. carpets industries in Mirzapur and
Bhadoi and glass industry of Firozabad,
and various other industries have 7-8
million child labourers. UP accounts for
20 per cent of the entire child labour force
in the country. It is shameful that after 47
years of independence India has more
than 5.5 crore child labourers. No serious
attempt has been made to liberate them
except the Child Labour (Prohibition and
Regulation) Act. 1986 and the Factories
Act in 1948.
According to the Centre of Concern for
the Child Labour, at present 10,000

2980

children are engaged in rag picking in
Delhi, with last 15 years registering a rapid
increase in their presence. The centre also
mentions that girls constitute 30 per cent
of the child labour. A large number of child
labourers live on streets and this makes
them more vulnerable to sexual and drug
abuse.
A few months ago India found herself in
an embarrassing situation when Germany
refused to attend an international conference
of carpet manufacturers organised by India
on the grounds that the Indian carpets were
made by the children. To abolish child labour.
the European Community has passed tbe
social clause to apply selective import
restrictions on the countries who are denying
minimum labour standard to their workers.
The Indian carpet industry, which has a
turnover of approximately Rs 1,400 crore,
will suffer.
In Mirzapur-Bhadoi carpet belt 40 per
cent of the carpet weavers are children below
14 years. Knitting, weaving and pre­
processing in these carpet industries
adversely affect their back and their eye
sight and in a very short period they lose
their fingers. Another 10,000children work
in the lock industry of Aligarh where they
slog for 12-15 hours in dim light and amidst
highly poisonous chemicals which make
them prone to asthma and various skin

problems. It has been estimated that45.000
children below 15 years arc engaged in
brass industries in Moradabad and 50.000
children in the bangle industries of
Firozabad. In Lucknow, zari industry
employs at least 45.000 children. Child
labour is a feature of almost all the states.
In diamond cutting and polishing industry
of Surat at least 50.000 children do drilling
and polishing in highly polluted environment
for long hours which exposes them to
several health hazards due to lack of basic
facilities at the workplace.
The world conference in Vienna in 1993
recognised the important role the
governments can play in improving the lot
of children. Il urged nations to mobilise
maximum resources to reduce child
mortality rate and provide nutritious food
to all children. Unfortunately, no political
party ever took to abolish child labour as
children do not constitute vote banks.
According to South Asian Coalition on
Child Servitude, only voluntary
organisations are doing the work of
emancipating child labour. Non­
government organisations can more
effectively implement policies for revival.
protection and development of children.
But most of the NGOs end up rendering
the child labourers unemployed.
The NGOs always demand high priority
to be given to the literacy of these children.
Now. how can a child afford education
after giving up his low waged job? If he
goes to school he has to spend on his
studies, while working not only was he
earning but also contributing to family
income.
Child labourers are paid low wages
ranging from one-third to one-half of that
paid to adult labourers, even if the output
of the former is more. Some demand equal
wages for child labourers. But laws hardly
transform the society. Last year (till June
1994) 309 child labourers were 'released'.
But now it has become a common feature
to find one lol of child labourers being
'released' only to be replaced by other
group of children. The inspectors upon
whom lies the responsibility to enforce
laws are often bribed by the employers. Of
course, industrialists who exploit child
labour on a large scale and get high profits.
will not pay enough to the children till
government exerts pressure.
Child labour is common in developing
countries like Nepal. India. Pakistan and
Turkey, etc. In these countries poverty and
child exploitation go hand in hand. Instead
of industrialisation which deprives the
children of income earning opportunities,
schemes for poverty alleviation and
rehabilitation of chi Id labourers area better
alternative.

Economic and Political Weekly

November 25. 1995

Muslim Women’s Voices

communities. If the final enactment of a
Uniform Civil Code is not to be made an
eventual contingency in the face of the
growing chasm between the constitutional
law and the provisions of the personal laws,
Sabeeha Bano
internal reform through rationalising the
personal laws would appear to be a good
An opinion survey among Muslim women in a section of Delhi indicates strategy for those groups and communities
which do not want to submit under pressure
that while the enactment of a Uniform Civil Code is a difficult
ofeither thelibcrals or the Hindu chauvinists
proposition, the objectives sought to be promoted through the enactment to the tyranny of a Uniform Civil Code.
can be achieved equally well by a process of reform of personal laws
Our aim here is to articulate Muslim
women's voice on this question by focusing
through the internal initiatives of different communities.
on the response offered by women
respondents on aspects ofsocial practice and
EVEN though there has been a spate of Civil Code is a necessary condition for the
law which arc the core of the issue of gender
research on women in India since the UN
promotion of a strong national feeling. Others justice and the principal reason for the
declared the International Women's Year
still demand a Uniform Civil Code because
demand of a Uniform Civil Code on the part
two decades ago. little corresponding
they feel that the personal lawsof the different
of those who feel that gender justice cannot
research exists in respect of Muslim women
communities, including Muslim Personal
be assured under traditional personal laws
in India. The few studies that have appeared
Law, are gender unjust, and gender justice
of the different communities in general and
kduring the last two decades have been
may be easier to ensure through a Uniform
Muslim Personal Law in particular. Our
^undertaken either with the commonly
Civil Code. On the other hand, those opposing
analysis is based on the assumption that
prevalent prejudice against Muslims in mind
the enactment of a Uniform Civil Code have
eventually consensus on the question of
orwere otherwise methodologically deficient
couched their arguments in the democratic
internal reform would be a suitable strategy
in that they employed indices ofmeasurement
right of cultural minorities to continue to
to withstand pressure for the enactment of
of women's status which had little relevance
follow their distinct cultural traditions and
a Uniform Civil Code and in the process of
to the realities of thetr existence within the
personal laws.
that reform what Muslim women themselves
Indian environment. Therefore, studies on
This is not an appropriate place to
think should be of critical relevance.
Muslim women are called for if a realistic
undertake an examination of the rationale
The data presented here was collected
assessment of the issues of concern to them
of the different arguments advanced to
from a sample of 200 respondents drawn
and their community is to be formed.
demand or oppose theenactmentofa Uniform
from the Muslim localities in and around the
Since little empirical research exists on
Civil Code. It is sufficient to indicate that
Jamia Millia Islamia in Delhi as part of a
Muslim women, the impression somehow
the manner in which the debate on this
larger study designed to find out women’s
exists that they have no voice and no feelings
controversial question has gone on, there
understanding of the Koranic and Muslim
about the issues which concern them. This
has emerged a fair degree of consensus that
Personal Law provisions relating to divorce,
is particularly the case when it comes to the enactment of a Uniform Civil Code in the
marriage and inheritance, etc. From this
issue of gender justice. On this important
present situation is not going to be easy. For
study, we have isolated a set of questions
issue, which has been highlighted time and
one thing, the legal diversity which exists
for this discussion. Of the total respondents
again during the past several decades through
in this country is far too complex and
covered by this study, 194(97 percent) were
the demand for enactment of a Uniform Civil
bewildering and any attempt to force
Sunnis and 6 (3 per cent) were Shias. Most
Code applicable to all Indians, the debate has
uniformity of legal practice will be generati ve
of them belong to the Ashraf category of
usually taken place among men. Even when
of a great deal of social strife. Secondly,
social groups such as Saiyed. Pathan and
women have raised the issue, their reasons
there also exists diversity with respect to
Sheikh. The Saiyed women account for 30
^or demanding a Uniform Civil Code have jurisprudence or what might be considered
(15 per cent). Khan for 37 (18 per cent), and
^een taken over by men and equally, con­
the philosophy of law. Enactment of a
Sheikh for 72 (36 percent). Others belonged
tested by men. What are women’ssensibilities
Uniform Civil Code will entail reconciling
to intermediate or lower social groups of
on this question has never appeared on the
these different principles of jurisprudence
Muslims: Ansaris account for 15 (6 per
surface, and this has distorted an undcrwhich is not going to be easy. Finally,
cent), Sulaimani.Saifi and Dhobi for 22(11
standingof the problem in properperspective.
personal laws of several tribal communities
per cent), and Meo for 5 (3 per cent). The
Enactment of a Uniform Civil Code
are sanctified by the Constitution and over­
large majority of them, 142 (71 per cent)
enjoined upon the state in terms of Article
ruling them can lead to constitutional
were between 26 and 45 years old, 28 (14 per
44 of the Directive Principles of State Policy
cent) were below 25 years of age and 30 per
difficulties.
in the Constitution of India has proved to
On the whole, consensus among large
cent (15 per cent) were above 46 years of age.
be an extremely contentious issue. The
sections of opinion, except some hardcore
In terms of educational background. 37
protagonists of the Uniform Civil Code do
liberals and nationalists, is tending towards
(19 percent) were informally educated, 125
not as a whole belong to a common category
the position that enactment of a Uniform
(63 per cent) had received formal education
in terms of the arguments which they use
Civil Code is not possible, but the question
and 38 (19 per cent) were illiterate. Of the
in order to buttress their demand for
of ensuring gender justice remains. This
formally educated respondents, 15 (8 per
enactment of a Uniform Civil Code. Among
should be ensured through the different
cent) were educated up to the fifth standard,
them, there are a good many people who are
communities taking the initiative on their
40 (20 per cent) were educated up to sixth
strongly committed to democratic and liberal
own to reform their personal laws to give
to 12th standard, and 70 (35 per cent) were
values and feel that the conceptof a common
effect to considerations of gender justice
educated up to the degree level. Whether
citizenship enshrined tn the Indian
without coercion from the state or any other educated or not. most of the respondents,
Constitution demands that there should also
agency. Such reform is also called for in the
147 (74 per cent) were housewives, two (1
be a common law for all citizens. Others arc
face of the emerging tension between the
per cent) were working in house-based
motivated by very narrow nationalist or
constitutional civil law as it has developed
economic activity, 10 (5 per cent) were selfchauvinist ideas to demand a common civil
through the decisions of the Supreme Court
employed, 40 (20 per cent) were in service,
code for all Indians. For them, a Uniform
and the personal laws of the different
and one (.5 per cent) is in business. Of those

Expanding Gender Justice under Muslim Law

Economic and Political Weekly

November 25, 1995

2981

engaged in gainful economie activity, 11
(6 per cent) were earning up to Rs 500, six
(3 per cent) were earning between Rs 500 and
Rs 1.500, 10 (5 per cent) were earning bet­
ween Rs 1,500 and Rs 3,000 and 26 (30 per
cent) were earning more than 3,000 a month.
Since women enjoy limited autonomy in
terms of what they do with their earnings
and their access to the economic resources
of their families, the respondents were asked
a set of questions with respect to those
aspects as well. Of those having an
independent earning, seven (4 percent)spend
their earnings the way they want, and 46 (23
per cent) hand over their earnings to the
husband to be spent on the family. Again,
87 (44 per cent) respondents said they were
free to open and operate their own bank
account, and 113 (57 percent) admitted that
they did not enjoy this freedom. On the
whole, it would appear that the respondents
are by and large living within a traditional
family setting and are dependent on their
husbands and families in terms of their daily
course of life.
Their personal lifestyles further confirm
this. Of all the respondents, only one is
unmarried but lives within a family setting;
175 (88 per cent) arc married, four (2 per
cent) are divorced, 17 (9 per cent) are
widowed and three (2 percent) are separated,
but they too are living with their paternal
families. Of those married, 198 (99 percent)
had a traditional religious marriage and only
one had a civil marriage. As many as 138
(69 per cent) pray daily (which does not mean
that they pray live times daily: it only means
that they perform al least one prayer daily).
40 (20 per cent) pray at least on Friday, and
19 (10 per cent) pray occasionally. One
respondent said she prayed only during
personal crises and two said they did not
pray at all. Again. 156(78 per cent) observe
fast for all 30 days during Ramazan, 40 (20
per cent) observe fast on some days, and four
do not observe fasts at all. As far as engaging
in a reading of the Koran as a religious duty
is concerned, 63 (32 percent) read the Koran
daily, 85 (43 per cent) read only sometimes,
five (3 percent) read only on special occasions
and 47 (24 per cent) do not read the Koran
as a religious duty. Of those who read the
Koran. 70 (35 per cent) admitted that they
understand the Koran and 83 (42 per cent)
admitted that they did not understand what
was there in the Koran even though they read
it from time to time.
Since observance of purdah is considered
a characteristics of Muslim women, the
respondents were asked if they believed in
the purdah and what was the precise form
in which they themselves observed purdah.
Of all the respondents 182 (91 per cent) said
they believed in purdah and 18 (9 per cent)
denied believing in purdah. Of those who
said they believed in purdah, 65 (33 percent)
believed in wearing the burqa, 68 (34 per
cent) believe in covering the head with the
end of the sari or a dupatta, and 49 (25 per

2982

cent) believe in observing purdah through
proper behaviour without engaging in any
adherence to form of dress. On the whole,
therefore, the large majority*of the women
respondents covered are fairly typical Muslim
women.
Since one of the areas at the centre of the
controversy over the enactment of Uniform
Civil Code is that of marriage and divorce,
the respondents were asked a scries of
questions about marriage and divorce. Of all
the respondents, 86 (43 per cent) reported
that their formal consent to the marriage was
sought by their parents, and as many as 113
(57 per cent) said that no formal consent to
their marriage was sought from them. Again,
198 (99 per cent) were married through a
‘nikah* ceremony. The payment of mchr
promised by their husbands at the time of
marriage ranged as low as Rs 100 and as
high as Rs 40,000. Three respondents (2 per
cent) entered marriage on a ‘mchr* of less
than Rs 100,35 (18 per cent) on Fatmi mehr
which is an amount equivalent to that fixed
by Prophet Muhammad while marrying his
daughter, seven (4 per cent) on an amount
between Rs 100 and Rs 1,000, 25 (13 per
cent) on an amount between Rs 1.000 and
Rs 5,000 and 92 on an amount above
Rs 50,000. This last category includes one
respondent whose mehr was of the order of
Rs 1,25,000. Interestingly, as many as 37
(19 per cent) respondents reported that they
did not know what was the mehr fixed at
the time of their marriage.
For all the respondents except one, their
present marriage was their first marriage. It
is often believed that the case of divorce in
thecaseof Muslims results in frcquenlcasting
away of the wife. If our data is to be relied
upon, it would seem that divorce is not very
common among Muslims. This is as true of
men as much as women as our question with
respect to the marriage of the respondents'
husband shows that in the ease of 187 (94
per cent) respondents their marriage to their
present husband was also the first marriage
for the husband. Only in eight (4 per cent)
cases the present marriage of the husband
was his second marriage and in one case the
present marriage was a fourth marriage. Of
those husbands whose present marriage is
not their first marriage, only eight (4 per
cent) had divorced their wife and three (2
per cent) had married a second time after
having been widowed earlier.
Even though the overwhelming majority
of the respondents have never been divorced
and only eight (4 per cent) have married
husbands who had been widowed or di vorccd
earlier, the large majority of them arc of the
view that the practice of triple divorce is
iniquitous to women. As many as 164 (82
percent) felt that the practiccof tripledivorce
should be abolished completely, while 20
(10 per cent) thought otherwise and another
16 (8 per cent) did not show a firm opinion
on this matter. On the question of polygamy
as many as 173 (88 per cent) want the

provision for polygamous marries to be
abolished completely, 14 (7 percent) think
otherwise and 13 (7 per cent) arc undecided.
Accordingly, on an overall assessment, as
many as 76 (38 per cent) respondents felt
that Muslim personal law discriminates
against women, 70 (35 per cent) thought
otherwise and another 54 (27 percent) were
undecided.
If such a large proportion of women feel
that the provisions of Muslim personal law
relating to triple divorce and polygamy arc
iniquitous to women and should be abol ished
or that Muslim personal law discriminates
against women, the question naturally
follows what they feel about how the reform
of the law should be effected. Of all the
respondents 76 (38 percent) felt that Muslim
personal law should remain unaltered which,
in other words, means that in their opinion
the personal law needs no reforms. The
remaining respondents thought that changes
or reforms in specific areas were called for.
As many as 73 (37 percent) felt (hat reform
in respect of polygamy was called for. 62
(31 per cent) felt that reform in respect of
custody of the child in the event of separation
or divorce was called for, and 58 (29 per
cent) said that the provisions regarding
maintenance to a divorced or separated wife
needed reform. Only one respondent also
said that reform in respect to a woman's right
in paternal property was required.
The broad consensus which seems to be
emerging in Indian society with respect to
the enactment of Uniform Civil Code is that
such an enactment is a difficult proposition.
but the objectives sought to be promoted
through the enactment of Uniform Civil
Code can be achieved equally well by a
process of reform of the different personal
laws through internal initiative of the
communities themselves. Our discussion of
the data from the respondents shows that
there is a clear understanding of the need
for this kind of reform as well as a clear
understanding of the areas where such
reforms arc called for. Our respondents'
specific answers also go to show this broad
consensus. The respondents were asked to
indicate whether a Uniform Civil Code
should be enacted, or Muslim Personal Law
should be retained as it is, or it should be
reformed. Only 29 (14 percent) respondents
said that Muslim Personal Law should be
replaced with a gender-just Uniform Civil
Code, and a roughly equal number 30 (15
per cent) felt that Muslim Personal Law
should be retained as it is. Of the remaining
respondents, 35 (28 percent) felt that Muslim
Personal Law should be retained with minor
changes and another 57 (29 per cent) said
that Muslim Personal Law needs drastic
reforms, but that these changes should be
brought about within an Islamic framework.
There cannot be clearer indication for the
leaders of the community and greater reason
for them to initiate the process of reform than
this testimony.

Economic and Political Weekly

November 25, 1995

as suggested by the chief ministers’ con­
ference and thereafter it should be stepped
up each year in a phased manner to reduce
the burden of subsidy to agriculture sub­
stantially. The committee had also
emphasised the importance of discontinu­
ing the horsepower-based tariff and had
urged that the board should install meters
on the premises of all agricultural consum­
ers within three years at the latest.
The move to provide free electricity to
all farmers needs to be reconsidered against
this background. How can the MSEB ever
become financially viable if it is to provide
one-third of its total electricity supply
free of charge? The state government is
apparently considering the question of set­
ting up a state electricity regulatory com­
mission (SERC). The central government,
under political pressure from its allies in
Punjab and Tamil Nadu, has done a na­
tional disservice by diluting the provi­
sions ofthe central act on the subject insofar
as laying down a time-limit for upward
revision of agricultural tariffs and reduc­
tion of cross-subsidisation of this sector
are concerned. It will be futile to appoint
a SERC if irrational policies of supplying
free electricity are to be pursued by the
state government.
The tari If for various categories ofconsu­
mers was stepped up by MSEB by 10 to
15 percentjust acoupleofmonths ago. This
tariff increase in much lower than what
had been recommended by the board to the
state government. Any additional burden
of subsidising the agricultural sector will
require further increase in tariff. The situ­
ation will be further exacerbated once
power from Enron starts flowing in the grid
of MSEB by the end of 1998. This high
cost power will increase the average cost
of power to the board. This problem will
get further aggravated as more and more
high cost power supply becomes available
to the board from private sector power
projects in the next three years. These
large implications should not be lost sight
of in taking a final decision on this subject.
The national implications of the pro­
posed move in Maharashtra also need to
be appreciated. As the draft Ninth FiveYear Plan formulated by the erstwhile
Gujral government (March 1998) has
rightly emphasised, rationalisation ofelec­
tricity tariff is perhaps a pre-requisite for
carrying out reforms in the power sector.
The Plan brings out that, nationally, ag­
riculture and domestic sectors are pres­
ently subsidised to the tune of nearly
Rs 20,000 crore each year. There is a limit
to which the burden of subsidised sales
of electricity the agriculture and domes­
tic sectors can be passed on to the indus­
trial and commercial sectors. The Plan has
underlined that unless corrective steps are
taken, the electricity boards will face
difficulties in attracting financial resources.

Economic and Political Weekly

Private sector investment is also likely to
suffer. By now all this is well known. But
is anybody listening?
Andhra Pradesh and Haryana have leamt
a lesson on this score the hard way. Both
these states had to go back on their de­
cision to supply free electricity to agricul­
ture due to the large and unsustainable
implications for the state government

finances. One would have expected the
other states to learn from this experience.
But Maharashtra has shown that all that
matters is to retain political power at any
cost. With elections round the comer, one
should not be surprised i f some other states
follow suit and rush headlong towards the
precipice. Indeed the world of lemmings
is difficult to understand.

Price Control on Drugs Is Essential
Wishvas Rane

The drug industry has done its best to sabotage the price control
order. But even in its present form it serves a useful purpose and
cannot be allowed to be scrapped.
IN most countries including developed
countries in Europe and America regula­
tion of drug prices is prevalent in one form
or the other. Twelve out of the 16 west
European countries control dtug prices di­
rectly. All the countries have schemes for
reimbursing health care cost. The manu­
facturers are forced to keep prices low so
that the drug is kept on a high reimburse­
ment list and this is prescribed more fre­
quently. In UK. theDepartmentof Health’s
Pharmaceuticals Price Regulation Scheme
determines target profit levels individual­
ly for each company based on its con­
tribution to the UK economy. Excessive
profit gain is corrected either by a reduc­
tion in pricesorby directly reimbursing the
excess profit to the department of health.
Most of these measures are incorporated
in our DPCO, but its implementation is
not satisfactory. The DPCO was first
introduced in 1970 and has been revised
thrice since then. In 1970 all the drug
prices were controlled, which were then
reduced and restricted to 347 drugs in
1978, to 163 drugs in 1987 and to just 73
drugs in 1995. And now the drug industry
wants the DPCO to be abolished step by
step.The first step is to decontrol 17 bulk
drugs, of which cases are pending with the.
government for past three years. There­
after. the remaining 57 drugs are to be de­
controlled at the rate oi 19drugsevery six
months (Economic Times, ieptamber 28).
The government has empowered itself
to fix the maximum sale price of bulk
drugs, fix retail prices of scheduled for­
mulations, fix ceiling price of scheduled
formulations, revise price of bulk drugs
and formulations, recover dues accrued
under theDPCO 1979,recoverovercharge
amount, etc. But the government does not
seem to use the powers to streamline drug
prices. Probably bringing IV fluids under
price control will be the first ever case
after DPCO 1995. Under section 10b of
DPCO the government has been given full
power to review the prices of decontrolled
products. Most of the newly introduced

October 17-24. 1998

drugs are highly priced (Wishvas Rane,
‘New Drugs at What Cost’?, EPW, June
28,1997) and the government should force
manufacturers to fix reasonable rates of
these products. This will be one of the
ways to make the National Essential Drug
List more realistic (Wishvas Rane, ‘Is
Essential Drug List Becoming Obsolete’?
EPW, December 6, 1997).
Though regulatory control on post tax
return on net worth was imposed on bulk
drugs, most companies flouted the control
by submitting appropriated data to the
Bureau of Industrial Costs and Pricing
(BICP). Immediately after the 1986 drug
policy, through public interest litigation
(PIL) it was revealed that Hoechst, Glaxo,
Pfizer, etc, had heavily overcharged on
some of their bulk drugs. Thereafter a
large number of companies were found to
be overcharging for both bulk drugs and
formulations. The Supreme Court directed
the government to recover excess profit
from the drug companies, amounting to
Rs 2 crore in 1987. Some of the drug
companies started paying up, but others
refused to do so. Pfizer, in their balance
sheet of 1993, had earmarked nearly Rs 5
crore to pay the government, and had
enjoyed the tax benefit, but never paid the
amount to the government.
A recent report (India Today, July 20)
highlighted the fact that flouting of DPCO
regulations is rampant in the country and
Table 1

Brand

Company

Price Rs

Floraquin-N
Mcriflox
Negaflox
Norbactin
Norflox
Norilet
Normax
Norspan
Nor-U
Obax
Quinolox
Uriben
Utibid

Themis Chem
Merind
Cadila H
Ranbaxy
Cipla
Dr Reddy’s
Ipca
Blue Cross
Hind Antib
Wockhardt
Kopran
CFL Pharma
Lupin Pinn

40.00
20.55
25.75
44.78
47.00
38.00
20.84
32.40
21.20
52.28
21.15
20.89
42.75

Note: Prices of 10 Tablets norfloxacin, 400 mg
2697

pharmaceutical companies continue to
make lakhs and crores of rupees, illegally,
abetted by the active connivance of the en­
forcement authorities. As a single example, 10
tablets of norfloxacin 400 mg has been
sold for Rs 52.28, while the actual cost
is fixed at Rs 22. The National Pharma­
ceutical Pricing Authority (NPPA) was
established to work out realistic drug prices.
But it was not able to comply with this
decision. Take the example of norfloxacin
and ciprofloxacin, the prices of which
have not been accepted by the drug indus­
try and they have obtained stay orders
from the courts. Thus these two salts remain
out of the purview of DPCO and their vary­
ing market pricescan be seen fromTable 1.
Karnataka has become the first state in
the country to start formal large-scale
inquiries into the issue of flouting of and
circumventing most of the recent set of
DPCO regulations. Karnataka accounts
for an average annual drug sale of Rs 1,000
crore and investigations by the state drug
control authorities have unearthed at least
61 companies making Rs 36 crore in a
single year simply through overcharging
of drugs that come in the DPCO scheduled
category. This includes such large and
reputed companies like Ranbaxy and Natco
and such drugs as amoxicillin, cioxacillin,
metronidazole and a combination of

norfloxacin and metronidazole.
of 50 mg, 75 mg, 100 mg, 150 mg, 325
India Today in its article further says,
mg, 350 mg, 500 mg and 650 mg and the
“The contribution of the pharmaceutical
prices varying from Rs 1.26 to Rs 6.91.
industry to the health sector cannot be Table 3 gives the comparative prices of
doubted, but this does not license them to
different brands of aspirin. Why should
dupe customers. Upward price revision is
the prices vary from Rs 1.26 to Rs 6.91
never communicated to physicians and
and why should 350 mg Disprin cost 19
consumers, but price reductions are touted
paise a tablet whereas a 50 mg (one sev­
in full page advertisements in medical
enth) ASA-50 cost 70 paise a tablet?
journals and other media. The government
OPPI, the MNC organisation have been
on its part does nothing to educate the
critical of the price control on bulk drugs.
consumer. Enforcement officials are ei­
But Knoll, Parke Davis, Rhone Poulenc,
ther ignorant or choose to look the other Fulford, Franco Indian are among the top
way. Given the scenario, all responsible
50 formulation companies that do not produce
consumers must take interest in this issue
any bulk drug. Glaxo produces only three
and bring instances of DPCO violations
price-controlled bulk drugs, Pfizer two.
to the notice of state drug control depart­
HMR three, Wyeth Lab one and German
Remedies only two, whereas the big Indian
ment or to the NPPA.”
There are many ways to hoodwink the
drug companies and medium capital com­
DPCO. Changing the composition of a
panies like Sol, Kopran, Cross land, Sun
Pharma, etc, are concentrating on produc­
formulation, transferring the brand toone’s
tion of a wide range of essential bulk drugs.
own subsidiary small-scale industry, and
finally discontinuing a product. Pfizer has
The claim of Indian National sector
industry of lowest drug prices in India is
discontinued its Diabinese (chloropropanot correct (AmitavaGuha, ‘Pricecontrol of
mide) and Combatrin (pyrantel) because
they are not economically viable. The
Drugs in India: An Overview’, Rational
NPPA has further brought down the prices
Drug Bulletin, Vol 8, No3).Itis true that the
of these products by 26 to 60 per cent, but
drug prices in India are lower in compari­
son to many countries, but is certainly not
that does not solve the problem of the
consumers. As a monopoly product, the
the lowest as is evident from Table 4. If we
NPPA should make it compulsory to manu­
compare the prices of drugs procured by
international agencies like UNICEF and
facture the products. Change in compo­
sition of a formulation has been prompted
some international distributing houses, we
Table 2: Change in Formulation of Corex
in some cases because of the government
will observe that in dollar terms theirprices
Ingredient
Strength
ban orders. Take the example of Corex of are cheaper than the brands available in
Befor 1995 After 1995
Pfizer, wherein ephedrine has been drop­
India. Our government has never tried to
ped, but the prices have not been reduced.
negotiate the prices with the manufacturers.
Chlorpheniramine
maleate
4 mg
4 mg
Another glaring example is of ferrous
A study done by Delhi Science Forum
Codeine Phosphate
10 mg
10 mg
sulphate, a very commonly required
shows that large drug companies are not
Ephedrine HC1
5 mg
interested in producing bulk drugs, but
product. Formerly Glaxo had ‘Fersolate’
Sodium citrate
150 mg
that contained ferrous sulphate 195 mg,
rather prefer to act as mere traders and
Menthol
0.1 mg
<
middlemen by concentrating on formula­
copper sulphate 2.6 mg and manganese
Note: Price remains the same.
sulphate 2.6 mg per tablet. 500 tablets of tion market. In such a situation there can
Table 3: Prices of Aspirin
be no justification for liberalising produc­
‘Fersolate’ then costed Rs 40, i e, 8 paise
a tablet. This brand was then taken over tion controls, in fact more stringent con­
Brand
Company
mg/tab
Rs/10 tab
by Wellcome. They have kept the same - trols are called for. The study furthershows
ASA-50 German
composition, but have changed the name
that the prices of drugs under price control
Remedies
50
6.91
have not risen. DPCO, has thus been
as ‘Fersolate-CM’ and changed the pack­
Aspicot Concept
80
2.35
eminently successful in keeping the price
ing to 30 tablets costing Rs 23. The same
Casprin Biochem
500*
4.00
Colsprin Reckit
100*
1.26
Fersolate now costs roughly 76 paise a
of controlled drugs under control.
2.16
325*
tablet or an increase of 85 per cent.
Presently the price control through
2.80
650*
DPCO has not been effective. Prolife­
It is the duty ofthe Food and Drag Administ­
Cotasprin Batco
50
2.00
ration of irrational formulations further
ration to fix the composition of a formu­
Disorin
Rcckit Piramal 350*
1.90
Micropyrin Nicholas
350*
2.14
compound the problem of drug pricing.
lation. Take the example of aspirin which
Drug companies have been trying to cir­
is included in scheduled of the DPCO, and
Note:* inclusion of calcium carbonate, citric
cumvent the DPCO by introducing differ­
allowed to be marketed in various strengths
acid or caffeine.
ent strengths (of formulations), and dif­
Table 4: Comparison of International and Indian Drug Prices (1996)
ferent packs. Standardisation of the
strength of a formulation and its pack sizes
Drug/Strcngth
Unit
Supplier
_________ Prices US $
can be notified based on information
Indian
Internation al
available from standard medical litera­
Amoxicillin 500 mg
100 tab
UNICEF
6.84
28.59ture. A suitable mechanism for fixation of
Cephalexin 250 mg
100 cap
14.00
KCR
8.60
ceiling prices should be worked out with
Cefuroxime 750 mg .
10 vials
36.50
ECHO
20.88
Chloramphenicol 250 mg
100 cap
5.71
UNICEF
2.13
a built-in formula that can take care of the
Furosemide 40 mg
0.62
0.95
100 tab
Cross
fluctuations in bulk drug prices. In short,
Nifedipine 10 mg
21.14
100 tab
3.14
Cross
instead of abolishing the DPCO, the pro­
Note: US S 1 was taken as Rs 35 (1996 rale).
visions of the present DPCO be made
Source: International Drug Prices Indicator Guide, Boston.
operative in a more firm and rigorous way.
2698

Economic and Political Weekly

October 17-24, 1998

INTELLECTUAL PROPERTY RIGHTS AND

THE PHARMACEUTICAL INDUSTRY
By
Dr. Parvinder Singh
Vice Chairman b Managing Director
Ranbaxy Laboratories Limited

PHARMACEUTICAL INDUSTRY - STATUS
During the last 16 years since the Patents Act, 1970 came into force, the Indian
Pharmaceutical Industry has achieved diversified growth which has placed it
solidly on the world map. UNIDO has classified the Indian Pharmaceutical Industry

as having acquired the characteristics of :
- near self-sufficiency in raw materials to start production of Drugs from
basic stages;

- wide ranging therapeutic groups of drugs produced;
- using advanced development and process research ;
- possessing an efficient distribution system;

- levels of operation being comparable to international standards in
production, technology and quality of products.
The industry has recorded substantial growth during this period as is evident

from the following table:
TABLE - A
Production of
Bulk Drugs
(RUPEES IN CRORES)

Year

Production of
Formulations

1975-76

130

560

1987-88

475

2750

GROWTH

3.7 times

4.6

times

The demand for pharmaceutical products has been increasing rapidly and the

industry has played a commendable’role in anticipating and meeting this demand.
The industry is presently producing drugs of various therapeutic groups viz.

Antibiotics, Antibacterials, Analgesics, Antipyretics,

Anti-T.B., Vitamins, etc.

There are currently more than 10,000 manufacturing units in the country of which

250 are in the Organised Sector, including Multinational companies with foreign

equity.

It is estimated that the total investment of the industry is of the order

of Rs.850 crores which has grown from a meagre investment of Rs.24 crores in
1952 as follows:

TABLE - B

CAPITAL INVESTMENT IN PHARMACEUTICAL INDUSTRY
Year

Investment
Rs. Crores

1952

24

1961

56

1973

225

1977

<150

1982

600

1987

850

FUTURE CHALLENGES BEFORE THE INDUSTRY

Domestic Demand
The per capita annual consumption of drugs in our country is extremely

low as compared to other countries. Our per capita consumption is less than
Rs.30 (in rural areas, it is less than Rs.10) per annum. Though the per
capita consumption during the last one decade has gone up three-fold, we

are still far below many developing countries, as is evident from the

following data:
TABLE - C
PER CAPITAL CONSUMPTION OF DRUG IN INDIVIDUAL COUNTRIES
1985
(US $)

Canada
Argentina
Mexico
Egypt
Brazil
China
India

66.2
39.6
15.7
15.0
10.3
9.9
2.2

In our villages, where Health Care system is extremely weak, the require­

ments of modern drugs should be higher than what is at present. There are,

thus, great challenges before the industry to reach drugs to the masses in
rural areas to achieve the goal of 'Health for all by 2000 A.D.'.

It is anti­

cipated that by the turn of the Century, the demand for pharmaceutical
products is projected at over Rs. 10,000 Crores against the current level

of turnover of Rs.2750 Crores per annum.
Export Potential
In addition to domestic needs, there are vast opportunities for export of

drugs to both the developed and developing countries. In fact, the export
performance of the industry during the recent past has been excellent. During

the last 3 years, exports have risen from Rs. 199 crores in 1985-86 to

Rs.290 crores in 1987-88. Well before the turn of the century, it Is esti­
mated that the industry's export performance would exceed Rs. 1000 crores
per annum.
The global drug market during the last one decade has grown from US$ 93.05

billion to US$ 99.1 billion. However, India does not contribute even 2% of

the total market. The potential of the industry to generate large exports is
now being appreciated and with a pragmatic approach and determined policies,

India can certainly do much better in the coming years in substantially raising

its level of exports. Already the industry has been able to make its presence
felt in the developed countries. The buyers of the Indian drugs percentagewise

(?) of total export ( 1987) are as follows:
TABLE - D

EXPORTS TO DEVELOPED COUNTRIES

%
USSR

33

USA

19

West Germany

6

France

9

UK

9

Japan

9

PERFORMANCE OF THE INDUSTRY
A Committee of the U.S.Senate (Kefauer Committee) had commented in the

early Sixties that "prices of Drugs in India were amongst the highest in the
world". This was before the enactment of Patents Act, 1970. It is noteworthy

that prices of drugs in India are now amongst the lowest in the world.
Internationally, comparative data about prices at which pharmaceutical

products are available to the Indian people can be judged from the
following Table:

TABLE - E
SI.
No.

Products

Year of
Pa tent
Expiry

INDIA
Price
Rs.

UNITED KINGDOM
Pack
Price
Rs.

2.

3.

4.

5.

6.

7.

Price
diffe­
rence
%
8

1.

ALLOPURINOL TAB
lOOmg

1986

10's

5.89

100's

303.81

+■ 920 *

2.

LOPERAMIDE CAPS

1990

10's

5,00

30's

81.14

+ 991 *

3.

MEBENDAZOLE TAB
100 mg

1989

6's

9.88

6's

37.92

+ 677 *

4.

PIROXICAM CAPS
20 mg

1986

6'1

7.20

30's

184.75

+ 913 *

Pack

‘

1.

2.

3.

4.

5.

TIMOLOL MALEATE 25%

1988

5 ml

6.

NIFEDIPINE CAPS
10 mg

1986

7.

RANITIDINE TABS
300 mg

N.A.

8.

CLOTR1MOZOLE
CREAM

1989

9.

CIMETIDINETABS
200 mg

1992

10. CLIBENCLAMIDE
5 mg

N.A.

11. STANOZOLOL TABS
5 mg

N .A.

10's

5.

6.

7

8.

19.95

5 ml

129.92

+ 792 ‘

100's

50.00

100's

296.39

+ 993 *

10's

36.00

30's

666.82

+ 503 *

15 gm

6.15

20 gm

99.29

+ 990 ‘

10's

8.97

120's

932.72

+ 302 *

100's

8.88

100's

239.35

+2539

19.48

56's

590.90

+ 567

‘Difference worked out on proportionate basis
This price comparison is only one example - in most countries which follow

product patents, prices are as high if not even higher.

Further, in the domestic market the price rise of pharmaceutical products has

been the lowest as compared to other price-regulated industries in the country.
Th is is evident from the following Table:
TABLE - E

INDUSTRY

WHOLESALE PRICE INDEX
(BASE 1970-71 = 100 )
Annual Increase
1986-87
i

1.

Petroleum Products

622

33

2.

Coal

716

39

3.

Electricity

569

29

4.

Cement

969

23

5.

Sugar

901

19

6.

Paper

392

18

7.

Edible Oil

379

17

8.

Fertilizers

288

12

9.

Drugs 6 Medicines

203

6

The Pharmaceutical Industry in India has been under Price Contrdl since long.

The Impact of this control is also evident from a comparison of the All India
Consumer Price Index which has been as follows since the beginning of the
decade I.e. 1980-81

TABLE-G

ALL COMMODITIES

DRUGS & MEDICINES

100

100

1980-81

270

137.5

1983-84

321.7

189.2

1986-87

377.8

203.7

=

Base 1970 -■ 71

RESEARCH ACHIEVEMENTS
The above background indicates that the pharmaceutical industry in India has done

well in meeting the national requirements and has now begun to play an important

role in foreign trade.

This has been mainly possible because of the opportunities

which became available to Indian Scientists and to the national companies to develop
process technologies for various bulk drugs because of the process patent system

enunciated under the Indian Patents Act, 1970.

The scientific achievements in

introducing new drugs in the country are commendable. The period of introduction

of new bulk drugs discovered abroad has already been reduced to 4/5 years than a

much longer period in the past as is evident from the following table:

TABLE - H

INTRODUCTION OF NEW DRUGS

Introduced in
World

1 n dia

Gap
years

SalbutamoJ (anti-asthmatic)

1973

1977

4

Mebendazole (anthelmintic)

1974

1978

4

Rifampicin (anti-T.B.)

1974

1980

6

Naproxe.. (anti-Rheumatic)

1976

1982

6

Ranitidine (anti-ulcer)

1981

1985

4

Norfloxacin (anti-Bacterial)

1984

1988

4

Production of about 100 bulk drugs has been started in the country through
cost effective process technologies developed through indigenous efforts. There

are many drugs whose product Patents have yet to expire in the world

market.

Some of these bulk drugs are already being produced in our

country.

Production of several other new drugs would also be started

each year by national sector companies.

The names of bulk drugs whose

patents are expiring in the coming years are indicated in the following

Table:

TABLE - I

1990

1991

________1992

1993

Amikacin

Butorphanol

Becampicillin

Alprazolam

Amiloride

Carbidopa

Cefactor

Atenolol

Bromcriptine

Micanazole

Cyclobenzaprine

Dobutamine •

Diflunisal

Nifedipine

Naproxen

Metoprolol

Loperamide

Norgestrel

Probucol

Nadolol

Tolmetin
T retinon

1994

1995________

_____

1996_______

Cimetidine

Captopril

Aincinonide

Mezlocillin

Pentazocine

Cefamandole

Terbutaline

Pipercillin

Cefotaxime

Prazocin

Ciisplatin

Moxalactam
Against the above performance, global pressures are being mounted to

curtail

the freedom presently available not only to the domestic pharma­

ceutical industry but also to Pesticides/ Petro-chemicals and the Food
Industries thereby directly affecting the opportunities of self-reliance
export performance and availability of products at reasonable prices.

The Indian Patents Act, 1970
And The Pharmaceutical Industry

Dr Y K Hamied
Cipla Ltd
Bombay Central
Bombay 400 008
India

National Seminar on Patent Lavra
November 22,1988
New Delhi

WAY BACK IN THE EARLY 1940'S, AS THE
world was going through the trauma of another war, India
experienced a rude shock. The nations it depended on
for vital supplies were busy fighting. As a result there was
an acute shortage of life-saving drugs. With the national
industry still in its infancy, we learnt the hard way that
dependence on others could be suicidal. But then at that
time we were not independent.
Today, after 40 years of Independence, the
national sector pharmaceutical industry has attained an
enviable position of technological self-sufficiency. It was
the Indian Patents Act, 1970 that laid the foundation for
this development.
Unfortunately, today there are pressures to
amend this very Act, to sacrifice all our achievements by
joining a self-serving cartel and in effect to return to the
era of colonisation — this time economic and
technological.
The health care of its people has been one of the
prime concerns of our government. We are signatories to
the Alma Ata declaration of health for all by 2000 AD.
By that year our population is likely to exceed one billion.
The government is rightly intent on strengthening the
infrastructure to make available essential medicines at fair
and reasonable prices. This objective would be defeated
if the law is amended to provide extended process patent
protection and product patents.
To better appreciate the impact of any such
amendment, let us study the situation that existed prior
to this Act.

Before and after the Act

Even two decades after Independence, the
national scene was dominated by foreign-held patents.
Their stranglehold was so strong that monopolies and high
prices were the order of the day.
Il was a period when the Indian consumer was
denied the use of several life-saving drugs which were
being introduced internationally, as he had no access to
these.
Beecham introduced the semi-synthetic
penicillin, ampicillin, in Europe in the early 60’s. The
originators were unwilling to market this drug in our
country except on terms and conditions which were totally
unacceptable. This was also the case with the cardiac drug,
propranolol, introduced by ICI internationally in the
mid-60's.
The basic question was, why should India be
denied the use of such essential drugs merely because it
did not suit the originator. This situation necessitated the
promulgation of the Patents Act, 1970. As it happened,
propranolol, ampicillin and several life-saving drugs were
introduced in India by the national sector only after the
Act came into being.
In 1962, when foreign-held patents ruled the
Indian pharmaceutical industry, the Kefauver Senate
Committee of the USA observed that drug prices in India

TABLE 1
Comparative drug prices
(Wholesale price in rupees; for pack of 10's)
Drug

India

U.K.

Cimetidine 200 mg
(antiulcer)

6.77

36.40

Ranitidine 150 mg
(antiulcer)

16.15

121.67

Captopril 25 mg
(antihypertensive)

15.45

58.56

Nifedipine 10 mg
(cardiovascular drug)

3.82

29.90

Diltiazem 60 mg
(antihypertensive)

15.26

40.89

Atenolol 100 mg
(cardio vase ular drug)

11.29

61.15

Haloperidol 5 mg
(cardioprotective drug)

13.58

41.16

Naproxen 250 mg
(antiarthritic)

12.76

31.07

Rifampicin 150 mg
(tuberculostatic)

9.01

46.88

were among the highest in the world. The situation today
is happily the opposite, as is revealed by a comparison of
the prices of certain drug formulations (table 1).
Let us take the example of ranitidine. Its
originator is among the 20 companies which market this
drug in India. The price in India is just one-eighth of that
in Europe. Had there been product patent protection
in India, the originator would have used his monopoly
advantage to dictate the drug’s availability and its price,
as is the situation even in neighbouring countries.
The main reason for drug prices being reasonable
in India is the absence of monopoly as a consequence of
the Patents Act, 1970. Hence, even the transnational
corporations here are compelled to market their products
at prices that are competitive.

Growth of Indian industry

The Indian drug industry is today the best
organised among all developing countries and is
beginning to become a force to reckon with even in the
international market. During the 15 years from 1973,
the capital investment in the industry has increased by 300
per cent — from Rs 225 crores in 1973 to Rs 850 crores
in 1987 (table 2).
As a consequence, there has been a spectacular
growth in the ancillary industries as well. Today we are

TABU 2
Investment In drug Industry
Year

Investment
(Rs crores)

1952
1962
J973
1982
1987

24
56
225
600
850

more or less self-sufficient in basic chemicals, pharma­
ceutical manufacturing machinery, laboratory testing
Equipment and pact ,ing equipment
The drug industry has been providing growth
opportunities to a large number of highly qualified, highly
skilled managerial and scientific personnel. Moreover, the
industry has been eminently complementing the efforts of
the scientists in the national research laboratories. The
laboratories have developed the technology for a number
of new products which have been successfully
commercialised by the industry.
The technological development in our country is
reflected in the wide range of bulk drugs being produced
from the basic stages, through complex multi-stage
synthesis and intricate fermentation and extraction
technology. Currently India is self-sufficient in a large
number of essential drugs (table 3). Anti-TB, antiinfective, anti-cancer, anti-bacterial and anthelmintic
drugs are among a host of bulk drugs that are also being
exported even to the developed countries.
In 1962, India produced bulk drugs worth Rs 15
crores, and formulations worth Rs 100 crores. In 1975,
three years after the Patents Act came into effect, bulk
drugs production rose to Rs 90 crores, with the national
sector accounting for two-thirds. There was a four-fold
increase in the production of formulations also, half of it
ing from the national sector.

TABLE 3
M^jor bulk drugs manufactured In India
Albendazole
Amoxicillin
Ampicillin
Aspirin
Atenolol
Betamethasone
Cephalexin
Cnioroquln
Chlorpropamide
Cisplatin
Clonldine
CtoxaciUln
Codeine
Danazol
Dextropropoxy phene
Diazepam
Diphenylhydantoin
Doxycycline
Emetine
Erythromycin
Ethsmbutol
Fru semide
Furazolidone
Gentamydn
Glyb»nclamlde
Hydrochlorothiazide
Ibuprofen

Insulin
Mebendazole
Methocarbamol
Methyldopa
Metoprolol
Metronidazole
Nalidixic Add
Nifedipine
Nitrofurantoin
Norfloxadn
Paracetamol
Piroxicam
Prednisolone
Propranolol
Pyrantel Pamoate
Pyrazlnamlde
Quinine
Rifampicin
Salbutamol
Sodium Valproate
Sulfamethoxazole
Terbutaline
Theophylline
Tlnldazole
Trimethoprim
Vinblastine
Vincristine

In 1987, the national sector contribution was 82
per cent of bulk drugs and 60 per cent of the formulations
produced in India (see chart).

RELATIVE CONTRIBUTION OF
NATIONAL AND FOREIGN SECTORS

1987

1975

BUUCDRUG9

CULK raUGO

FORMULATIONS

Thus, the Indian Patents Act, 1970 has served one
of its main purposes. It has enabled the national sector
to make an increasingly significant contribution towards
self-reliance and self-sufficiency, utilizing innovative and
appropriate technology, based essentially on indigenous
raw materials and resources.
India is now producing most of the new drugs for
which there is a genuine requirement in the country and
that too within a short span of their international launch
(table 4).
TABLE 4

Introduction of drugs

Drug

Year of launch
World

India

Ranitidine
(antiulcer)

1983

1985

Cimetidine
(antiulcer)

1976

1981

Norfloxacin
(antibacterial)

1984

1988

Astern izole
(non-sedating antihistamine)

1986

1988

Acyclovir
(antiviral)

1985

1988

Salbutamol
(bronchodilator)

1973

1976

For example, in the area of anti-bacterials. the
quinolones have been a new development Already well
over 40 of these have been dcvelcped abroad. We in India
are selecting only those that are specifically suited to our
requirements. Also from the wide range of cephalosporins,
we are currently using the first and second generation
cephalosporins. Today we do not need the third and fourth
generation cephalosporins as bacterial resistance has not
yet been encountered to the earlier ones. At the
appropriate lime we will consider introducing the later
generations of these anti-bacterials.
Thus, the charge that our country is being denied
the latest technology is false. As regards getting foreign
technology this is what Dr G S Sidhu, former Director
General of CSIR, had to say:
"No one will sell you the technology oftomorrow
— not even that of today. The moment you purchase
technology, you are already in the field of obsolescence
by five years or so. By the time you build a plant based
on imported technology, your obsolescence has increased
from five to may be seven or eight years. No country with
technologically advanced knowledge will, in its own
interest, give us modern technology."

Vested interests

Mebendazole
(anthelmintic)

1974

1978

Ibuprofen
(antiinflammatory)

1967

1973

Lorazepam
(anxiolytic)

1977

1978

It is significant to note that only those drugs
which are of proven efficacy, and safety arc approved by
the Ministry of Health. Thanks to this cautious policy, our
country has been spared several drugs such as
thalidomide, benoxaprofen, zomipirac, isoxicam, etc.,
which were introduced abroad, later found harmful and
subsequently withdrawn.
Each year approximately 40 to 50 new chemical
entities are being marketed as new drugs internationally.
The claim made by vested interests is that India is being
denied the use of these drugs. This is totally baseless. India
does not need each and every new drug that is developed
abroad. The majority of these, in any case, are me-too
drugs produced by molecular manipulation, similar in
efficacy to the original, with little or no additional
therapeutic benefit

India is now, by its own efforts, beginning to
consolidate its position as a manufacturer of sophisticated
bulk drugs and formulations. It appears that the
international business and political groups cannot digest
our technological advancement.
India is beginning to make a concerted export
thrust into the international markets. India does not
violate the patent laws of individual countries. We export
sophisticated non-patented drugs at competitive prices.
Currently,
the level of exports of bulk drugs,
intermediates, natural products and drug formulations is
well over Rs 300 crores annually and is expected to go
up significantly. It is this recent growth that the vested
interests would like to thwart.
They would like to tie us down in the name of
protection of intellectual property rights. Such a principle
will be viable only between contracting countries that are
on an equal footing. In reality this is not so.
Of the estimated 3.5 million valid patents in the
world, less than one per cent belong to the third world
countries. Over 85 per cent belong to transnational
corporations and 90 per cent of these are not worked on
at all. So patents do protect. Not the interests of the
developing nations but the monopoly of some of the
developed countries.
It should be noted that most of these nations
allowed patents only after their domestic industries had
attained a slate of equality with other leading countries.
Germany provides an interesting example. In
1876, when German industry was in its infancy, Bismarck
appointed a committee to study the likely impact of
patents. Among the members of the committee were the

founders of Siemens and Hoechst Their observations
make interesting reading:
"Today industry is developing rapidly; ...
monopolization of inventions and abuse of patent rights
will inevitably expose large segments of industry to
serious injury. The government must protect industry
against these dangers.... These patents will not be taken
out in order to protect industrial plants established or to
be established in Germany: they will be taken out to
monopolise production abroad. These articles will be
imported into this country. Such a danger must be met."
We hold the same view in Indio today precisely!
because we are concerned about the future growth of our
industry.
Stand of other nations
A more recent example of Japan tells the same
story. Till 1976 Japan did not have patents. Only when
its domestic industry reached technological parity with
Europe and the USA, did they opt for product patents.
The case of Italy holds a lesson for us. Italy is
the fifth largest producer of drugs in the world and
supplies 40 per cent of the non-patented bulk drug
requirements of the USA. Il had successfully built up an
internationally competitive pharmaceutical industry based
on adaptation of technology for new drugs. But the
decision to go for product patents spelt doom. Today the
share of local firms is nominal, domestic R&D has been
slashed and exports have plunged.
Countries in South America have all had flexible
patent laws like India. Intense pressure is being mounted
on these countries even in the form of trade barriers.
Chile has resisted this as die country is concerned
about the welfare of its people. It needs a domestically
competitive industry to produce drugs at affordable prices.
Patents, Chile has concluded, arc hardly healthy.
Costa Rica virtually abolished patents in the late
70’s when the country realised the high price difference
between patented drugs and similar drugs available from
patent-free countries.
Brazil, Argentina and Mexico arc all keen to
ensure that the poorest sections of their society have
access to vital drugs. Therefore their patent laws permit
free access to scientific and technological knowledge. But
they too arc under pressure to change their laws. Brazil
is already facing an embargo on exports. The US
Pharmaceutical Manufacturers Association (PMA) has
filed a petition with their government complaining against
Argentina’s refusal to grant patent protection.
Countries like Norway and Finland still do not
have any pharmaceutical patents.
East European
countries including the USSR have maintained their
independence with regard to patents. One cannot visualise
China, with its teeming millions requiring cheaper drugs,
to adopt patents. If ail countries are not being pressurised,
it is only because some are in a position to retaliate.

It is remarkable that in the face of such pressures,
Philippines has shown courage in introducing a bill to
entirely abolish pharmaceutical patents. What has led a
country like Philippines to make this move? The
observations made by the initiators of the bill provide the
answer.
"(Patents result in higher prices and) diminished
welfare for the consumer.... (Patents have) merely served
to preserve the domination of the (pharmaceutical)
industry by multinational firms and effectively increase
the cost ofhealth care in an impoverished society... since
these patents involve the use of trade marks, royalties and
licensing agreements, the repatriation ofprofits by these
multinational firms also adversely affects the country’s
balance of payments position and depletes its dollar
reserves."
The bill seeks to exclude from patent protection,
inventions related to drugs and medicines, pharma­
ceutical preparations and products, vitamins and
nutritional supplements and other products similarly
essential to the maintenance of life and improvement of
health.

In India’s interest

As these examples indicate, each country has to
decide for itself what is best suited to its own needs.
External pressures should not override the considerations
based on intrinsic logic.
India too, should not succumb and surrender all
its achievements that have taken years of painstaking
efforts. Patent protection will cripple R&D in the country
not only in pharmaceuticals, but also in the areas of
biotechnology, agriculture, food, atomic energy, nuclear
power and defence. Let us not forsake our future. We have
a duty towards the future generations.
The Indian Patents Act, 1970 was bom out of a
deep concern for the nation’s future. It took 12 years to
materialize. Probably no other statute was subjected to
such protracted debates and deliberations.
It was given shape after marathon debates in both
houses of Parliament. Committees headed by eminent
jurists like Justice Bakshi Tck Chand and Justice
N Rajagopala Ayyangar studied all issues in detail.
The National Conference of Scientists and Joint Commi­
ttee of Parliament on Patents Bill considered all evidence
of both Indian and foreign experts and various associations
before making their recommendations against patent
protection.
We have been under pressure to change the Act
earlier loo. Whenever the question arose, the government
appointed committees to deliberate on the matter. The
working group under the chairmanship of L M Thapar, the
group led by Dr S Ganguly as well aS the recent ihrcemember committee headed by Ashok Ganguly have
examined the issue. They have all recommended against
any amendment.

Above all, repeated assurances have been given
in the Parliament that India will not amend its Patents Act
or join the Paris convention. The latest such assurance
was given on August 4, 1987 by the Minister of State for
Industrial Development
The Patents Act, 1970 was shaped by Indian
necessities in the light of Indian realities. The rationale
behind the Act is still valid. The government should not
act hastily and amend the Act without recourse to a
national debate and referendum. Let the consumer also

be involved in this.
Prior to our Independence, there was a burning
spirit of patriotism, unity and a sense of purpose in our
countrymen. What we now need is another national
objective. That of preserving our overall freedom. That
of developing our country to the status of a great nation
by our own efforts.
The fight is not for the industry nor for a mere
piece of legislation. It is a fight for a moral issue. A fight
for the right to decide our own destiny.

The Dunkel Draft/113

Dings and Dunkel
O Prakash C. Rao.
In my medical practice of sixteen
years, I have observed an interesting
phenomenon. In the beginning of the
month, my practice is good, a lot of
patients attend my clinic and pay for the
treatment promptly. As the end of the
month approaches, the practice comes
down - few patients attend. This is the
experience of my friends too in the
profession. Whether people fall ill only in
the beginning of the month? No. People
do fall ill at the end of the month too. But
people attend the clinic when they have
money. Towards the end of the month
people do not have money to buy the
drugs. Prices of the drugs are high for the
majority. Although drugs in India are the
cheapest in the world, yet the poor find it
hard to buy. We have to understand the
Dunkel draft in the light of this finding
with
special
reference
to
the
multinationals in the drug industry.
Food, health and education are the
basic areas of investment for the

development of human resources of any country. These
are basically social investments and the benefits too are to
be accrued socially. The pattern of historical development
of this industry, will enable us to draw some conclusions
regarding the impact of the DUNKEL DRAFT TEXT
(DDT) and the present government's supporting role of
liberalisation and globalisation on the use of drugs in the
country and the fate of the indigenous drug industry.
The enterprise of drug manufacture in India is
divided into two groups, indigenous and multinationals
(MNCs), with their contrasting roles. The Indian industry,
with the public sector as its backbone produces a majority
of the bulk and essential drugs while the MNCs have
flooded the market with the high profit yielding non
essential formulations. This fact has been recognized by
several authors, particularly since the pioneering findings
by the Kefauver and the Hathi Committee reports. Some
of these historical details will be brought to focus in the
sections that follow.
Beginning of the indigenous drug industry
Prior to the First World War we were importing
almost all our drugs. During the first world war, all the
import of drug to India was stopped and diverted to the
warring countries while India badly needed drugs for her
ailing millions. Then the situation in India was that
infectious diseases were taking heavy toll of life. With the
pioneering efforts of the Indian Scientists, the Indian
Pharmaceutical Industry was established around 1920 and
it began manufacturing medicines for Malaria, Kala-Azar
and many other Infectious diseases.
Soon after the first world war, the MNC's began their
business in India. Initially the MNC's collaborated with

114/Drugs and Dunkel

The Dunkel Draft/115

the Indian companies to produce drugs. Priority of the
drugs brought to India depended on the availability of the
drugs with their parent companies abroad and had little
connection with the country's own requirements. Later
MNCs established their corporate offices in India. They
were more active in promoting and selling drugs than in
producing drugs. Indian drug companies could not stand
the competition by MNCs and gradually the MNCs
surpassed the Indian Drug Industry in sales.

transfer but none of them came forward as they were
interested in establishing their trade in the country than
help India to become self reliant. However, UNICEF and
the World Health Organization (WHO) came forward to .
assist India to establish bulk drug production. As a result,
the Hindustan Antibiotics Limited (HAL) was bom in
1954. Similarly, the Indian Drugs and Pharmaceuticals
Limited (IDPL) was established in 1960 with the assistance
of the USSR.

Organanisation of Pharmaceutical Producers of India

How did the MNCs earn their profits ?

Meanwhile MNC's joined together and formed the
Organisation of Pharmaceutical Producers of India(OPPI),
and began influencing the Indian government. As a result,
the Industrial Policy Statement(1948) of Government of
India recognized the role of foreign companies resulting in
the entry of MNC's in a large scale. It was anticipated that
MNCs would bring in foreign technology and capital to
create an industrial base in India. This hope proved futile,
the experiences being too numerous to be enumerated.

1.
They produced only formulations and gave less
importance to producing bulk drugs. The major portion of
the bulk drug production is by the public sector.
Formulation activity is more profitable, less capital
intensive. India is the only country in third world which
produces bulk drugs, primarily through its public sector
and hence drugs in India are cheaper in comparison.
2.
It is often asked : What will be the impact on the
health programmes in India, if the MNCs leave? None at
all. This is because these agencies have in no way helped
us in the production of the essential bulk drugs. Some
studies, titled: A Decade after the Hathi Committee has
brought in this point admirably. The data published in the
above mentioned volume show how in the mid 70's to the
early 80's the share of the MNCs bulk drug production
has progressively gone down while that of the public
sector has progressively gone up.

Birth of Public Sector
Bulk drugs are utilized in the production of
formulation drugs(tablets, capsules, injection). Bulk drug
production is essential to produce any formulation that
you see in a medical store. In India till 1950, no company
produced any bulk drug. Most of the MNCs were
formulating drugs out of imported bulk drugs. By this
process the parent compamies were benefitted
enormously. It was then realized that India should
produce bulk drugs as a major step towards self reliance
in drugs. The Government of India sought the help of the
MNCs in bulk drug production, in terms of technology

116 / Drugs and Dunkel

The Dunkel Draft /117
table 3 shows.

Table 1

___________________ Table 3__________________________

Ratio of Bulk Drug Production / Formulation
Year
Foreign Sector
Indian Sector
Public Sector

1975

1981

1983

1:6
1:8
1:0.8

1:12.53
1:2.6
1:2.6

1:12.0
1:3.44
1:1.12

Similarly, the MNCs' production of some of the
essential drugs also declined, as shown in table 2.
Table 2
(in tonnes)

Year

1980

1981

Chloramphenicol
(Drug to treat typhoid)

46.41

36.16

PAS
(Drug to treat TB)

215.16

122.26

INH
(Drug to treat TB)

69.18

53.7

Piperzine
(Drug to treat worms)

6.3

4.2

Dapsone
(Drug to treat Leprosy)

10.28

10.17

10.58

8.48

DEC
(Drug to treat Eosinophilia,
filarial worm)

Despite the government's direction to produce
specific amount of essential drugs, the MNCs produced
less of essential drugs and more of non essential drugs, as

1979
Licensed Capacity
(tonnes)

1979
Production
(tonnes)

INH
(To treat TB)
(essential)

80

52

PAS
(To treat TB)
(essential)

110

94

Pro tinex - Pfizer
(Health Drink)
(non essential)

110

290

Terramycin Injection
(Antibioticinjection)
-Pfizer
(non essential)

14

54

3.
MNC's produced category III and IV drugs and
have been making huge profits. Drug Price Control Order,
1979 has fixed the profit matgin for category I & II drugs;
category III & IV fall under non essential durg category
and the drug companies are permitted to fix the prices of
drugs according to their wish. Hence all of the MNC's
produced mainly the drugs, which belong to category III
and IV. Table 4 shows the break up between the different
categories, as produced by the MNCs and proves this
point.

The Dunkel Draft / 119

118 / Drugs and Dunkel
Table 6

Table 4
% Share of the drug produced

Year

1978

1979

1980

Category I (Essential)
n (Essential)
Category ill (Inessential)
Category IV (Inessential)

4.5
16.7
67.7
11.7

4.2
14.8
67.8
12.2

3.6
13.2
68.6
14.6

This is also reflected in the percentage share of the
different groups of drugs, as produced by the MNCs in
1985. This is shown in Table 5.
_________________________ Table 5

Systemic antibiotics
Vitamin & Tonics
Cough & Cold preparation
Antacids
Enzymes
Sex harmones
Anti T.B. Drugs

21.15
15.95
4.7
3.64
2.1
2.0
2.5-

Of the above only the anti T.B. drugs and the
systemic antibiotics are the essential ones and the
production of these are extremely inadequate compared to
the needs.
4. The MNCs'other methods of profit making are: (a)
Collaboration with Indian firms to produce drugs and
selling them in their brand names at a high price, (b)
Transfer pricing - the price of imported chemicals are
higher. MNCs get these high priced bulk drugs and
formulate instead of using locally available cheaper bulk
drug. This leads to drain of foreign exchange in favour of
MNC. This is illustrated by some specific cases shown in
table 6.

Doxycycline
(antibiotic)
Ethambutol
(Anti T.B. Drug)
Frusemide
(Diuretic)
Librium
(Anti Anxiety
Drug)
Gentamycin
(Antibiotic)

prices at
which bought
per/kg

international
prices
per/kg

%of
profit

5890

1377

340.5

620

320

93.8

1426

450

216.9

5555

312

1680.4

35670

3500

919.1

In many cases the import price that the MNCs force
us to accept are even higher than the international prices
of these bulk drugs. One such, interesting case concerns
the drug librium.lt was available with STC in India at Rs
312 /kg. Roche bought the same drug from the parent
company at Rs. 5555 /kg. The reason for refusing to buy
from Indian STC was that the product was originally from
an East European country.
Some of the other irrational drugs produced by
MNCs which have no relevance to our country's needs
are:
a
Alcohol based tonics
Growth of alcohol based tonic

Santivini
Bayers tonic:

Sandoz
Bayer

1979

1984

growth

1.83
1.45

3.05
2.54

66.67%
74.17%

The Dunkel Draft 1121

120 / Drugs and Dunkel

b

Health drinks-Horlics, Coinplan etc

c

Vitamins There is no rationale for consuming
vitimins in excess.

d

Enzyme preparation - unienzyme

e

Cough expectorant

f

Gripe waters

g

Sex tonics

h

Combination drugs - eg Neurobion

i

Hazardous drugs - like clioquinol used for
diarrohea,but dangerous because it causes
blindness. Analgin - baralgan, novalgin,
oxygephenbutazone and many pain killers,
which are banned in other countries but are
being freely marketed in India.

5.
As can only be expected, MNC are using
aggressive sales promotion techniques. India has the
highest number of medical sales representatives in the
world. Doctors are misinformed about the products eg.
anabloic steroids (Durabolin, Dianabol) to be used for
improving the body's strength and Cyprohaptidine to be
used for improving the appetite. Doctors are visited
frequently and brainwashed about the products and
appeased through lots of gifts and invitations for fivestar
dinners.
6.
MNC's are promoting drugs in brand names and
propagate myths about better quality of the drugs
(eg.Calpol of Burroghs Wellcome)and are in fact taking
advantage of the inadequacy in our country's drug
inspection infrastructure. To this should be added the

double standard that these companies maintain, vis-a-vis
drug sale eg. selling those drugs in India, which are
banned in the parent country of these companies (eg.
Baralgan, Piriton, Osto Calcium B12.).
7.
MNC are not spending any money on research in
India. Most of the MNCs in developed world will have to
spend 10-12 % of their turnover on research. The amount
spent in the name of research in India is on market
research. Some research is done on drugs for
Hypertension and Cancer. Research on drugs to treat
diseases of the third world is limited. This exposes the
myth that the presence of the MNCs in our country brings
to us the rcent advances in medicine

Hathi Committee report

This poor record of the MNC's in India had created
furore in the parliament. The Government of India ;
appointed the Jaisukh Lal Hathi committee to go into the :
details of drug industry in India. Hathi report is one of
the most scientific reports on the drug industry since
independence. Hathi Committee confirmed that India had
the capability to produce all the drugs needed for our
country and MNCs blocked the growth of Indian •
companies.
This report was published in 1975 but was kept in
cold storage due to heavy lobbying by the MNCs against
the report. Today the government is being accused of not
making the contents of the Dunkel Draft public. My
experience with the procurement of the Hathi-Committee
report is quite illustrative of the government's conduct in
these affairs. Circulation of this report too was blocked by
several agencies. However, I did procure a copy after
paying some bribes. If this be the attitude of the

122/Drugs and Dunkel
government to its own reports, the present cover up on
the contents of the DDT is quite understandable. Three
years after the Hathi Committee report a new drug policy
was announced in 1978 and it completely ignored Hathi
report and gave concession to MNCs. Even today, there is
a lot of talk on giving further concessions to the MNCs,
though it is known that the drug companies are exploiting
a situation characterised by the visible neglect of the
primary health centres and open encouragement to the
proliferaton of superspeciality hospitals and diagnostic
centers.
In contrast, we need a National Drug Authority, who
monitors the need and production of drugs in India, as
suggested by Hathi Committee report. The NDA must
plan the need for essential drugs, their distribution, and
quality control. It is necessary to remove inessential,
banned and bannable drugs from the market and use the
technology available in our country to make the nation
self reliant. It is also necessary to bring in a contact
between health professionals researchers and planners.
This process is yet to gain maturity and even partial
collaborative efforts are now threatened due to the World
Bank, IMF and GATT conditionalities, that are unified in
their demand that our planning process be dismantled.
However, if India is to gain self reliance in the field of
drugs, it is necessary to defy these conditionalities. Only
then can we develop a peoples' drug policy, which will
rid us of 70,000 formulation of which 80 % are inessential.
As a matter of reinforcement, the contours of this policy
have already been worked out through the Hathi
Commitee Report.
It is sad to note that even after 45 years of
independence we have remained in the cluthces of MNCs.

The Dunkel Draft /123

124/Drugs and Dunkel

Medical profession is unaware of DDT and the drug
industry is divided in its opinion on the DDT. In view of
the above historical background it is possible to create a
post DDT scenario, particularly, when enough damage
has been done even in the pre-DDT era. It is seen that
even though the social requirement vis-a-vis the drug
industry are well recorded, the government's pressures on
the MNCs to satisfy the social needs of India have at best
been feeble. What the DDT aims to achieve is to prepare a
legal framework, in which no society can demand that
trade has to be subordinated to the societal needs and not
the other way round. As far as the Indian drug industry is
concerned, the DDT brings pressures through coercive
measures like the TRIPS and TRIMS, from which the
following conclusions can be derived.

Reversing the Indian Patents Act

1.
Inspite of the MNCs, our drugs have remained
cheaper comparitively and this is because of the Indian
Patents Act of 1970. According to IPA, a drug process can
be patented but not the end product-drug. Hence there are
many competitors using various processes to produce a
drug, which has brought down the price of drugs. The
process patent expires in 5-7 years but DDT wants to
reverse this, by giving importance to product patents,
lasting for 20 years. Since most of the drugs available have
been patented in the west earlier than in India, we will
lose the patent on these drugs. We may have to buy the
drugs from the MNCs, paying a high royalty for 20 yrs.
This will force the drugs to become costlier (even 10
times!) and will hit our R&D efforts and industries,
resulting in closure of all pharmaceutical laboratories
(nearly 8000). This will in turn lead to large scale

The Dunkel Draft/ 125
unemployment.
2.
DDT demands that there be no restriction on
foreign equity participation. Foreign equity participation
allows MNCs to send huge profits to the country of their
origin. Hathi committee has observed that MNCs are
making huge profits by producing inessential drugs and
sending large sums to the parent companies abroad. Hathi
report proposes that there should be a gradual reduction
of equity participation.The DDT negates this process.
3.
DDT demands no restriction in the area of
investments. This will enable MNCs to produce drugs
which give them more profit. The need of the hour is a
National Drug Authority to decide on the issue of priority
of drug production and not DDT to dictate us.
4.
DDT demands that there should be no licensing.
This is one of their major demands. If MNC's are given
free hand to do whatever they want(delicencing), it
simply means we cannot plan what we need and we
cannot exercise any control over them. This will result in a
total sell out of our sovereignty to the MNCs.
5.
DDT demands that there be no export obligations.
Whenever a product is imported there is an export
obligation for the company. This will help to keep the
balance of payments intact. If DDT is accepted, we will be
importing bulk drugs in large quantities at a higher cost.
There will be no restrictions on the import of non essential
drugs too. Drugs necessary for the elite sections of the
people, i.e. those which fetch higher profits will be freely
available, while those for the poor will become scarce and
prohibitive. In addition, we will be drained of our foreign
exchange and will be continuously running short of
foreign currency to buy some essential products whenever
necessary.

1261 Drugs and Dunkel

6. DDT wants to remove the obligation to use locally
available products and raw materials. Our labour force
thus becomes inconsequential. The raw material can be
sent by the MNC subsidiary to the parent company
abroad and imported back at a high price after value
addition.
7. DDT wants foreign investment to be treated at par
with domestic companies. This condition will give a
severe blow to our sovereignity. If this is accepted our
drug companies will not have any preferential treatment
even in the country of origin, eg. even the government
hospitals cannot declare that they will purchase the drugs
from the country's public sector.
In short the DDT wants to scrap the IPA 1970 and to
do all the planning globally, through the conditionalities
of the TRIMS. Thus the richer nations will be given the
freedom to exploit the resources and the markets of the
poorer nation.
It is true that the DDT is applicable to all the GATT
member countries but given the present historical
scenario, one concludes that as a result of globalisation, of
which the DDT is a part,
i)
America and other developed nations will find
even larger markets for their products, mainly
by taking advantage of the economic
dependence of the developing nations,
ii) the developed nations will find a free access to
the sources of raw materials in the developing
nations,
iii) cost of the drugs in developing countries will go
up adding misery to the lives of the common
man,
iv) large scale unemployment and closure of

The Dunkel Draft /127
industries will result,
v)
developed countries will get huge royalty out of
patents as the control on product patents will
remain with developed countries.
The process of globalisation has begun. The public
sector, the backbone of the Indian drug industry is being
dismantled. Protection to it is being gradually removed.
The signals are already around. IDPL, the pioneer in bulk
drug production is about to close. This is bound to have a
crippling effect on the Indian drug industry.
Our dependence is being perpetuated and medical
drugs are used as tools in maintaining this dependence.
The Hippocratic oath of the doctor will lose its relevance
as the doctor now will be forced to serve the demands of
the MNCs and not the requirements of his patients'
health.

patents

- a design for disaster

Disease controlled by Amelioration of diseases depends
upon medical personnel, health infrastructure and
pharmaceutical industry.

In India we have a good

infrastructure of pharmaceutical industry.
Our phar­
maceutical industry produces most of the basic drugs in
bulk and has brought self reliance in drugs.
This is
due to the provisions of Indian Patents Act, 1970.

Now, drugs are going to come under a new Patent regime.
This patent regime is being forced on many developing
countries and India also.
Now health aspects of the

drugs become secondary to trading aspect of drugs.
Five decades back, it was felt that there is a need for
all the countries of the world to have a fair trade in

consumer goods, food products, industrial component
parts etc.
A good intention indeed 1
The discussion
was initiated and one of its aim was to assist the third

world countries to improve their trade and economy.

Several rounds of trade negotiations were held in various
countries.
Eighth round of negotiations was held in
Uruguay.
The negotiations were dragged on for more than

six years.
Before the negotiations were concluded,
Dunkel, tne Director of General Agreement on Tarrifs and
Trade (GATT) presented a draft known as Dunkel Draft

Treaty (DDT) in 1991 and asked all the partners either
to accept or reject and there was no scope for negotia­
tions.
The contents of DDT was in favour of developed

countries, a definate deviation from the original goal 1
The discussion was held in the background of globalisation
a warning of disaster to come.
The real actors on whose
behalf this was done were the MNC’s, whose global

expansion can take place only by limiting the soverignity
of nations.
Meanwhile the third world countries had received a lot
of loan from international agencies (IMF, WB) supported
by developed countries.
It was possible to pressurise
because the US became dominant after the collaps of the

Soviet Union and East European countries.

The developed

countries mainly the US used tnis opportunity to bring
pressuse on the third world countries to accept DDT.

Remember tnat India opposed the move in the beginning

but later accepted.
It can be concluded that there was
change in the stage of the play from United Nations to
trinity of GATT, IMF & WB.

GATT.

There are various issues in

2

Lets discuss the issue of patents in relation to
Pharmaceuticals.

Patent issue along with other eight issues are

discussed under intellectual property rights.
Patent is a recognition given, right granted by the

government to investors for a specific period to
exclude other individuals and enterprises from infringing
a patented product or process or both.
Patents are
granted to encourage invention and to secure that

invention worked on commercial scale to the fullest
extent, to benefit mankind.
In India, tne patent regime is tnere since 1856.

A

very favourable patent system evolved only after
independence, after indepth studies and debates,
leading to Indian Patents Act, 1970.
It became
effective in 1972.
The salient features of IPA 70 are :

Product patent is granted to all except for food,
medicines, substances produced by chemical processes.
Process patent is given to food, medicines and
substances produced by chemical processess.

Invention^relating to atomic energy, agriculture
and horticultural products are not patentable.
Patents last for 10-14 years.
For food, drugs
and substances produced by chemical processes it
lasts for 7 years from the date of application
or 5 years from the date of securing a patent,

whichever is earlier.
The Indian Patents Act gave boost to Indian Pharmaceu­
tical Industry.
As a result, we could achieve self

sufficiency in medicine.

We could produce 100 basic

drugs, 65 - 70 % of the bulk drugs needed for our
country were manufactured in India.
We entered
international market.

New drugs were produced in 3-4

years after the drug was released elsewhere, by inno­
vative processes.
The prices were once highest in
India, before IPA 70 and reduced drastically and were
the lowest.

We have exported about 640 crores of drugs to other

countries in 1939-90 and today the export is worth
2000 crores.

3

Exploitation by tne MNC's was kept low.
A good achievement indeed ‘

The IPA 70 protects the interests of both investors and
consumers.
National interest is given priority, over the
interests of the patentee and it helped India develop novel

processes in drug production.
The aim of the DDT is to reverse the IPA.

DDT demant^ that

there be no restriction on foreign equity participation, no

restriction in the area of investment, no licensing system,

no export obligation and DDT wants foreign investments to
be treated at par with investment of the domestic companies.
This helps global planning through conditionalities of TRIMS.

Richer nations will be given the freedom to exploit the
resources and market of poorer nations.

The developed

nation will find a free access to the resources of raw
materials in the developed nations

As a result, the cost of the drugs in developing countries
will go up, adding misery to the lives of common man.

it

may result in closure of industrial units of Indian origin
leading to unemployment. Developed countries will get huge
royalty out of patents as the control on product patents
will remain with developed countries.

Now WTO replaces GATT

and India has subscribed to it in 1994. Citing the dangers
of WTO "The Tentacles of WTO reach every nook and corner of
public life.
It regulates industrial products, trade
related investment and intelletual property matters.
It
has complete control over the agricultural services sector

and telecommunication and information technology.
It is
aimed to convert all human life into a big market all human
values into exchange commodities".
Twisting of the Patents issue is part of the globalisation,
privatisation strategy. The western world with its surpluses
is looking towards less developed world and its aim is not
only selling their goods but also stop other countries use
S & T and become dependent.
It is a blueprint for a vicious
economic recolonisation of the third world and redivision of

the world by the advanced capatalist countries.
The pro­
ponents of new patents are telling that there is no
alternative.
Such lies can convince the common man .

It is not for promoting development, co-operation and
accomodating the entry of developing countries on the

world stage.
Instead, it aims at establishing insidious
control over the decision making process on the countries

of tne South.

The recommendations go far beyond the

perview of trade and infact the draft comes as a blatant
attach on our economy and political soverignity.

Patents bill was hurriedly presented in the parliament.

External compulsion being the main reason - WTO, WB and

the pressure of the US government.
The need of the hour is for every Indian to register the
protest, otherwise the dangers of neocolonisation will not
be far off to see.

Or. Prakash C Rao
Secretary
Drug Action Form

Karnataka

73/2, I (R) Block,
Rajajinagar.
Bangalore 560 010.
Tel : 3379016.

INDIAN PHARX^^.UTICAL INDUSTRY

Indian Pharmaceutical Industry: Effect
of Proposed Product Patent Regime
Amit Sen Gupta
US statesman Thomas Jefferson remarked, “Ingenuity should re­
ceive a liberal encouragement”. Jefferson introduced the first patent bill
to the US Congress in 1790. It became the Patent Act, upon which US
patent and trademark law is built His comment sums up a popular
notion of intellectual property rights, one that is promulgated to a large
extent by industries. Discoverers and inventors are thought to deserve
special reward or privilege because of the benefit of their discoveries or
inventions to society. Benefiting society is not considered a reward in
itself, and, true to classical economic theory, certain incentives-are need­
ed to encourage invention or innovation.
The strongest proponent of strengthened intellectual property pro­
visions as part of the World Trade Organisation (WTO) is the United
States. Not coincidentally, the companies most concerned about intellec­
tual property are U.S.- based. Individual companies, as well as industry
groups like the Pharmaceutical Manufacturers Association (PMA) and
the Intellectual Property Committee (IPC), a coalition of 13 major U.S.
companies, including IBM, DuPont, General Motors, Merck and Co.
and Pfizer, had strongly lobbied with the U.S. Govt, on intellectual
property issues.
The industrialized and developing countries’ conflict over intellec­
tual property protection of pharmaceuticals minors the broader conflict
over protection for high technology. High technology multinationals claim
“imitation goods”, many emanating from the Third World, cause them
to suffer large losses. The industrial countries do not say, however, that
in order for the multinationals’ to recover those ‘losses’ a massive
transfer of income from the poor countries to the rich woul<t-be re­
quired. Third World countries dispute these claims. They point to the
historical record of the industrialized countries, most of which did not
have strong intellectual property laws when they were developing. For
Dr Amit Sen Gupta, Secretary, Delhi Science Forum, New Delhi.

407

example, the United States in the nineteenth century and Japan through
most of the twentieth engaged in exactly the sort of activities the United
States now labels piracy. More recently, the “four tigers” of East Asia - Taiwan, South Korea, Hong Kong and Singapore - industrialized
with the help of weak intellectual property protections.
The WTO agreement includes provisions which require changes to
be made in the Indian Patents Act of 1970. Such changes would have a
direct bearing on the Drug Industry in the country. In fact the Indian
Drug Industry has especially been targeted by the Pharmaceutical MNCs
for alleged violation of the principles of “free trade”, which supposedly
provides the philosophical underpinning of the WTO agreement. It is
another matter that the principles of free trade in an unequal world are
designed almost entirely to benefit those who are more equal than oth­
ers, namely countries in N.America, Europe and Japan. Moreover a
strong Patent regime, as outlined in the WTO agreement is harmful to
the interests of not only the Third World but also a large number of

people in the developed world.

Intellectual property rights (IPRs) come in five varieties: patents,
plant breeders’ rights, copyrights, trademarks and trade secrets. This
paper seeks to focus on the area of patents, and more specifically on the
possible impact of a change in the 1970 Indian Patent Act, in line with
the WTO agreement, on the Pharmaceutical Sector in India. The major
substantive change being sought by the U.S., European Union and Ja­
pan in the Pharmaceutical Sector is a switch to a Product Patent Re­
gime from the present Process Patent Regime. The shift from a process
•patent regime to the recognition of an exclusive right on production and
commercialization, is likely to lead to changes in the market structure
and in the conditions for access by consumers to pharmaceutical prod­
ucts. The implications may be examined with regard to drug prices,
impact on health care and self reliance in the Indian industry:

Impact on Self Reliance
The Indian Drug Industry has built up a base for production of
almost all bulk drugs from basic stage using innovative process technol­
ogies. A major role has been played by various CSIR laboratories. This
has been possible because of Indian Patent Act of 1970 which allows
Process Patents and not Product Patents in the area of vital areas in­
cluding drug production. One of the proposals in the WTO agreement

Table 1 i CHANGING PATTERN OF RETAIL DRUG SALES - 1985 TO 1996 (Figures in *000)

antianaemic

anti parasitic

ELECTROLYTES (ORAL & IV)
analgesics
anti spasmod/cholinergic
anti diarr/ disinfect

DIGESTIVES INC. ENZYMES
TETRACYCLINES
TRIMETHOPRIM COM.
TONICS
'
TOTAL

percent

Value

percent

Value

percent

Value

percent

% change
(1985 to 1996

4.72
3.81
1.72
3.40
1.05
1.36
1.47
4.48
1.93
1.72
6.28
5.70
1.70
2.13
5.55
2.16
1.89
1.01
1.01
1.93
6.15
3.29
1.60

1744458
1254401
493109
1147929
340099
389529
433982
1790065
652952
684380
2515369
1857988
638270
775677
2217417
794162
766729
365949
392072
758531
2353495
1493832
554532

4.53
3.26
1.28
2.98
0.88
1.01
1.13
4.65
1.70
1.78
6.54
4.83
1.66
2.02
5.76
2.06
1.99
0.95
1.02
1.97
6.12
3.88
1.44

477457
213649
470153
186716
• 201848
175848
' 898627
384703
293214
1263622
1086320
278028
424128
1176726
445001
370927
225622
211761
519279
1486687
757107
332000

2.27
1.02
2.24
0.89
0.96
0.84
4.27
1.83
1.39
6.01
5.17

83463
99045
212344
65655
91296 ..
104781
375779 . .
161929 149402
,
551748 II

2.02
5.60
2.12
1.76
1.07
1.01
2.47
7.07
3.60
1.58

525252
161563
210292
570355
255329
236159
132601
139393
. 268550
945837 *
507538
255455

0.71
0.84
1.80
0.56
0.78
0.89
3.19
1.38
1.27
4.69
4.46
1.37
1.79
4.84
2.17
2.01
1.13
1.18
2.28
8.03
4.31
2.17

2987.16
1072.04
980.93
975.89
910.11
846.55
706.57
703.80
679.10
669.85
634.04
612.64
586.02
557.30
470.98
441.38
414.65
389.63
386.10
339.82
337.64
322.68

1830572
1959325
637097
1798505
798395
942429
858835
1083589
964931
569014

2.71
2.90
0.94
2.66
1.18
1.39
1.27
1.60
1,43
0.84

1038274
1166858
449930
1144683
426096
551739
545152
737617
961144
460426

2.70
3.03
1,17
2.98
1.11
1.43
1.42
1.92
2.50
1.20

699183
749532
278316
676147
306164
313923
357894
508635
751962
412360

3.32
3.56
1.32
3.22
1.46
1.49
1.70
2A2
3.58
1.96

436898
.467818
158792
448946
203501
248497
246946
398557
508440
359902

3.71
3.97
1.35
3.81
1.73
2.11
2.10
3.38
4.32
3.06

318.99
318.82
301.21
300.61
292.33
279.25
247.78
171.88
89.78
58.10

100

473.99

38471053

21030743

11775823

100

100

100

67592595

3187521
2576634
1160849
2295296
706373
922188
991801
3030905
1301584
1163986
4247658
3855555
1151355
1442635
3748957
1457866
1278522
682436
682512
1305410
4160010
2221193
1079769

QUINOLINES
CBPHALOSTORINS
ANTI DIABETIC
CARDIAC THERAPY
ANTI EPILEPTICS
ANTIEMETIC
HYPOTENSIVES
ANTACID etc.
MACROLIDES
SYSTEMIC ANTIHISTAMINE
AMPI/AMOXY/CLOX
COUGH & COLD PREP.
PSYCHOLEPTICS
ANTI ASTHMATIC
•
’ ANTI INFLAM/RHEUM
TOP. CORTICOSTEROID
SEX HORMONES
HEPATIC etc.
MINERAL SUPPLEMENTS
GENERAL NUTRIENTS
VITAMINS
ANTI T.B.
SYS. CORTICOSTEROID

I

1985

1989

1992

1996
Value

lllcrajKMitlc Group

Source: ORG Retail Audit for relevant periods

’

.

0
sF
£
9
p

414

SOCIAL ACTION V

48 OCT.-DEC. 1998

INDIAN PHARMACEUTICAL INDUSTRY

This interesting outcome exposes chinks in the arguments put for­
ward by the two contending Industry Associations in the pharmaceutical
sector in India - the Indian Drug Manufacturers Association (represent­
ing Indian Companies) and the OPPI (representing Multinational Com­
panies). IDMA has consistently argued that drug prices are the lowest
in India and a change in Patent Laws would reverse this position. The
above analysis clearly shows that drug prices are lower in India only in
the case of Patent protected drugs. We find from our study that in the
case of other drugs, prices are higher in India than even developed
industrialised countries. Given the fact that drugs in the Indian market,
which are under Product Patents globally, account for only 10-12% of
total pharmaceutical sales, this means that by and large Indian drugs are
costlier.
This is indeed a strange situation as logically India should have an
edge over almost any country in the world in this respect. Unlike Paki­
stan, Bangladesh and Sri Lanka India has the indigenous capability to
manufacture most drugs. Further economies of scale should favour Indi­
an manufacturers in comparison to these South Asian countries, given
the much Larger size of the Indian market. Compared to U.K. and
Canada, Indian manufacturers enjoy the advantage of much lower
infrastructural and labour costs. A conclusion one can draw is that the
Industry in India is either unwilling or incapable of passing on the
results of these gratuitous circumstances to the consumer. In fact, to the
contrary, companies in Indrar-(both Indian and MNC) have receive a
further bonus in 1995 in the form of the new Drug Price Control Order,
where price control mechanisms have been further relaxed by drastically
reducing the span of control and by increasing the profitability allowed

Table 2: Comparative Costs of O lder Drugs
(Not Patent Protected)

The analysis is shown in Tables II and III. We see from Table II
that the average cost of older drugs is the highest in India. The cost is 3
times that in Sri Lanka and even higher than in U.K. and Canada.
Adjusted against GDP per capita, cost of these drugs works out to be 5
limes that in Sri Lanka and 12 to 16 limes that in U.K. and Canada.
The position is the complete reverse in the case of newer (Patent Pro­
tected) drugs. Table III shows that in the case of these drugs, prices are
lowest in India. These drugs are 3 to 13 times more expensive in the
other countries studied. Even when adjusted against GDP per capita the
cost of these drugs work out to be the cheapest in India.

415

418

SOCIAL ACTION VOL. Wct .-DEC. 1998

Scheme. The scheme’s objectives are to secure the provision of safe and
effective medicines to the NHS at reasonable prices. The scheme was
renewed in 1993 for five years ;md is currently under review. The
House of Commons Health Committee has now recommended that the
criterion of comparative cost effectiveness (as is in vogue in Australia)
should be adopted by the NHS before it agrees to pay for new drugs. ■’

Present Trends in Pharmaceutical Industry
In the last two decades, while the Indian Drug Industry has grown
considerably, a several disturbing trends are discernible. As these trends
would have a bearing on changes within the Industry in case the Indian
Patent Law of 1970 is changed to allow Product Patents in Pharmaceu­
tical, a discussion on some of these trends would serve to highlight some
relevant concerns.
•

Emphasis on Expensive Drugs
Most manufacturers are vying for the up-market section of the
Indian consumer who can pay heavily to ‘buy’ health care. Production
of expensive drugs outstrip demand while less expensive drugs are in
short supply (see Table 4) Thus the indifference shown by companies
towards production of low-cost essential drugs. In doing so the Industry
is also in danger of falling into a self-destructive loop where 1000
manufacturers fight for the market for drugs among 5% of the popula­
tion who can pay. This acts as a major constraint to further develop­
ment of the Industry. With a Product Patent regime, such a trend can
only be accentuated, leading to larger sections of the people being “costed
out” of the market for drugs.
“Free” Market Ethos of the Reform Process
A study of the production pattern of monitored bulk drugs shows
that larger companies arTnot interested in producing bulk drugs, but
rather prefer to act as mere traders and middlemen by concentrating on
the formulations market In such a situation there can be no justification
in liberalising production controls, and in fact more stringent production
controls are called for.
_

The logic of the market forces is even less applicable to the Phar­
maceutical Industry than other sectors. Unlike consumer goods, drugs
are not purchased by. the consumer on the basis of his choice or prefer­
ence. They are purchased/ consumed on the advise of the medical pro-

INDIAN PHARMA

CAL INDUSTRY

INDIAN PHARMAClWlCAL INDUSTRY.

422
NUTRIENTS & MINERALS
163.6
COUGH & COLD
3773
& ANU ALLERGIC
ANTI-INFLAM/ANALG.,
413.4
& ANTI SPASMODIC
RUBS & BALMS
48.0
ANTACID etc.
259.9
ANTI ANAEMIC
145.4
DIABETES, CVS.,
. 422.6
EPILEPSY, etc.
ANTIASTHMATIC
1235
ANTIBACTERIALS
1254.2
ANTI PARASITIC/
236.9
ANTI DIARRHOEAL
ANTI T.B.
17?.7

SOCIAL ACTION VOL 48 OCT.-DEC. 1998
59.5
160.7

.
.

52.4
129.2

88.06
80.40

226.6

150.0

66.18

41.1 ■
143.1
. 61.6
134.9

26.6
845,
29.0 -;
56.3 .

64.96
59.04
47.03
4.1.77

11.1'

224.9
17.4.

40.22
29.53
25.71

18.6

17.84

27.6
' 761.8
■: _ 67.6

......

1045 ....

'

Source : ORG Retail Survey of top 200 Brands, December 1994.

MNCs Reduce Productive Activities .
A recent trend in the Industry would need mention here. Since
1990-91 there has been a discernible trend of a dwindling market share
in the case of Multinational companies (see Table 7). Along side this
trend there have been a spate of mergers and tie-ups in the Industry in
the last few years. Many of these mergers have been a consequence of
mergers that have been taking place globally among giant Transnational
Pharmaceutical. Companies. Bristol-Myers, Sqibb, Hoechst Marion
Roussel, Novartis (merger of Ciba and Sandoz) and Pharmacia and
Upjohn are all recent products of the trend in mergers. While the above
has had its repercussions in the Industry, Indian companies like Piramal
(which acquired Nicholas and some other Cos.) have also got into the
act in the domestic Industry. Prominent tie ups between Indian firms
and foreign Cos. include those between Ranbaxy and Eli Lilly, Cadila
and American Herbal Products, Nicholas Piramal and Reckitt & Colman,
Cheminor Drugs and Schien, Sarabhai and Magainin Pharma, etc.

Global Trends Towards Increased Monopolies
This global trend towards merger of Drug TNCs has been sparked
off due to two kinds of compulsions. Globally, Drug Companies are
being forced to reduce the cost of medicines. Pressure is being mounted
by Health Insurance Cos., Health Management Organisations (HMOs)
and Governments (in countries like U.K. and Canada where the Slate
provides Health insurance cover) all over Europe and North America.

Table 7 : SALES TURNOVER AND MARKET SHARE OF. TOP 20 COS.
SALES
1990-91
Ranbaxy
Glaxo
Lupin
Cipla
Hoechst '•
Dabur
Pfizer
SOL Pharma.
Sarabhai
Torrent
Dr. Reddy’s Lab.
.
Alembic
Knoll . •
.
HAL
Kopran
IPCA
Smithkline Beecham
Burroughs Wellcome
Cadila
Parke Davis

SHARE
1994-95

MARKET SHARE %
1994-95
1990-91

7.0.
4.8
765.85
4.8
482.77
2.1'_ .'
J.O
334.49
2.7' "
‘
1.6
' 295.83 ■
98.05
'
' ' 2.6
33 281.74
196.74' •
2.4
0.8
26036
4533 '
1.9—
1.9 •'
211.99
111.64 ,
. . 1.9
05
210.23
■
20.65 ...
1.9
2.0
209.92
118.50
1.8
N.A
— 1 —
199.63
1.8
3 0.9- 194.76
52.96
.192.72
.
2.1
.
123.25 .
• 13189.02
77.80
1.7 (est)
l,?r .
198.00 (est)
103.03
1.6
N.A
180.01
1.6
178.49
'
1.0
60.11
1.6
1.6
17832
97.02
1.6
. 1.6 .
175.18
93.10
1.6
1.2
175.00 (est)
74.67
1.3
1.6
148.39
•
94.36

285.14 ~.
288.93
.
12652,.' ‘

Source ; Centre for Monitoring ofIndian Economy (CMIE)

These pressures have become stronger in recent years with the realisation
that spiralling Drug costs are making Health insurance cover (whether
state funded or privately managed) unsustainable. In all these countries
there is a major move to insist on generic prescription in most cases,
thus opening up a huge generics market. The ability of leading Drug
TNCs to operate in this market is obviously compromised, as they do
not have the advantage of using their Brand Images to comer large
chunks of this emerging market They are thus forced to compete on
more dr less equal terms .which a large number of. lesser known Cos,
ahd'also self drugs at relatively cheaper rates. In the U.S., for example,
from 1995 through 1997, generic drug prices showed a double-digit rate
of decrease. Large Drug TNCs are thus in the process of working out
new strategies -- which include greater cartelisation in the form of
mergers and tie-ups — to maintain their suzerainty over the global Phar­
maceuticals market. Companies like Rhone-Poulenc and Bayer are al­
ready getting into the generics market

426

SOCIAL ACTION VOL 48 OCT.-DEC. 199S

cense and market a drug, respectively, without making available all the
evidence about the beneficial and adverse effects of the drug. Pharma­
ceutical companies claim that clinical-trial reports are commercially
valuable intellectual property. In practice, to support the marketing of
their new products, most manufacturers make some of their intellectual
propertv generally available by publishing some of the reports upon
which their successful licence applications were based. Unfortunately,
these reports are not generally representative of all the evidence. A
report in 1980 showed that studies submitted in support of applications
for new licences for drugs in which side-effects had been shown were
less likely than others to be published6. There have been innumerable
recent instances of suppression of vital information by Drug Companies
about their products, even in an environment of strong patent protection.
A few of these would merit mention here. .
.
The Journal of the American Medical Association reports that a
drug company suppressed research which showed that generic thyroid
drugs were as effective as its own branded product for almost seven
years. A randomised trial had concluded that two brand name and two
generic forms of thyroxine sodium (levothyroxine) were bioequivalent
and interchangeable without loss of therapeutic efficacy in most patients
for the treatment of hypothyroidism. The two brand name products were
Synthroid - the most commonly used brand in the United States, and
Levoxine (now renamed Levoxyl) — a newer, cheaper product similar in
price to generic forms. The authors of the study estimate that using
generic, or less expensive brand name products, in the United Slates
could save $356m a year. .

These findings were published in 1997; despite being ready for
publication in 1990. In 1987 Betty Dong and colleagues from the de­
partment of clinical pharmacy at the University of California-Medical
Center in San Francisco were asked by Flint Laboratories, the manufac­
turer of Synthroid, to carry out research comparing their drug with three
others. Both sides apparently expected the study to show that Synthroid
was superior. By the end of 1990, when the study was complete and it
. becapie clear that all four preparations were bioequiyalcnt,. the results
were, sent off to Boots Pharmaceuticals," which had taken over Flint
. Laboratories..
’............ '
'. ./.

INDIAN PHARMAbWhCAL INDUSTRY

427

Dr. Rennie says that over the next four years Boots “waged an
energetic campaign to discredit the study and prevent its publication.
The study was eventually submitted to JAMA in April 1994, and a
publication date was set for 25 January 1995. On 13 January 1995 Dr.
Dong suddenly withdrew her manuscript from publication, citing im­
pending legal action by Boots. Apparently, Dr. Dong had signed a
restrictive covenant at the beginning of the study stating that all infor­
mation gathered in the study was confidential and could not be pub­
lished or released without written consent from Flint Laboratories.
In March 1995 the pharmaceutical branch of Boots was taken over
by Knoll Pharmaceuticals. The FDA wrote to the company saying that
its assertion that Synthroid was pharmokinetically superior to other
preparations was misleading and that the information should not be
disseminated. Under pressure from the FDA Knoll agreed on 25 No­
vember 1996 to allow the research to be published, but it still insisted
that the conclusions were not supported by the data7-

Drug companies submitting licensing applications to the Food and
Drug Administration (FDA) in the United States will now have to reveal
whether researchers involved in a drug trial have any financial interest
in the company. The new regulations aim to eliminate possible data bias
arising from financial considerations. Effective from February 1999, the
new rules will require companies to disclose whether clinical investiga­
tors have received stock and patent options, payments in the form of
research grants, gifts of equipment, consultant fees, and honorariums

from lectures.
Drug companies routinely recruit doctors and scientists to study
their products and to conduct clinical trials. Clinical, investigators may
receive substantial compensation for participating in these studies, and
these may then be used to support an application to the FDA. A.xecent
article ’ found that doctors who had a financial relationship with manu­
facturers of calcium channel blockers were more likely to consider them
safe and promote them over competing antihypertensive treatments than

■ those who lacked such relationships’. The problems, that can result from inappropriate concern about
intellectual property are illustrated in the case of human albumin solu­
tion, a blood product that has been used in the treatment of hypovolaemia
and burns since 1941. The licensee! indications for albumin are the

430

INDIAN PHARMA^^HCAL INDUSTRY

SOCIAL ACTION VOLWOCT'.-DEC. 199.8

ment Foundation International (RAFT), in Canada has shown, if the
contribution of Third World peasants and tribals is taken into account,
the roles are dramatically reversed: the US owes US$302 million in
royalties for agriculture and $5,097 million for pharmaceuticals to Third
World countries, according to these latter estimates. In other words, in
these two biological industry sectors alone, the US owes $2.7 billion to
the Third World™

431

NOTES & REFERENCES
1.

MajOmdar, J.S. 1986. Background Paper in Amit Sen Gupta, fed). The Drug

2.

Industry and the Indian People, DSF and FMRAI, New Delhi.
For a more detailed discussion on differences in prices of new and older drugs
in India refer to, Sen Gupta, Amit, “Do Drugs Cost Less in India”, Economic

3.
4.

and Political Weekly, January 27, 1996.
British Medical Journal, 1997. 315:200-201.
Government of India, Annual Report, 1994-95, Ministry of Chemicals and

5. Fertilisers.
WHO, Clinical Pharmacological evaluation in Drug Control, Copenhagen,

Conclusion
Finally, an over-arching tendency in the Industry - applicable to
both large Indian Cos. and TNCs - needs to be taken note of. Over the
years many large Cos. have cut down Bulk Drug production, and are
increasingly acting as mere traders. In many therapeutic groups, major
production is accounted for by the Small Scale sector. In many cases
the latter is depending heavily on imported bulk drugs, i.e. they function
as suppliers of imported bulk drugs to large Cos. The trend is discern­
ible, as commented upon earlier, in the sharp rise in the rate of growth
. of imports. This tendency has been fuelled by liberalisation in the Indus­
try -- making imports easier and also the scrapping of ratio parameters
which earlier made it mandatory that a certain percent of a Co’s turn­
over should be made up of by bulk drug production. The Indian industry
is thus faced with the twin danger of a resurgent Foreign Sector poised
to strike, armed with a strong Patent regime, and an Indian Sector that
is increasingly dependant on imported Bulk Drugs. A possible safe­
guard against such threats — the Public Sector -- has all but been wound
up. The implications for self reliance and Health Security are obvious.

Contrary to the reforms ideology the market does not regulate prices of
drugs, as demand primarily depends on prescription habits of doctos,
disease profiles, drug resistance etc. Hence the market cannot ever be a
proper mediator of prices of drugs. The oligopolistic nature of the In­
dustry, where few companies have monopoly within various therapeutic
groups, makes the operation of the market even more infructuous. The
present policy of abandoning price and production Controls has already
led to unjustified rise in prices. Tlie concessions to the Foreign Sector
maflTa dangerous shift in our policy framework. These concessions and
a possible change in the Indian Patents Act will return the Drug Indus­
try to the situation prevailing in the fifties - a situation where TNCs
can earn super profits due to their control over technology and. brand
images.

6.
7.

WHO, 1993.
Lancet, 1998.352: 726-29.
Journal ofAmerican Medical Association, 1997;277:1205-18.

8.

New England Journal ofMedicine, 1998;338:101-6.

9.

British Medical Journal, 1998;316:493.

10.
11.
12.

Lancet, 1998; 352: 726-29
British Medical Journal, 1998;317:618.
Shiva, Vandana, Third World Resurgence, No. 86, October 1997.

DISCUSSION

Patent System and Pharmaceutical Sector
Biswnjlt Dhar
C Niranjan Rao
ANALYSIS of the impact of changes in
patent laws have acquired prominence in
the context of the patent regime that the
Uruguay Round of GATT is seeking to
introduce. The volume of literature pro­
duced on the subject has been phenomenal
which has contributed to the ongoing de­
bate. But unfortunately there is also a flip
side to the debate. Articles have been
produced without adequate understanding
of the terrain that is sought to be covered.
Authors of such articles tend to take a
predetermined position and then try to
produce masses of data to overawe the
uninitiated. The contribution by Prasad
and Bhat (1993) forms a part of this catory of articles. Right from lhemannerin
iich the problem is posed to the method­

e

ology adopted, not to speak of the inaccu­
racies in factual details and interpreta­
tions, the article appears to be somewhat
contrived. The intent of the authprs may
have been to express their support for the
Dunkel proposals and to convey the mes­
sage that India should nqt be afraid of the
proposals .But even in doing so they should
have made a more competent attempt al
handling the complex of iskues involved.
The question that arises while arguing
for a strengthening of the patent regime of
any country is whether it will lead to either
better technology transfer or indigenous
technology generation. The question
whether it will lead to higher prices is
essentially a secondary question, and this
latter aspect is central to Prasad andBliat’s
paper. Unless the first question is an­
swered, the arguments for strengthening
patent system are not valid. Ute ques­
tion of the effect of a change in patent
regime on technology has been cursorily
treated (p 1049), probably because the
authors do not understand its importance.
There is a surprising lack of acquaintance
with the literature and knowledge of how
the patent system works, as is evident
from the discussion. A good starling point
for work on patents is Scherer (1980), at
the very least the authors could have re­
ferred to this contribution to have some
clarity on the subject.
Section II of the paper dealing with the
'Factors behind Emphasis on Strengthen­
ing Patents Regime' provides an entirely
erroneous interpretation of the dimensions
of India’s technological dependence.

Economic and Political Weekly

While the fact of India’s dependence on
imported technology is beyond dispute,
the use of patent statistics to arrive at this
conclusion is confounding. Patents granted
cannot be used as an indicator of transfer
of technology under any circumstances. A
little awareness about the working of the
patent system is all that one requires to
avoid such misinterpretations. Moreover,
it is a known fact that technology sold to
India has an overwhelming share of non­
patented know-how. The authors would be
well advised to have a look at the Surveys
of Foreign Collaborations that the RBI has
done in the past.
The discussion on technology gap is
equally misleading, particularly in the use
of statistics. A crude attempt is made to
indicate the technology gap that exists
between India and some countries in
Table 6 using the Vernon-Ilirsch product
cycle theory without making any refer­
ence to the literature on the subject. The
supporting data used in Table 6 have been
picked up from Figure 63 of the publica­
tion of the Department of Science and
Technology referred to as the source. Fig­
ure 58 of the same source, on the other
hand, tends to suggest that the conclusions
sought to be arrived at by the authors
about India’s technology gap vis-a-vis
other countries is an exaggeration. 1986,
for which data arc provided in Table 6, is
one of the worst years of India’s trade in
technology-intensive products. The ratio
of exports to imports which had dipped to
0.11 when Congress made its come-back
after the Janata rule had increased to 0.26
by 1984-85 and in 1985-86 it had fallen to
0.14.1985-86 cannot therefore be consid­
ered as a normal year as it was defying a
trend that was being witnessed in the 80s.
Section III sets out to indicate the
‘Impact of Strengthening the Patents Re­
gime on Drugs and Pharmaceuticals’ by
first indicating what effect the proposed
change in patent regi me would have on the
prices of pharmaceuticals. The question
of rise in prices of pharmaceuticals after
the introduction of product patents with a
longer patent term is inspired by the state­
ments of the then United States Trade
Representative (USTR), Carla Hills. This
was done, in our view, essentially to divert
attention from the more important ques­
tion of what kind of patent system deve­

October 2, 1993

loping countries should have.
At the outset Prasad and Bhat make a
bold statement that "...the arguments of
many supporters and opponents of India's
present patent regime are not backed by
data...”. Illis assertion appears self-con­
tradictory since they do cite various, au­
thors who have provided data to bring out
the adverse implications of the proposed
changes.
In fact, evidences provided by Kcayla
and others, which the authors have made
references to, can be used to contradict
their view. They refer to the findings of
the Kefauver Committee which had com­
mented that Indian drug prices were
"amongst the highest in the world” at a
time when India was following the colo­
nial Patents Act, the Patents and Designs
Act of 1911, which was a product patent
regime. The adoption of the process patent
regime following the Patents Act of 1970
has radically changed the price situation
in the Indian drugs industry in the decades
of the 70s and the 80s—by the authors'
own admission, drug prices arc now
amongst the lowest in the world.
Table 13 purports to give evidence to
say that DPCO rather than patents were
instrumental in the lower increase in prices
of pharmaceuticals. Apart from various
methodological problems of using index
numbers to illustrate this point, which we
shall not discuss here to avoid digression,
there is one major lacuna in this analysis.
If the DPCO was introduced in 1970 and
the new Patent Act in 1972, how does one
distinguish the impact of these two mea­
sures. The comparison between the two
time periods before and after 1972 docs
not make any sense.
Evidence of the critical role of the patent
system in determining the level of prices
in the pharmaceutical industry is provided
by the authors themselves. Table 15 A and
15B indicate that countries in the immedi­
ate neighbourhood oflndia have relatively
high drug prices and these countries do not
follow a process patent regime. Sri Lanka
and Indonesia, being members of Paris
Convention, have a product patent regime
and Pakistan, though not a member of the
Paris Convention, follows the same Pat­
ents and Designs Act of 1911 which India
had been following before the 1970 Act.
The impact of the patent regime on prices
is quite conclusive as is borne out by the
data the authors provide.
While increase in the price of drugs and
pharmaceuticals is inevitable if the pro­
cess patent regime is changed to a product

2167

patent one, a position which the authors
also accept, they have adopted aquccrlinc
of reasoning to assuage the fears that
much damage would be caused as a result.
The first is their excessive emphasis on the
use of DPCO to quell the pilch of price rise.
The second is that the rise in the prjee of
patented drugs would not affect the poor as
they do not consume modern medicines!
Reliance on price controls, particularly
after the Dunkel proposals arc accepted,
would not remain an option as along with
the Trade Related Aspects of Intellectual
Property Rights (TRIPS) which includes
patents, Trade Related Aspects of Invest­
ment Measures (TRIMs) would also have
to be accepted. The latter provides by any
obligations or controls. In view of this the
repeated references to DPCO as a control­
ling mechanism when drug prices do go up
after accepting the Dunkel proposals is
simply astounding.
The assertions on the impact of increase.
of drug prices on different sections of the
population, particularly its impact on the
poor, is very disquieting. Why such con­
cern for the poor after leaving them out­
side the health system? They do not have
entitlement for health services in the ex­
isting system (see, for example, the report
on three surveys conducted on the health
care system—Business India, August 1730, 1992, pp 138IY). The effort should be
to expand the health services to all, and
more importantly to create entitlements
for the poor.
This simplistic analysis is based on two
assumptions. First, strengthening the patent
system will result in drug inventions in
developed countries relevant to their health
needs. Such needs may be useful for the
rich in developing countries. Second such
strengthening will not result in any drug
inventions of relevance to the poor. If.this
argument is valid, and the overwhelming
desire is to have product patent regime,
then can one come to the policy conclu­
sion that to lessen the effect of any ad­
verse affect of increase in drug prices that
is inevitable, the number of people below
the poverty line should be increased?
The estimation of what percentage of
drugs that are produced in India arc still
under product patents abroad was an idle
question till the former USTR, Carla 1 Jills’
statement that only a small percentage of the
total pharmaceuticals produced in the coun­
try are covered by patents. The situation on
the ground is, however, quite different. In
some therapeutic groups it has been found
that the patented drugs account for more
than 90 per cent of the total production. The
authors not only take the former USTR’s
statement uncritically, they also seem to
suggest that for a majority of the popula­

2168

tion, modern medicines, viz, the patented
Tire
(iv)
authors indicate that “thequesdrugs, will remain out of their reach..
tion of ‘pipeline protection’ has not even
In their comments on the drugs scene in
been mentioned in the original text of
India, the authors make contradictory state­
Dunkel”, a statement that notonlycontraments. They begin by arguing that “...India
dicts their earlier remarks on ‘pipeline
is a drug starved country’ ’ and then go on to
protection’, but is also confoundingl I low
state that "... India is almost self-sufficient
many texts did the former director general
indrugs...”.
of<GATT, Dunkel, prepare, according to
Tire handling of the discussion on the
thcauthors? •
GATTnegotiations is the lowest point of the
(v)
In the discussion on transitional ar­
paper. One of the most contentious issues in
rangements the authors use a wrong ex­
the proposed agreement on TRIPs, viz, treat­
pression 'pipeline protection granted to
ing importation as working of the patent has
developed countries under MFA’, used by
been discussed without a proper understandthem to mean the ’transition period’ given
ingof the proposals. This is clearly reflected
to the developed countries for removing
in the two statements that are made in the
the quota restrictions under MFA.
Il is impossible to list all the other errors
paper. The author's first make an emphatic
statement that "in the Dunkel Draft Text
that the article is strewn with. Some of
nowhere has it been mentioned that imports
these arc: (i) “most American drugs arc
arc tantamount to working...' ’. They go on to
expected to expire in 1990-95”, and (ii)
' 'Patents office is the highest office sanc­
say that “though the text says that imports
tioning transfer of technology to India”,
cannot be allowed by others without the
consent of'the patentee, this necessarily
and last but not the least, (iii) RCA is
does not mean that the patentee can himself
expanded as Relative Competitive Advan­
tage.
import it”.
Tire confusion that the authors create in
The authors display surprising igno­
this regard can be settled by looking at two
rance about the status of the Paris Conven­
tion when they comment on India’s join­
articles of the TRIPs agreement.. Articles 28
and 31. In Article 28, which lays down the
ing it. A reading of the Dunkel proposals
rights of the patentee, imports have been
would have told them that this issue would
automatically, get settled once the TRIPs
introduced as one of the exclusive rights.
agreement is signed. Article 2 of the draft
Article 31 lays down the conditions for
working of the patenland the conditions arc
agreement bn TRIPs provides that coun­
tries would have to comply with Articles
so defined that ‘working’ would now be
1-12 and 19 of the Stockholm Act of the
allowed only under exceptional cases. These
Paris Convention (1967).
two articles taken together indicate that the
A word about the source of patent statis­
TRIPs proposals are in fact aimed at Virtu­
ally taking away the right of the patent
tics used in the paper. Looking at the
comprehensiveness of the data one sus­
granting country to ensure working of the
pects that the original source lies else­
patent granted to a foreign patentee while at
where. To our knowledge the Economic
the same time they give the patentee the
right to,exclusively import the product cov;
Growth Center at Yale University has the
only comprehensive database on patents
crcd by the patent in the country of grant.
In the discussion pertaining to the Sogranted it India.
And finally, one cannot gloss over the
called transitional period provided in the
complete lack of orderliness in the presen­
Dunkel Draft Text, the authors commit glar­
tation of the references in an academic
ing errors. These are briefly given as under:
(i)
All countries would not get a transi­ article. For example, note 42 refers to the
Draft Final Act of the Uruguay Round
tional period of five years for changing the
patent regime. Developed countries get only
Negotiations, which is known as the Dunkel
Draft Text as Dunkel Committee Report I
one year and all developing countries get
four years over the period available to the
The Trade Negotiations Committee which
had tabled the Draft Final Act docs not
developed countries, i c, five years.
(ii)
Tire exclusive marketing rights for even find a mention.
pharmaceutical and agro-chemical products
that the authors indicate is being insisted on
References
by the Americans is in fact a proposal pro­
Prasad, H Ashok Chandra and Shripad Bhat
vided in the Dunkel Draft (Article 70.9).
(1993):
'Strengthening
India's Patent Sys­
(iii)
Providing exclusive marketing rights
tem: Implications for Pharmaceutical Sec­
is not called ‘pipeline protection’, accepting
tor', Economic and Political Weekly, Vol
applications for product patent immediately
28. No 21. May 22 (pp 1037-1058).
after the new GATT comes into force if
called ‘pipeline protection'.This provision
has been included as a part of the transi­
tional arrangements.

Scherer,F M (1980): 'IndusirialMarketStruc­
ture and Economic Performance', Rand
McNally, Chicago. IL (2nd edition).

Economic and Political Weekly

October 2, 1993

__ _____________ ______________ ____________________ SPECIAL ARTICLES

vz

Strengthening India’s Patent System
Implications for Pharmaceutical.Sector
H Ashok Chandra Prasad
Shripad Blial

This paper examines the factors behind the current demand for strengthening the Indian patents system and
the effect of such strengthening on the.pharmaceutical sector. Against the background of their study of these
issues, the authors attempt to arrive at policy conclusions and to answer the following-questions: (i) Should India
amend its Patents Act, join the Paris Convention or toe the Dunkel line? (iijlf the Patents Act is to be amended,
what are the modifications needed? A nd (Hi) what policy changes are needed in the context of the pharmaceutical
sector specifically?

I
Introduction

Technology (DST), Government of India,
etc, have been used wherever necessary:

II
THE issues of Intellectual Property Pro­
tection (IPP) is receiving great attention
Factors Ix-liind Emphasis on
at present and there is great pressure on
Strengthening Patents Regime
developing countries in general and India
in particular to strengthen their Intellec­
In this section, let us examine the im­
tual Property Rights (IPRs). The purpose
portant factors behind the new emphasis
of this paper is not to go into the whole
on strengthening the patents regime in
gamut of discussions pertaining to IPRs
India. This involves the examination of
or their evolution in international negotia­
the following factors: (1) The extent of
tions.1 The purpose of this paper is to in­
dependence of India on different coun­
vestigate the following specific issues:
tries for technology. (2) The situation in
(1) The factors behind the emphasis on
developed countries, especially US with
strengthening the Indian patent system in
respect to their economy, balance of
India.
payments position and future growth. (3)
(2)
The effect ijf strengthening the The change in the political situation in
Patents Act in the case of India’s pharma­
India, developed countries and world in
ceutical sector.
general.
(3)
The modus operandi for strengthen­
India's increased dependency on deve­
ing India’s patent regime.
loped countries for technology can be seen
In the light of our study of the above
mentioned issues, we have made an at­
tempt to arrive at policy conclusions,
which try to answer the following ques­
tions: (1) Should India amend its Patent
Act, join the Paris Convention of toe the
Dunkel line? (2) If India has to amend its
Patent Act, what are the modifications
needed? (3) What policy changes are
needed in the context of patents for the
pharmaceutical sector?
The main sources of data for this study
are the patents data and company’s data
at the ISID. The former are available from
1972 to 1989 and the latter from 1974-75
to 1989-90. Besides these data bases,
Monthly Index of Medical Specialities
(MIMS), .Indian Drug Manufacturers
Association (IDMA), Organisation of
Pharmaceutical Producers of , India
(OPP1), World Intellectual Property
Organisation (WIPO), United Nations
Conference on Trade and Development
(UNCTAD), Department of Science and

Economic and Political Weekly

by examining three aspects: (1) The impor­
tance of different countries in the patents
granted by India. (2) The dependency and
relative dependency ratio of India with
respect to patented technology. (3) The
technqlogy gap between India and the
developed countries and India and other
developing countries and other techno­
logy-related indicators of India.

Importance of the Different
Countries in the Patents Granted
by India
CTable I shows tha^fthe patents granted

by India to developed countries forms a.
major chunk of all patents .granted by
India and the only important category
among the developing countries is the
patents granted by India within the coun­
try. Among the developed countries, the
US (as an individual country) and Europe
(as a group of countries) occupy an im­
portant place Since 1982 the percentage
of patents granted to Japan is increasing,

May 22, 1993

though it is nowhere near that of the US.
Country-wise, the US lops the list of
patents granted by India. This is given in
the official publication of the government
of India2 which says that the US simply
accounted for 40.3 per cent of total ap­
plications filed for patents by foreign na­
tionals during 1989-90. This is followed
by West Germany, Japan, UK and France.
Then comes Switzerland, Russia, Nether­
lands, Italy and Sweden. Among the
developing countries the patents granted
by India to Indians is lower than that of
the US, individually and Europe in toto.
Among the LDCs (other than India), East
Europe is very important in i984-89. Next
is Israel and NICs, Malaysia and Thailand.
South Asia and Africa are nowhere in the
picture. )
Thble 2 shows the percentage of patents
granted by countries and by sectors.
Sector-wise, sectors C and B sltows the
highest percentage of patents granted.
Among the countries also C and B sectors
are important in the case of.the patents
granted to developed countries. But in the
case of patents granted to Indians all the
sectors seem to be well balanced.
I Thus, the tables clearly show that India
depends on developed countries for tech­
nology3 and that too on a single country
like the US or group of countries like
European countries: Sector-wise India’s
dependence is more in C (chemistry,
metallurgy) and B (performing opera­
tions, transporting) categories. One note
of caution is that we have not given
weightage to type of patents by the extent
of the technology involved.^

Dependency and Relative
Dependency Ratio of India
with Respect to Patents
The dependency ratio (which here,
means the total number of patents granted
by India to non-Indians as a proportion

1037

of the patents granted by India to Indians)
given in Thble 3 shows that it has been
high till 1978, low from 1979 to 1982 arid
then again higher since 1983. While the
total number of patents (both in force and
sealed) has fallen, the dependency ratio
has not fallen over the years, except for
the initial fall from 1968 to 1970 (i e,
before the Patent Act was implemented),
indicating that India’s increased depen­
dency for technology on developed coun-'
tries has not been allowed to materialise
due to the 1970 Patents Act.

The relative dependency ratio (which,
here means the total number of patents
granted by India to a particular foreign
country (or group.of countries) as a pro­
portion of the patents granted by India
to Indians) also given in Table 3 shows
that India’s relative dependency ratio is
still absolutely higher with Europe than
with the US and India’s dependency on
the US (as an individual country) and
Europe (as a group) is more than India’s
dependency on itself. The relative depen­
dency ratio of India with the US which
has always been at a lower level than with
Europe fell-from 1976 to 1983 and than
regained to the earlier level. But the
relative dependency ratio on Europe also
fell from 1976 to 1980, then it rose, but
never regained its earlier level, thus nar­
rowing the gap between the relative
dependency ratios on the US (a single
country) and on Europe (a group of coun­
tries). The relative dependency ratio on
Japan, though lower than Both the US
and Europe, and has shown a fall during
1976 to 1981, has regained its earlier level
and even risen to higher levels. The relative
dependency ratio of India with other
developing countries which is also at a
lower level, has also fallen during 1976 to
1981, and then risen, but has never regain­
ed its earlier level. Strangely the relative
dependency ratio of India with USSR has

been very low and it shows many ups and
downs.
Another important fact is that India’s
dependency ratio in terms of patents in
force is higher than in terms of patents
sealed as can be seen in Thble 4/ The
table also shows that Indies dependency
ratios (both in terms of patents scaled and
patents in force) before 1972, i e, the
period before the 1970 Patents Act was
implemented, was very much higher.
While during the period 1976-77 to
1980-81 the dependency ratio in terms of
patents sealed have shown a fall and then
a gradual rise, the dependency ratio in
terms of patents in force shows a fall
through the entire'period after 1976-77.
This is possible because of the greater
death rate of old patents, though the birth
rate of new patents after 1981-82 is rising.

countries for technology. This necessarily
docs not mean that it is good for the
economy as technology transfer will be
low, while the economy has not yet reach­
ed a stage of relative self sufficiency in
technology.
However at this stage we are concerned
only with showing India's relative depen­
dence on other countries for technology
which has put pressure bn India to accept
the new IPRs and the above analysis clear­
ly shows India’s continued dependence
and increasing dependence on developed
countries for technology in terms of
patents in force and patents sealed
respectively.

The above analysis brings into focus the
following important facts: ~UJ~ India’s
relative dependence on other countries,
especially the developed and among them
the US and Europe, and among them on
the US as a single country has been in­
creasing despitelhe fact that total number
of patents sealed is falling. In today’s
unipolar world this has far-reaching im­
plications. (2) India’s dependency on the
west, which fell from 1977 to 1980, coin­
ciding with the Janata Party rule, shows
a rise from 1981 during the Congress Party
rule.’(3) As noted earlier, the fact that total
number of patents are falling consequent
to the 1970 Patent Act and the fact that
dependency on developed countries is not
falling, shows that the relative high
dependency on western technology has
not been allowed to materialise. ]

The technology gap between India and
developed countries and India and other
developing countries can be judged with
the help of comparative indicators of
technology like expenditure on R and D
as a percentage of GNP, per capita
R and D expenditure, number of scien­
tists, engineers and technicians (SET) per
thousand population, SET in R and D per
thousand population.
The other technology-related indicators
of India which show its dependence on
technology from other countries, especial­
ly the developed countries are the follow. ing: (1) India’s trade in technology-inten­
sive products; (2) External assistance for
S and T programmes received by India;
(3) Foreign investments in India; and (4)
Royalties, lumpsum amounts, technicians'
fees, etc, received and paid by India.
In Thble 5, the comparative technology
indicators of India and other countries are
I given. Column 1 gives the expenditure on
R and D as a percentage of GNP for
. selected countries. This column shows
[ that India invests a very small percentage

, Whether a lower dependency ratio is
good or bad is a debatable question. But
certain inferences can nevertheless be
made. For a relatively underdeveloped
economy a lower dependency ratio indi­
cates that it is less dependent on foreign

Indicators of Technology Gap and
Other Technology-Related
Indicators

Table 1: Patents Granted by India: Share of Different Countries (1972-1989)

(In per cent)

Year
1972
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989

UK

USA

Aus • Asl

Jap

Fra WGm

Rus

20.18 13.04 26-61 3.88
20.16 11.31 24.85 4.10
24.31 11.86 23.42 3.13
27.88 9.39 22.45 2.81
26.62 9.24 24.47 2.52
36.69 7.95 23.14 2.56
36.50 8.51 20.65 2.45
32.85 9.00 21.33 1.95
30.59 7.70 22.00 4.52
24.87 5.94 24.16 5.62
21.75 8.59 25.76 4.64
25.29 8.82 26.26 5.51
28.95 7.71 27.54 4.16
25*.6O 9.17 27.71 4.07
22.20 6.61 29.27 4.61
19.70 5.15 29.29 5.98

3.35 10.57
5.80 9.91
4.03 11.30
3.71 12.81
4.12 10.70
3.41 8.80
4.89 9.30
3.89 10.71
3.78 11.63
4.84 13.76
6.16 12.13
4.74 8.98
6.30 9.67
6.66 8.73
5.84 11.39
5.27 12.01

1.94 1.15 0.26 0.18 1.41
2.46 0.59 1.11 0.47 0.70
2.26 1.02 0.75 0.56 0.83
1.98 1.26 0.83 0.47 - 0.72
3.11 0.55 0.64 1.01 0.14
1.85 0.43 0.92 0.35 0.14
2.64 0.68 0.59 0.78 0.39
2.76 1.38 0.65 0-81 0.32
2.96 0.96 1.04 0.30 0.37
3.23 0.58 0.84 1.23 0.71
2.32 ' 0.77 1.03 ’ 0.96 0.70
1.48 0.82 1.12 0.51 0.36
1.10 0.24 1..16 0.86 0.18
1.66 0.68 1.05 0.75 0.48
3.47 1.06 1.76 1.06 0.33
3.14 1.24 2.54 0.65 0.41

Ind

Can

Bel

Den ■ Nel
0.79
0.64
0.83
0.79
0.59
0.14
0.29
0.24
0.15
0.39
0.55
0.76
0.37
0.54
0.20
0.59

2.20
2.11
2.64
1.87
2.10
2.13
1.96
1.70
1.85
1.81
2.84
2.80
1.53
1.29
1.80
2.43

Nor

Swe

Sws

Italy DCs Europe LDCs

0.44 1.23 3.44 4.14 75.24 41.32 5.198
0.23 1.52 4.04 ' 3.87 74.15 40.97 3.458
0.34 0.98 2.56 3.50 70.33 39.65 3.351
0.58 1.44 3.13 2.84 67.66 38.31 2.518
0.59 0.69 3.48 3.93 68.62 37.28 3.934
0.14 1.14 3.62 2.06 59.76 30.87 7.310
0.20 0.98 2.74 2.54 60.47 33.46 0.685
0.24 1.87 4.14 2.35 63.99 35.93 3.650
0.37 1.04 3.63 2.30 65.41 33.85 2.444
0.32 0.65 4.91 2.33 72.03 J7.53 0.323
0.37 1.18 3.39 2.73 75.19 40.47 2.912
0.46 1.27 3.16 3.11 71.65 36.36 2.346
0.31 1.53 2.08 2.33 67.99 33.72 2.938
0.20 1.63 3.57 2.17 71.71 36.37 2.309
0.16 1.18 3.80 1.84 75.18 34.82 2.367
0.41 1.42 3.43 2.31 7.7.22 34.91 2.367

Source: Calculated from the data available at the 1SID.

1038

Economic and Political Weekly

May 22, 199

of GNP on R and D, 0.9 per cent in 1990,
while most of the advanced countries
devote more than 2 to 3 per cent of their
GNP on R and D. Even Pakistan is ahead
df India with 1 per cent expenditure on
R and D in 1987] The gap becomes more
sharper when we examine the per capita
R and D given in column 2. India is at a
very low level of the US $ 2.76, while most
developed countries are above the US
$ 200 level and some even above the US
S 500 level. NICs like Republic of Korea
and Singapore show a level of the US $ 75
and 68 respectively. Column 3 shows the
number of SET per thousand population
which is also at a very low level of 4.50
in 1990 which is lower than the developed
countries, NICs and even other developing
countries like Brazil, Philippines, etc. This
fact should make us realise that though
India boasts of being one of the most im­
portant nations in the world in terms of,
SET, in relation to India’s population,
India is at a very very low level. Similarly
SET in R and D per thousand of the
population is at a very low level as can be
seen in column 4.
Table 6 shows the export and import
market shares of some selected technology-intensive products of India and some
other countries. This table showsflthat
India’s Import market shares are higher
than export market shares and is also
I relatively higher than most of the other,
I countries given in the table for almost all
the four categories of technology-intensive
goods./'
Table 7 showslhat the share of imports
of technology-intensive products are high
in India’s imports and have risen in the
80s, though it shows some ups and downs
as well. More important, is the fact that
while the ratio of exports to imports is at
the 0.50-0.70 range in the 80s the ratio of
technology-intensive exports to techno­
logy-intensive imports is still lower at the
0.11 to 0.26 range^/This shows that while

India is relatively'more dependent on
other countries in its commodity trade, it
is more so in the case of technologyI intensive commodity trade] The ratio in

I the case of trade of others commodities
: / is more than 1 in all the years’indicating
clearly that India’s adverse balance of
trade has been due to trade in lechnology' intensive products. The only point of
■ solace for India is that the ratio is almost
: constant over the years in the case of
; technology trade, while it has fallen in the
80s in the case of total trade.
; r Thble 8 shows the external assistance
’ deceived by India for S and T program' mes which is a sizeable amount of US $
. 110.35 million in 1987. Among the donors
■ the bilateral sources are more important
than multilateral sources, indicating
India’s greater dependence for technology

Economic and Political Weekly

Table 2: Share or Patents in Each Category of 1PC to Total—Countrywise (1972-1989)

Category

UK

USA

WGm

Fra

Jap

Ind

Rus

1972-74
Other Other
DCs LDCs

ft

6.33
34.81
18.99
7.59
1.27
13.29
7.59
10.13

7.95
3X11
31,46
4.30
1.99
7.28
3.64
10.26

■ 4.17
2.63
16.67
28.95
44.74
50.83
12.50 . 0.00
2.50
0.00
4.17
10.53
2.63
3.33
5-83 . 10.53

27.27
18.18
43.18
0.00
0.00
•0.00
6.82
4.55

18.34
19.65
20.09
6.11
6.11
12.23
10.92
6.55

4.55
31.82
18.18
4.55
0.00
13.64
13.64
13.64

6.18
23.60
*.*..38
7.30
3.93
6.74
1.12
6.74

15.38
23.08
41.03
0.00
7.69
7.69
0.00
5.13

UK

USA

WGm

Fra

1975
Jap’

Ind

Rus

Other
DCs

'
Other
LDCs

5.76
28.27
17.80
5.24
3.66
18.85
3.14
17.28

11.79
19.81
30.19
2.83
2.83
11.32
6.60
14.62

5.92
18.34
38.46
8.28
1.18
9.47
2.37
15.98

4.04
15.15
45.45
6.06
3.03
13.13
9.09
4.04-

8.57
22.86
42.86
0.00
4.29
8.57
2.86
10.00

11.92
21.80
26.16
3.78
■ 4.65
7.56
9.88
14.24

0.00
35.71
9.52
.0.00
4.76
7.14
2.38
40.48

6.08
17.87
44.87
10.27
3.80
7.60
4.18
5.32

6.82
17.05
43.18
5.68
3.41
6.82
1.14
15.91

_______________________
UK
Fra
USA WGm

1980
Jap

Ind

Rus

Other
DCs

Other
LDCs

16.00
8.00
48.00
4.00
4.00
12.00
4.00
4.00

12.87
21.98
25.74
4.29
•5.36
11.80
8.04
9.92

7.41
22.22
7.41
0.00
3.70
14.81
22.22
. 22.22

7.56
26.05
28.57
8.40
5.88
8.40
9.24
5.88

6.45
32.26
41.94
0.00
6.45
6.45
0.00
6.45

__ _________________________ 1985
USA WGm
UK
Fra
Jap

Ind

sRus

Other
DCs

Other
LDCs

9.26
14.31 ' 0.00
18.52
10.34
18.35
37.96
29.23
31.03.
4.63 t 3.83
o.oq
1.85 ' 5.44
17.24
7.41
24.14
15.93
3.70
5.85
6.90
16.67
10.34
7.06

11.40
25.08
26.06
9.12
4.89
13.36
3.58
6.51

14.29
19.64
33.93
3.57
8.93
7.14
1.79
10.71

Other
DCs

Other
LDCs

B
C
D
E
I(J
H

'■

A
B
c
D
E
P
G
H .

8.05
28.74
13.79
2.30
6.90
18.39
3.45
18.39

B .
Q
D
E
F
G
H

A
B
c
D
E
F
G .
H

A
B
c
D
E
F
G
H

•

9.00
32.70
27.49
1.90
3.32
12.80
2.84
9.95

5.26
27.37
22.11
11.58
2.11
12.63
5.26
13.68

2.00
20.00
26.00
2.00
16.00
28.00
2.00
4.00

10.12
23.81
23.21
1.19
5.95
21.43
3.57
10.71

13.40
24.08
25.83
2.52
2.52
14.76
5.63
11.26

2.84
21.59
42.05
10.80
1.14
9.09
3.98
8.52

2.15
26.88
32.26
7.53
3.23
16.13
3.23
8.60

UK

USA

WGm

Fra

1989
Jap

Ind

Rus

M.65
30.23
13.95
0.00
10.47
23.26
4!65
12.79

11.11
16.57
29.29
2.83
’ 1.21
16.36
9.49
13.13

3.94
7.87
21.18 ■ 17.98
29.06
32.58
8.87
3.37
2.46
3.37
14.29
8.99
4.43
13.48
15.76
12.36

11.88
13.86
30.69
2.97
0.00
18.81
5.94
1’5. $4

15.02
18.02
30.93
3.60
8.41 .
9.61
8.71
5.71

11.32
26.42
33.96
0.00
1.89
16.98
1.89
7.55

7.66
23.53
27.01
19.61
28.10. 21.57
.7.jO
0.00
7.84
4.01
14.23
15.69
•5.84 ' 3.92
5.84
7.84

Notes : As per International Patent Classification; A = Hutnan Necessities; B = Performing
Operations, Transporting; C = Chemistry, Metallurgy; D = Textiles, Paper; E = Fixed
Constructions; F = Mechanical Engg, Lighting, Healing, Weapons, Blasting;
G = Physics; H = Electricity.
Source: Calculated from the data available at the IS1D.

May 22, 1993

1039

transfer on bilateral than multilateral
sources./Here of course, the European

countries are the principal donors.
Tat?le 9 shows the foreign investment
stocks till 1989 and fresh approvals to
India in the 90s. The table shows that the
manufacturing sector and in this the
technology-intensive products have been
important in the foreign investment stocks
till 1989. Among the new approvals also
(in terms of numbers) technology-intensive sectors have been important till 1990.
The total approvals of foreign investments
in 1992 is more than the stock of foreign
investments till 1989, and the US has a
major share in the new approvals. The
technology gap between’India and the
developed countries is cited as the impor­
tant reason for liberalisation of foreign in­
vestment and today India is dependent on
the developed countries in general and the
US in particular for technology transfer
' via foreign investments. In fact 60 per cent
of foreign direct investment approvals bet­
ween August 91 to February this year is
Ahe US.5
^nable 10 shows the payments and

Economic Situation in Developep
Countries

logy and on the whole Indies dependence
has been increasing. If we see the percen­
tage change in the nine-year period of 80s
over 70s (from 1971-72 to 1979-80), lumpsum payments show a per cent increase
of 1,099 per cent whereas for royalties it
is 343 per cent. A remarkable increase in
payments of management fees, etc, and
payments for other professional service
(which are also related to technology
transfer) has taken place in the 80s.

In the earlier section, we have noted the
continued domination of developed coun­
tries and the growing technology gap bet­
ween developed countries and developing
countries like India. Here we intend to
■show how the changing economic situa­
tion in the world and in the developed
countries have made them to focus their
attention.on issues like IPRs. (Here we
consider some important indicators need­
The above analysis clearly shows the
ed for our analysis like exports, imports,
technology gap between India and other
trade balance, current account balance,
countries and India’s continued and in­
growth rate of exports, imports, etc, for
creasing dependence on advanced coun­
the world and some developed countries
tries in general and some countries (the
US) and groups of countries (Europe) in j like the US, the UK, etc, and trade bet­
ween DCs and trade of LDCs with DCs.)
particular for technology.
Table 4: Dependency Ratio of Patents Sealed and Patents in Force

No of Patents Sealed
Indian
Foreign

Year

426
645
596
629
265
278
358
737
426
928
657
281
516
349
421
405
340
263
451
532
588
795

1968
1969
1970
1971
1972
-1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
.1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89

No of Patents in Force Dependency Ratios
Foreign
P Sealed
P Force
Indian

3547
2231
2568
3063
3673
3718
3948
3039
2991
2746
3065
2469
2786
2757
3038
3329
3523
3008
2549
2004
2150
2584

3704
4308
2936
3294
1245
. 1064
1058
3207
1894
1964
1857
499
1657
670
936
822
980
1206
1500
1594
1516
2585

37816
25483
25753
27663
28650
28718
28270
24758
23453
19780
19795
13966
14474
14448
14892
15291
15726
13162
10844
10059
10115
11015

8.7
6.7
4.9

10.7
.

10.0
9.0
receipts by India for technology trade in
7.8
the form of royalties, technical know-how
3.8
and technicians’ fees. Royalties are mainly
7.2
3.0
4.4'
8.1
the payments/receipts of recurring nature
4.4
7.8
related to patented technology; technical
.7.2
2.1
know-how payments/receipts are mainly
6.5
2.8
for lumpsum (non-recurring) royalties6
5.7
1.8
and technicians’ fees are the payments/
5.2
3.2
receipts for technicians. While the receipts
1.9
5.2
are small under all categories, payments
2.2
4.9
2.0
4.6
are quite substantial, with payments for
2.9 '
4.5
technical know-how becoming increasingly
46
important in the 80s. This shows the
3*3
4.3'
preference in the 80s of the government
3.0
5.0
to purchase technology for lumpsum pay­
2.6
ments. This of course decreases our
3.3
4.3
dependence on foreign countries to some
Source. GO1, Department of Science and Technology, Research and Development Statistics
extent, yet lumpsum payments can be for
(various issues).
both patented and non-patented techno­
Table 3: Relative Dependency Ratio of Patents and Its Index Numbers
Dependency Ratios of India
With
With
With
Japan
Europe
LDCs

With
USSR

In
General

Index Numbers of Dependency Ratios _______
With
With
With
With
With
USA
Japan
Europe
LDCs
USSR

0.227
0.282
0.196
0.160
0.179
0.097
0.083
0.096
0.131
0.125
0.141
0.121
0.106
0.105
0.118
0.156

0.096
0.122
0.091
0.071
0.117
0.050
0.072
0.084
0.097
0.130
0.107
01058
0.038
0.065
0.156
0.159

100.000
100.075
76.595
65.391
69.661
43.610
43.979
51.675
57.345
76.353
90.951
74.656
62.041
73.448
88.559
103.001

100.000
93.462
71.570
61.054
69.704
47.814
42.895
49.241
54.530
73.661
89.837
78.733
72.141
82.063
99.942
112.717

Year

In
General

With
USA

1972
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989

3.956
3.959
3.030
2.587
2.756
1.725
1.740
2.044
2.269
3.021
3.598
2.954
2.455
2.906
3.504
4.075

1.319
1.233
0.944
0.805
0.919
0.631
0.566
0.649
0.719
0.971
1.185
1.038
0.951
1.082
1.318
1.486

0.192
0.203
0.126
0.101
0.095
0.070
0.067
0.059
0.148
0.226
0.214
0.218
0.144
0.159
0.208
0.303

2.048
2.032
1.598
1.374
1.400
0.841
0.917
1.094
1.107
1.509
1.861
1.438
1.165
1.420
1.568
1.772

100.000
100.000
105.906 . , 99.216
65.550 ’ 78.020
67.098
52.381
49.184
68.375
36.241
41.083
44.769
34.883
30.842
53.409
76.871
54.029
117.609
73.685
90.868
111.148
113.325
70.189
74.822
56.879
82.831
69.355
76.562
108.109
157.856
86.511

100.000
J24.178
86.206
70.462
78.694
42.590
36.600
42.407
57.581
54.905
61.952
53.272
46.552
46.141
51.810
68.769

lOQ.OOO
127.088
94.772
73.871
121.618
52.347
75.347
87.385
100.814
135.183
111.148
60.860
39.612
67.645
162.642
165.670

Source. Calculated from the data available al the ISID.

1040

Economic and Political Weekly

May 22, 1993

Tkble 11 shows the exports, imports,.
trade balance, current account balance
export and import of goods and non­
factor services in GDP for the world, in­
dustrial countries in total and for some
industrial countries and developing coun­
tries. The table shows an increase in trade
and current account deficits for countries
like the US.
In Table 12 the growth of trade in
manufactures is given which shows that
in the 80s there is a fall in growth rate of
exports of the world in general, a relatively
greater fall in exports of developed market
economies to developing countries as
compared to their exports to developed
countries. Further while the exports from
developed to developing economies has
fallen to a great extent, exports from
developing to developed countries shows
a still greater fall. Thus the developed
countries are depending less on develop­
ing countries for imports weakening the
^rosition of developing countries. Mean^Bhile the growing balance of payments
deficits of the developed countries,
especially the US has made them to search
for new areas of interest to them and IPRs
is one such area. Table 11 also shows that
the balance of payments for Japan and
West Germany are positive and they are
neither the initiators, nor vociferous in
demanding IPRs. While the weakness of
India and LDCs have further weakened
them in their bargaining power, the
weakness of the economic situation of the
US and other European countries’ have
made them vociferous in the three new
issues ‘Services’, TRIPS, and TRIMS.

Change in World Political Scenario
f The change in the w.orld political
scenario has also contributed to the new
emphasis on TRIPS. The fall of the Soviet
Union has made this world a unipolar
^k-orld with the US as the only superpower.
®Fhe political and economic weaknesses in

India had made it vulnerable at the very
moment when the US started mounting
pressure to liberalise. Many developing
countries, which were hitherto opposed to
the new patents regime have mellowed
down and even adopted the new regime
The fall in the importance of UN agencies
like UNCTAD (which also have slowly
shifted to the philosophy of liberalisation)
and the rise in importance of World BankIMF combine and the dependence of
India on these organisations have enabl­
ed the US and other MDCs to pressurise
India to accept the new patents regime.
To sum up, while the dependence of
India on different countries for techno­
logy had prepared the ground and the
economic conditions of the advanced
countries have made the developed coun­
tries more vociferous, the changed poli­

Economic and Political Weekly

tical situation in the world and in India,
have finally paved the way for pressuris­
ing India to change its patents regime./

in
Impact of Strengthening Patents
Regime on Drugs and
Pharmaceuticals
The impact of strengthening the patents
regime on drugs and pharmaceuticals can
be seen under the following headings:
(a) Effect on prices, (b) Other effects—
(i) Effects on different sections of the
population; (ii) Effect on Indian industrial
sector in general and by types of com­
panies in particular; (iii) Effect on other
sectors of the economy via linkages; (iv)
Effect on technology transfer to India,
development of indigenous technology
and quality of drugs; and (v) Effect on
balance of payments.

Effect on Prices
The most debated issue at present regar­
ding the impact of strengthening the
patents regime on the Indian pharma­
ceutical sector is one of rise in prices.
However, the arguments of many sup­
porters and opponents of India’s present
patents regime are not backed by data and
also data given by alternative sources dif­
fer greatly. A rigorous quantification of
this aspect, though not impossible, it dif­
ficult at this stage. So we have mad e an
attempt to arrive at logical conclusions
weaving together pieces of data which are
readily available to us. The effect on prices
can be seen by examining the following
aspects: (i) Examining the changes in drug
prices before the present patents regime
and immediately after the introduction of
the present patents regime; (ii) Examining
the impact on prices in India and prices
in other countries which have/have not

Table 5: Comparative Technology Indicators for Selected Countries

Country

Scientists,
Expenditure on Per Capita R and D
Engineers and
in US Dollar
R and D as
Technicians (SET)
Year
Percentage of GNP R and D
Per Thousand
(US $)
R and D
Year
Population
Per Cent
Year
SET
of GNP

Brazil
Philiooines
Cuba
Pakistan
Singapore

Australia
Canada
Rep of
Korea
Germany

Hungary
Sweden
UK
USA
Czechoslo
vakia
GDR
Israel
USSR

4.71
26.63
36.47
53.08
184.81

1980
1980
1981
1990
1990
1980
1986
1986
1986

0.39
0.12
2.01
0.27
0.15
1.85
0.74
3.33
3.4

1985
1984
1989
1990
1988
1987
1987
1988
1988

1988
1987
1987
1988
1987
1987
1986
1988

53.14
77.84
NA
45.76
111.14
NA
NA
21.46

1981
1987
NA
1984
1987
N/
NA
1988

2.2
4.71
5.07
3.26
6.05
6.14
3.85

1988
1987
1988
1989
1989
1987
NA
1988

1988
NA
1983
NA

35.45
103.23
82.6
125.82

1980
1988
1984
1987

6.94
11.7
5.77
5.97

1989
1989
1984
1990

1.4

1985
1984
1987
1990
1987
1987
1986
1987
1987

6.41,
0.68
NA
2.76
2.91
68.14
45.97
153.85
216.06

1985
1984
NA
1990
1987
1987
1987
1987
1987

2.8
2.3
2.4
2.8
3
2.3
2.6

1988
1987
1987
1988
1987
1987
1986
1988

75.21
523.98
364.13
60.82
558.8
577.57
226.83
514.70

6.4
0.1
0.9
0.9
1.0
0.9
0.6

4.6

6.2

1988
1988
1983
1988

177.43
NA
246.43
NA

SET in R and D
Per Thousand
Population
Year
SET

11.23
36.65
14.35

Na

Sources: (a) GOI, Department of Science and Technology, Research and Development Statistics,
1990-91.
(b) GOI, DST: Pocket Dap Book, 1989.

Table 6: Export and Import Market Shares in.Per Cent of Some Selected' Technology
Intensive Products of Certain Countries for 1986

Country

USA
FRG
India
Rep of Korea

Export

14.17
18.89
30.65
41.37
27.04

20.44
20.49
20.82
3.14
4.77

14.35
15.1
5.44
10.41
6.59

Primary Metals

Import

Electrical
Equipment
Export Import

Export

Import

12.57
11.17
4.11
14.49
16.88

9.02
8.14
20.75
1.39
17.18

10.88
6.89
2.87
3.39
2.49

1.28
6.18
6.78
0.91
6.07

42
9.85
6.39

Machinery

Chemical and
Allied Products
Export import

4.51

Source: GOI, Department of Science and Technology, Pocket Data Book 1989.

May 22, 1993

1041

____________

adopted the new patents regime; and (iii)
Examining the value of foreign patented
drugs and drug formulations in India at
present and examining the possible impact
on prices by strengthening the patents
regime.
■' The present patents regime commenc­
ed with the Patents Act of 1970 which
became operative from 1972. Studies by
Mehrotra and others’ have shown that
the prices of drugs and drug formulations
fell considerably after the introduction of
the 1970 Patents Act and “both the public
sector and private sector companies were
involved in the technological development
which helped India boost its bulk-drugs
formulations”. Misuse of patents by TNCs
have also been highlighted in these studies.
The study of Agarwal and others8 shows
that prices of many drugs outside the pur­
view of the Drug Prices Control Order
(DPCO) have also fallen. A look at-Thble
13 shows that the price index of phar­
maceutical items is lower than the price

index of all commodities for most of the
years. The drug price index which shows
a rise by 41.9 points by 1970-71 with
1961-62 as the base year and is lower than
the index for chemicals and chemical pro­
ducts and for all commodities, is uniform­
ly lower than the price increases of all
commodities in the 70s and 80s. Even in
the 60s the price index for other com­
modities was higher than the price index
of drugs by the same times or higher in
some years (1964-65 and 1966-67), and
hence one cannot consider thatthe 1970
Patents Act as the main factor affecting
prices of drugs. In fact the more impor­
tant factor which has kept the drug prices’
under control directly is the DPCOs and
even today 74 per cent of the drugs and
formulations in India are under control.
The effect of patents on prices comes in­
directly through increase in input costs,
^fessitating price rises.
■'^^he above analysis shows that though

the relatively lower rise in prices of phar­
maceuticals in the 70s and 80s are due to
the two important factors, namely (1) the
relaxation in the patents regime helping
indigenous units, and (2) the drug price
control act (especially the 1970 act). The
latter is not only the more important of
the two, but overshadows the former in
its effects. Today also the above two fac­
tors are still ih effect, while the’ Indian
drug industry has come to age and
become quite competitive and capable of
producing a major portion of the neces­
sary drugs and drug formulations. As
stated by Patel D S currently this segment
(Indian companies) of the (pharmaceuti­
cal) industry contributes more than 60 per
cent of the country’s production and de­
mand. The national sector is involved in
the manufacturing of life-saving drugs not

1042

only for the loc?l market but also for the
international market. India became selfsufficient in various raw materials by pro­
ducing them indigenously ... it led to the
creation of a strong R and D set-up. It
also gave rise to the development of the
ancillary industries and petrochemical
projects. Thus a strong base was created
which resulted in the growth of the in­
dustry. The post- 1980’s era saw more
changes in the pharmaceutical industry,
as it became a global player. The industry
started exporting bulk drugs which were
earlier being imported. In the process the
industry became a foreign exchange
earner and net exporter. Today, in certain
products, India is the only supplier or
controls a major share of the market.9
Further as observed by Mehrotra N N10
the process technology involved for many
of the drugs produced by the Indian sec­
tor companies “fall under the term hightechnology as defined by the Ramanathan
Committee of the government of India for
the same while examining the technology
status of foreign companies”.
In Table 14 we have computed the
revealed competitive advantage (RCA)
and repealed comparative disadvantage
(RCD) of the pharmaceutical sector of
India and some developed and developing
countries, following both the.market share
approach and Bela Balassa approach."
The table shows that RCA (market-share
method) of India in 1988 compared to
other countries is high and RCD quite
low. If RCA (Bela Balassa method) is con­
sidered then India’s RCA in 1988 com­
pared to 1980 has increased and is more
than all the developed and developing
countries given in the table except for
Indonesia and Malaysia. But RCA in 1988
compared to 1970 of India is the highest.
India’s RCD (Bela Balassa method) in
1988 compared to 1980 is quite low com­
pared to the developed and some develop­
ing countries. While RCD of India in 1988
compared to 1970 is high, it is lower than
many underdeveloped countries. In 1988
compared to 1980 only India, Indonesia

and Malaysia have relatively higher RCAs
and lower RCDs. In 1988 compared to
1970, only the US and UK have relatively
higher RCAs and very low RCDs. But
India has very high RCA and relatively
high RCD. On the whole the above
analysis shows that India's RCA has im­
proved remarkably and RCD has become
less compared to even the developed
countries.
j While opponents to change in the
patent system emphasise that competitive
position has been achieved by India due
to India's patent regime, in the case of
drugs and pharmaceutical we have sepn
that this has been possible mainly due to
PCO and then due to the present patents
regime. So while there is no need to fear
much, any changes in the patents system,
we have to be more careful of a sudden
decontrolling of the prices in this sector. J
Table 8: External Assistance for S and T
Programmes Secured by India, 1987

Total Percentage
(Mn USS) to Total
Multilateral
(Total UN system)
I! Bilateral
of which
UK
FRG
Norway
USA
Switzerland
Denmark
Italy
France
Netherlands
Australia
Canada
Sweden
New Zealand
III Npn-Govemmental
Organisations
Ford Foundation
IDRC
Grand total
I

43.92
65.36

39.8
59.2

24.85
7.90
7.77
6.87
4.54
4.07
2.89
1.91
2.11
1.21
0.89
0.31
0.04

22.5
7.2
7.0
6.2
4.1
3.1
2.6
1.8
1.9
1 1
0.8
0.3
0.0

1.07
0.72
0.35
110.35

1.0
0.7
0.3
100.0

Source: GO.I, Department of Sceience and
Technology: Research and Develop­
ment Statistics, 1990-91.

Table 7: India's Trade in Technology-Intensive Products
(In Percentage)

Year

1965-66
1970-71
1975-76
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86

Exports
(Per Cent)

Imports
(Per Cent)'

6.5
17.2
19.6
16.9
20.6
28.8
28.8
28.7
19.3

67.2
62.8
64.8
80.1
77,1
78.4
71.9
74.3
75.0

Value of Exports/lmpons
Total
Others
Technology
Intensive

0.58
0.93
0.76
0.53
0.57
0.61
0.62
0.69
0.55

0.06
0.26
0.23
0.11
0.15
0.23
0.25
0.26
0.14

1.65
2.07 ,.
1.75
2.22
1.98
2.03
1.57
1.9
1.78

Source: GO1, Department of Science and Technology, Pocket Data Book 1989.

Economic and Political Weekly

May 22, 1993

Comparative Prices.of
Pharmaceuticals
As mentioned earlier, the rise in prices
of drugs and medicines in India has been
lower than the rise in prices of chemicals
and chemical products and all commo­
dities. But these indices are based on a
sample of 12 bulk drugs and 19 formula­
tions only and almost all these drugs are
under price control.12 However, we
should note that at present, though the
number of drugs under price control has
been reduced from 375 drugs (and their
formulations) to 145 bulk drugs (and their
formulations), actual control in terms of
sales has declined only marginally from
79 per cent to 74 per cent. So, the results
of the price indices (which includes the
drugs under price control) broadly reflect
changes in the pharmaceutical sector.
The table given by the OPPI (Table 15)
>ws that the prices of important drugs
India have risen in 1992 compared to
1986, though marginally in many cases.
Our calculations (Table 16) of a larger
sample of drugs (which are usually
quoted) also show a rise in price of im­
portant drugs, also marginally in many
cases. However, these drugs are not im­
portant in terms of their percentage in
total consumption in India. So in Table 17
we have given the prices of some of the
drugs which form a major share of India’s
consumption. In the case of these drugs
the prices are constant or have risen very
marginally. The more important aspect is
that the drugs quoted by Keayla, I DMA,
etc, are US patented drugs, while the drugs
quoted in Table 17 are off-patent or opes
whose patents have expired and are the
most important items consumed by India.
This further highlights the fact that in the
case of a major percentage of drugs and
icines consumed in India, prices are
greatly affected by patents. On the
other hand, the DPCO has been a major
influence on prices, while many people
have been (knowingly or unknowingly)
highlighting the prices of drugs patented,
which form a very small percentage of the
total consumption in India. In fact B K
. Keayla13 has written “A committee of the
US senate (Kefauver Committee) had
commented in 1959 that ‘Prices of certain
drugs and antibiotics in India were
amongst the highest in the world and that
in drugs, India was one of highest priced
nations'. This was before the enactment
of the Patents Act 1970. It is noteworthy
that prices of drugs in India are now
amongst the lowest in the world... The
above price comparisons are only a few
examples. In most countries which follow­
ed product patents, prices of these and
other pharmaceutical products are as high
if not even higher!’ While it is true that
the US Senate had commented in 1959

»

Economic and Political Weekly

that prices were very high in India and the
prices after 1970 when the Patents Act
1970 was enacted were low, the low prices
especially in the 70s and 80s is not a
logical conclusion of changes in patents
system, rather it is due to the DPCO in
India which was also introduced in 1970
and the 1962 Drug (Display of Prices)
Order. '
Further, in the list usually taken by
Keayla and others, few drugs are under
DPCO (while most of them are under pro­
duct patents abroad), while in our list
which covers a major part of India’s con­
sumption, all are under DPCO and few
are under product patents abroad. Thus
even by introducing product patents, a
major portion of drugs (given in Table 17)
will not be affected, while removal of price
control (vehemently proposed by both
OPPI and IDMA) will surelyzaffect the
major, percentage of drugs consumed in
India. Thus not only are prices for drugs
low in India, a major part of them are offpatent and the DPCO has been successful
in limiting the rise in prices of drugs.
/" If we compare the prices of some drugs
’ in India and other countries (Table 15),
we can notice that drug prices are com­
paratively lower in India. In fact as men­
tioned in the IDMA-OPPI joint report,14
“Drug prices in India are among the
lowest in the world”.)This is a fact con-

firmed by the Tariff Commission and official surveys and studies.
" As can be seen
in Table 18, compared to advanced coun­
tries like UK and the US, drug prices in
India are very much lower. But it may be
argued that comparison of drug prices
between India and advanced countries, by
converting the prices in terms of foreign
currencies to rupees may not be appro­
priate unless it is for purpose of trade and
for imported drugs. However compared
to India’s immediate neighbours also
(where useful comparisons can be made),
prices in India are comparatively low both
in 1986 and 1992 and the rise lower and
fall greater from 1986 to 1992 for many
drugs (Table 15). Among the Asian coun­
tries, Sri Lanka and Indonesia have join­
ed the Paris convention in 1952 and 1950,
respectively. Pakistan, like India has not
joined the Paris convention. Indonesia
under its liberalisation policy has extend­
ed “deregulation in investment procedures
to agriculture and the pharmaceutical in­
dustry”15 while in(l992 it accepted pro­
duct patents and interestingly the prices t.
of important drugs in Indonesia are very l
much higher compared to prices in India \

especially in 1992 and this rise cannot be
due to product patents introduced in the
same year. This shows that price changes
in pharmaceutical sector are not mainly due to patents and as seen in the Indian

Table 9: Foreign Direct Investment-Industrywise and Countrywise

(Rs Cron)

Industry

Total
Manufacturing
of which
Chemicals and Allied
Products
Machinery and Machine
Tools
Electrical Goods and
Machinery
Transport Equipment
Metals and Metal Products

Country

Total
qf which
UK
USA
West Germany
Switzerland
Japan
NRls

FDI Stock
End March
1987 1988 1989

Number of Foreign Collaboration
Approvals
1989 1990
Industry

1742
1492

Total
of which
Electrical Equipment
Telecommunication
Transportation

605

666

99
37
30

88
69
22
75

2045
1768

2302
1990

516

604

647

Industrial Machinery

59

210

249

294

Misc Mechancial and Engg
Industry

26

88

35

38

66

66

207
173
85

236
199
124

286
245
120

industrial instruments
Chemical (oth*rr than
Fertilisers)

FDI Stock End-March
1987
1988
1989

FDI Approvals
1991
1990

1992

1742

2045

2302

128.32

534.11

3887.54

901
332
154
65
64

1039
396
187
79
83

1127
460
229
80
112

9.06
34.48
19.51
13.50
5.00
5.24

32.1
185.85
41.8
35.5
52.71
19.7

117.67
1231.50
86.27
689.76
610.23
439.13

Source-. For FDI Slock, RBI. 'India’s Foreign Liabilities and Assets as on March 31, 1989',
RBI Bulletin, February 1993. For Countrywise FDI approvals: Economic Survey, 1992-93
and for Induslrywise approvals: Department of Industrial Development, Handbook
of Industrial Statistics, 1991-92.

May 22, 1993

1043

Table* 10: Indies Technology Balance of Payments—1972-73 to 1988-89

(Rs in crore)
Year

1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979 - 80
1980-81
1981-82
1982-83
1983 - 84
1984-85
1985-86
1986 - 87
1987-88
1988-89

_________ Payments____________
Royal­ Tech- Techm- Other Mana- Total
ties
meal
cians' Prof gement
Know­
Fees
Fees
Fees,
how
Etc

7.3
6.2
8.5
10.5
15.9
19.5
12.7
9.6
8.9
16.0
39.7
27.6
28.5
23.5
40.1
60.4
180.6

11.3
14.1
12.5
25.7
37.8
28.1
55.5
44.0
98.0
270.7
258.6
314.9
300.6
367.8
358.4
459.3
316.7

8.2
10.1
7.4

2.7
2.8
3.4
4.1
13.2
37.6
8.0
11.3
11.9
13.9
42.0
45.3
82.6
69.5
105.7
282.0
230.4

10.3
10.2
45.4
9.1
22.6
13.1
30.1
26.1
29.9
42.0
73.0
103.0
160.0

26.0
55.5
28.9
62.1
33.1
64.9
50.9
98.3
73.1
150.3
80.0
175.4
96.2
217.8185.5
259.5
146.6
288.0
261.0
574.7
210.6
581.0
233.5
647.4
294.6
736.2
331.7
834.5
447.9 1025.1
470.2 1374.9
714.3 1602.0

Royal­
ties

0.2
0.1
0.1
0.2
0.1
0.2
0.1
0.1
0.1
0.2
1.0
0.5
0.1
0.3
0.6
1.4
1.2

Receipts
Tech­ Techni- Other Mananical
cians'
Prof gement
Know­
Fees
1=ees.
how
1Etc

0.4
0.1
0.5
0.5
0.9
1.1
6.1
1.9
3.1
5.8
8.1
6.0
36
8.3
12.8
6.3
8.4

0.8
0.5
i i
1.3
3.1
4.6
33
7.2
5 I
6.7
8.4
7.0
8.9
10.2
6.6
12.4
20.2

2.7
0.2
0.7
0.9
0.5
0.5
0.7
1.2
2.1
1.9
2.3
3.2
4I
2.7
5.0
13.3

Total

14.3
18.9
21.1
25.2
25.8
30.2
58.8
73.7
74.5
90.8
198.6
153.6
232.4
172.8
214.3
347.8
516.1

Tech­ Tech­ Total
nology nology Tech­
BoP Related nology
BoP
and
Tech­
nology
Related
BoP

21.0 -25.8 -13.6 -34.5
22.3 -30.1
-12.3 -39.8
23.0 -27.3 -14.3 -41.9
27.9 -42.1 -28.5 -70.4
30.8 -62.1 -57.4 -119.5
36.6 -55.4 -82.8 -138.8
68.8 -101.3 -42.1 -149.0
83.6 -58.8 -115.9 -175.9
84.0 -123.2 -78.9 -204.0
105.6 -288.0 -177.4 -469.1
218.0 -311.2 -45.6 -363.0
169.4 -356.1 -118.2 -478.0
248.2 -351.7 -135.9 -488.0
195.7 -416.4 -218.2 -638.8
237.0 -445.3 -332.7 -788.1
372.9 -608.7 -392.0 -1002.0
559.2 -639.3 -408.4 -1042.8

Source: Reserve Bank- of India Bulletin, April 1992.

Table 11: Exports, Imports, Trade Balance and’Current Account Balance of Selected Countries

■j

■;
<■

g

|,

Item

1975

Exports (Bn USS)
Imports (Bn USS)
Trade Balance
(Mn USS)
Current A/c
(Mn USS)
Exports of Goods
(Percentage)
Imports of Goods
(Percentage)

829.5
836.6

World
1980
1897.6
1945.1

1988

1801.1
1878.3

2694.1
2787.3

568.9
589.4

1244.3
1370.1

1262.2
1348.4

1988

1975

1969.4
2041.6

108.85
105.8

USA
1980

1985

1988

225.5
256.9

218.8
346.3

321.6
459.5

22193

31894

12605

35946

9933

-67810

-37584

4029

8910

- 25500 - 122150 -126290

2451

-31993

-70175

- 66869

9657

-59392

-48888

-61593

18130

1840 - 115160 -134720

8

9.8

6.7

8.3

7.6

10.8

10

11

Item

1975

UK
1980

1985

1988

1975

Germany
1980
1985

1988

1975

Japan
1980

1985

1988

Exports (Bn USS)
Imports (Bn USS)
Trade Balance
(Mn USS)
Current A/c
(Mn USS)
Exports o( Goods
(Percentage)
Imports of Goods
(Percentage)

43.4
53.3

110.1
115.5

101.2
108.9

145.1
189.3

90.1
74.9

192.8
187.9

183.9
158.4

323.3
250.5

55.8
57.8

130.4
141.2

177.1
130.4

264.8
1873

-7272

3343

-2653

- 36514

16911

8887

' 28507

78640

4935

2130

55990

94990

-3417

7520

4765

- 26089

4422

-13886

16977

48580

-690

- 10750

49170

79630

25

27

29

23.6

25

26.8

33

29.7

12.9

13.9

14.7

10.3

26.9

24.7

28

27.4

22.1

26.9

29

24.3

12.8

14.7

11.3

8

1988

1975

India
1980

1985

1988

15.4
12.3

21.1
16.55

4.3
6.38

8.5
14.86

9.2
16.07

13.3
19.16

Item

1975

Republic of Korea
1980
1985

1988

1975

Malaysia
1980
1985

30.2
31.13

60.69
51.8

3.8
3.56

12.9
10.82

|:

Expons (Bn USS)

1
'';

J
I

Imports (Bn USS)
Trade Balance
(Mn USS)
Current A/c
(Mn USS)
Exports of Goods
(Percentage)
Imports of Goods
(Percentage)

|.

Source: IMF, International Financial Statistics, Year Book, 1989.

31

1044

B
••
.j.

Industrialised Countries
1975
1980
1985

1985

L_______________

5.08
727

17.5
22.29

-1671

-4384

-19

11445

256

2406

3577

5643

-286

-•5644

-5616

-1889

-5321

-887

14161

-496

-285

-613

1884

-148

-1785

-4178

27.6

35.1

36.8

45.4

57.6

55

68

6.2

6.5

6.1

35.7

41.1

35.2

47.2

55.1

50

57.4

6.8

9.8

9

Economic and Political Weekly

May 22. 1993

case,, it is due to DPCO. India which is
in a very competitive position compared
to other JLDCs, therefore should not fear
the strengthening of the patents regime.
On the other hand, regarding decontrol
of drug prices, a judicious approach is
needed.

under Patent’ and ‘Approved Drug Pro­
Glaxo, in light of their international pric­
ducts’ and the government statement is
ing policy would have priced the product
based on ‘Available Information’. The
hypothetically at least 10 times more ex­
IDMA1’ which has made a study for
pensive of its present sale price, i e,
Ranitidine 150 mg tablets makes the
Rs 16.10 per tab. Il would not be wrong
following observation, “Had it not been
to assume that at this exorbitant rate,
for the Indian Patent Act 1970, it would
offtake of this product would come down
not have been possible for anybody other
substantially. Therefore under the scenario
than Glaxo or their licencees to manufac­
existing after amendment of the Indian
ture and sell this product in the country.
Patents Act to fall in conformity with the
Under such monopolistic situation.
Dunkel’s proposal, the Indian population
Table 13: Price Indices of All Commodities and Drugs ano Medicines in India

Indigenous Production of Drugs
Covered by Product Patents
Abroad
The issue of value or percentage of in­
digenous production of drugs covered by
product patents abroad is one where there
are conflicting versions. The controversy
was triggered by the statement of the
United States Trade Representative (USTR)
Carla Hills during her visit to'India in
1992,'tliat only 5 per cent of the products
marketed in India are covered by patents
This statement was made to “persuade the
Indian government that recognition of
product patents as in China would not
have the feared adverse effects!’16 The In­
dian Drug Manufacturers Association
(IDMA)1’ immediately came with a
study indicating that in the therapeutic
groups where patented drugs are there,
nearly 46.32 per cent of these groups are
covered by patents in the US and patented
drugs in the total pharma market is 21.47
per cent. The percentage of drugs under
the different therapeutic groups are given
in Thble 13. The minister of state in the
ministry of chemicals and fertilisers'*
stated that about 10-15 per cent-of total
production in the country is covered by
patents abroad. The break-up of the dif­
ferent therapeutic groups given by the
ministry are also given in Thble 13. The
.IDMA study is based on Operational
Research Group (ORG) report and the US
Health Department Publications, ‘Drugs

Year

Al!
Commodities

Drugs and
Medicines

61-62
62-63
63-64
64-65
65-66
66-67
67-68
68-69
69-70
70-71
71-72
72-73
73-74
74-75
75-76
76-77
77-78
78-79
79-80
80-81
81-82
82-83
83-84
84-85
85-86
86-87
87-88
88-89

100
103.8
110.2
122.3
131.6
149.9
167.3
165.4
171.6
181.1
188.4
207.3
249.2
312.0
308.6
315.1
331.5
331.5
388.2
459.0
501.9
515.1
563.8
603.6
638.3
672.2
723.3
776.6

100
102.1
103.1
, 103.6
105.2.
112.4
121.6
123.6
129.8
141.9
141.9
143.8
144.9
- 154:0
168.9
190.6
194.0
193.7
192.4
195.7
219.8
243.9
269.3
272.8
281.0
289.9
316.5
386.q

Percentage Increase.oyer 61-62
Times
All
Drugs and
Higher of All
Commodities
Medicines
Compared to
Drugs

0.0

0.0

10.2
22.3
.31.6
49.9
67.3
65.4
71.6
81.1
88.4
107.3
149.2
212.0
208.6
215.1
231.5
231.5
288.2
359.0
401.9
415.1
463.8
503.6
538.3
572.2 .
623.3
676.6

3.1
3.6
52
12.4
21.6
23.6
29.8
41.9
41.9
43.8
44.9
54.0
68.9
90.6
94.0
93.7
92.4
95.7
1198
1433
1693
1723
181.0
189.9
216.5
286.6

Sourer. GO1, Indian Drug Statistics (various issues).

Table 12: Growth of World Trade in Manufactures (Annual Average Rate of Growth)

Exports from

Years

Total
Trade

Trade in
Manu­
factures

Total
Trade

Trade in
Manu­
factures

______ Developing Countries
Total
Manufactures
Exporters
Total
Total
TYade in
Trade in
Trade
Manu­
Trade
Manu­
factures
factures

World

19$5-73
1973-80
1980-87
1965-73
1973-80
1980-87
1965-73
1973-80
1980-87
1965-73
1973-80
1980-87
1965-73
1973-80
1980-87

15.1
19.5
32
.15.6
17.6
4.6
14.9
26.2
-1.5
19.3
21.5
9.1
12.9
17.3
5.4

16:7
17.9

15.8
18.7

16.6
17.7
6.3
23.7
23.1
14.3
27.6
24.2
.12.1'
14.2
15.3
5.5

16.0
16.4
5.9
15.1
25.7
-2.4
21.2
18.0
11.0
16.0
20.6
1.3

17.9
16.6
8.8
17.4
16.3
7.9
28.4
20.7
16.6
34.5
21.3
14.8
18.6
17.7
5.8

13.9
23.7
1 I
13.7
22.0
0.8
15.0
29.3
-0.6
17.7
29.1
5.1
13.2
20.1
8.8

World

Developed market-"
economy countries
Developing countries

Manufactures
exporters
Socialist countries

DMEC

13.9
23.0
2.6
13.7
22.4
1.3
19.6
27.7
7.8
20.9
31.4
6.4
10.1
21.6
6.2 <

20.5
22.9
4.622.2
19.5
6.0
18.9
30.5
0.5
21.5
24.9
8.3
132
20.8
11.1

.22.9
20.6
8.6
24.0
202
6.6
25.1
24.8
13.9
33.4
26.9
13.9
12.7
202
17.6

Socialist
Countries
Total
TYade in
Manu­
Trade
factures

132
16.7.
4.5
84
182
-02
112
20.3
81
16.5
23.4

12.0
15.0
6.4

15.4
153
5.9
20.5
192
2.4
7.6
193
28.6
10.7
233
11.6
142
13.0
53

Sources: UNCTAD, Statistical Pocket Book, 1989.

Economic and Political Weekly

May 22, 1993

1045

would have for its consumption a mere
l/10th of the total medicine available to
them today, but at 10 times the existing
prices!’
The above analysis shows that the lower
limits of the estimates of manufacture of
products patented abroad is 5 per cent and
the upper limit is 21.47 per cent. Moreover,
the major player in price changes is the
DPCO. As long as the composition of the
list of drugs not to be patented remains
unchanged, the feared danger of streng­
thening the patents regime in India is ap­
parent than real. However a careful and
judicious policy on price controls is need­
ed and not simply a total decontrol of
prices of pharmaceuticals as advocated by
many people especially the I DMA and
OPPI. In fact, it has been stated20 that
drug prices have increased aS a result of
India’s recent liberalisation efforts, and of
course this has nothing to do with patents.
As expressed by Vaish (secretary, depart­
ment of chemicals and petro-chemicais,
ministry of chemicals and fertilisers.

government of lndia),21 over the seeming
paradox of keeping prices under check'to
ensure that it reached every person, and
freeing the sector from checks as demand­
ed by the industry to ensure maximum
production, “we have to see that supply
line and production is maintained, yet
there is need to keep control". One should
also note that this is a sector involving
social security and while the EEC has its

own social security measures and the US
is also implementing new measures on
these lines, a developing country like India
cannot completely underplay the impor­
tance of health care to its- population
under the pretext of profitability. Thus
there is nothing wrong in continuing with
the price control on drugs. Otherwise,
firstly, the government as the largest buyer
of drugs and secondly, the common con­

Table 15B: Chance in International Prices vis-a-vis Indian Prices of Important Drugs

Name of the Drug

Unit

Times Costlier
in Pakistan
1986
1992

Times Costlier Times Costlier
in Sri Lanka
in Indonesia
1986
1992 ■ 1986
1992

1 Chloramphenicol
2 Metronidazole
3 Ferrous Sulphate
4 Ibuprofen
5 Propranolol HCL
6 Salbutamol
7 Nifedipine
8 Cimetidine

250 mg/10 caps
200 mg/10 tabs
150 mg/15 caps
200 mg/10 tabs
10 mg/10 tabs
2 mg/10 tabs
10 mg/10 caps
20G mg/10 tabs

0.21
1.08
0.10
-0.23
1.37
2.06
4.28
3.57

1.75
1.44
0.55
0.68
1.29
1.67
-0.08
1.20

0.68
3.28
1.41
0.82
1.72
—
5.43
4.25

2.20
4.29
4.21
1.39
0.54
2.53
0.84
9.80

1.68
14.76
—
1.08
_
_
0.70
1.57

3.49
26.16
4.61
1.36
_
—
9.60
11.19

Source: OPPI.

Table 14: Relative Comparative Advantage of Pharmaceutical Products of Selected Countries

RCA Bela Ballasa
Approach
RCA 88
RCA 8S1
to 80
to 70

Country

USA
UK
Japan
Germany
Republic of Korea
Indonesia
Thailand
Malaysia
India

1.16
0.99
1.02
0.86
0.98
1.99
0.38
1.24
1.16

RCD Bela Ballasa
Approach
RCD 88
RCD 88
to 80
to 70
1.31
1.18
1.13
1.04
0.82
0.81
0.41
0.75
0.82

1.37
1.19
1.01
0.94
NA
0.42
1.24
0.70
3.30

0.22
0.43
1.18
0.65
0.86
2.04
2.90
1.40
1.61

RCA Market Share
________ Approach
1988
1980
1970
1.47*
2.18
0.32
1.42
0.16
0.14
0.13
0.15
2.13

1.27
2.21
0.32
1.65
0.16
0.07
0.35
0.12
1.83

.

1.08
1.83
0.32
1.51
NA
0.32
0.11
0.22
0.65

1988

RCD Market Share
Approach
1980
1970

0.77
0.75
1.22
1.01
0.38
.. 0.85
0.63
0.78
0.76

0.59
0.63
1.08
0.97 ’
0.46
1.04
1.53
1.05
0.92

0.20
0.40
1.10
0.60
0.80
1.90
2.70
1.30
1.50

.

Note : RCA = Relative Comparative Advantage: RCD — Relative Comparative Disadvantage.
RCA

Xi/X1
Wie/Wte

RCA
_ RCA 1
(Bela Ballasa) ” RCA rl

(Market share
npproaunj'

Mi/Mt
RCD_ _____
Wii/Wti

RCD
(Bela Ballasa)

Where, Xi = Exports of pharmaceuticals of the country, Xt = total expons of the
counlty, Mi = imports of pharmaceuticals of the country, Mt = total
imports of the country, Wie.= Exports of pharmaceuticals of world,
Wte = total exports of the world, Wii = imports of pharmaceuticals of the
world, Wti = total imports*of the world, 1 == Current year, 11 =■ Base year.

RCD I

RCD II

Source. Computed from Untied Nations, International Trade Statistics Yearbook (various issues).
Table 15A: Comparative Prices of Important Drugs in India and Other Asian Countries
__

Name of the
Drug

Unit

1986

I ndia
1992

1 Chloramphenicol
2 Metronidazole
3 Ibuprofen
4 Ferrous Sulphate
5 Propranolol HCL
6 Salbutamol
7 Nifedipine
8 Cimetidine

250mg/10 tabs
200mg/10 tabs
200mg/10 tabs
150mg/I5 caps
lOmg/IO tabs
2mg/10 caps
10mg/10 caps
200mg/I0 tabs

5.72
2.76
6.13
8.46
1.96
Illi
6.00
7.96

9.95
3.65
3.71
8.64
3.70
1.93
5.78
8.75

1046

Percen­
tage
'“^ange

1986

Pakistan
1992 Percen­
tage
Change

73.9
32.2
-39.4
2.12
88.7
73.8
-3.6
9.9

6.93
5.74
4.68
9.36
4.66
3.40
31.65
36.41

16.78
15.64
6.78
20.84
10.06
_
37.18
45.92

145.0
172.4
44.8
122.6
115.8
—
17.5
26.1

Sri Lanka
1986
1992

15.74
6.74
10.34
13.15
4.49
2.97
5.49
17.54

31.86
19.30
8.87
45.04
5.71
6.82
10.64
94.52

(in Rs)

tage
Change

Indonesia
1986
1992 Percen­
tage
Change

102.4
186.3
-14.2
242.5
27.1
129.6
93.8
438.8

15.36
44.76
43.52
99.15
12.80
9.52
—
48.31
—
—
_
10.24 20.48
61.28
49.92 106.72

Economic and Political Weekly

191.4
127.8
^25.6
—

_
199.2
113.7

May 22, 1993

sumer (not the common man as we will
see later) will be hit by the rise in prices.
So while we advocate a judicious policy
in drug price controls, we see no reason
to fear the strengthening of the patents
regime in the case of drugs and pharma­
ceuticals by introducing product patents.
This is not to say that the 1970 Patent Act
was not useful. In fact it was useful and
along with DPCO has strengthened our
pharmaceutical sector. But in the present
situation, when we have become compe­
titive in pharmaceutical sector there is no
need to continue with this Act in the same
form. However, the pertinent question to
be answered is, how exactly the patents
regime can be strengthened by India in the
case of pharmaceuticals? To this question,
we will turn to Section IV.

Other Effects of Strengthening
Patents Regime
The other possible effects of streng­
thening the patents regime can be explain­
ed as follows.
Effect on Different Sections of the
Population-. An increase in drug prices is
believed to affect the common man. But.
as rightly pointed out by Mitra Sisir.22
“We ought to be clear about the descrip­
tion of this ‘common man’... But we have
to make another division of the ‘more
common’ amongst us, that is, the people
who live below the poverty line”. Accord­
ing to official estimates, this group con­
sists of 30 per cent of our population23
and these people hardly spend on drugs
and medicines, while basic necessities like
food, clothing and shelter are themselves
not available to them. So the question of
drug prices does not concern them. India
is a drug starved country. The per capita
consumption of drugs in India in 1989
was Rs 34 (Rural Rs 8). This is very low
compared to other developing countries
like Republic of Korea (Rs 346), Egypt
(Rs 190), TUrfcy (Rs 159), Taiwan (Rs 159),
Philippines (Rs 95), Nigeria (Rs 70),
Indonesia (Rs 42) and Pakistan (Rs 43),
even in 1984.24 Further as pointed out by.
Mitra Sisir,23 the expenditure on drugs in
India “is generally less than 10 per cent
of the total medical care .cost”, and
medical care expenditure forms 2.6 per
cent of total expenditure in. India.26
Among the other two classes, the rich and
the middle class, the former can afford
any rise in prices of drugs, while the latter
may be subjected to hardship. However,
there is the fact that even if the most
liberal estimates are taken, drugs product
patented abroad will not be more than 30
per cent of the drugs produced in India
and again the changes in drug prices can
come about mainly due to decontrol of
prices, rather than patents. If the possibili­
ty of substitution of non-patented drugs

Economic and Political Weekly

for patented drugs is further explored then
the effect of patents on prices can be fur­
ther lessened; on the whole, strengthen­
ing the patents regime especially by accep­
ting product patents in pharmaceuticals
will not have any great adverse impact on
common man in particular and the peo­
ple in general.
Effect on Indian Pharmaceutical In­
dustry. The strengthening of patents
regime is considered to affect the Indian
pharmaceutical industry. In the total sales
of drugs and drug formulations in India
the share of drug formulations is 76.5 per
cent in 1989-90 (78.4 per cent in 1988-89).
Therefore, it is mainly drug formulations
that are important in the total sales.
In fact, India is almost self-sufficient in
drugs and pharmaceuticals and indige­
nous production to the total indigenous
production plus imports is 89.4 per cent
in 1989-90 (91 per cent in 1988-89). More­
over, India is a net exporter of drugs and
pharmaceuticals at Rs 204.78 crore in
1989-90 (Rs 20.60 crore in 1988-89). In­
terestingly, the pharmaceutical sector is
one in which the concentration is very less.
The concentration ratio of drug formula­
tions in 1989-90 (shown by the share of
top four firms) is the lowest among'all
manufactures of non-primary commo­
dities at 17.5 per cent27 and interestingly
in the primary commodities industries
also only a few items are below this level.
While it is not possible to estimate the
possible effect of product patents by com­
panies (though the effect of introducing
product patents would be quite less in
general, as seen earlier), some indications
of the process patents are available. In
pharmaceuticals, we have not been able
to estimate the percentage of drugs and
drug formulations under process patents
but total- patents in drugs and pharma­
ceuticals22 is 9.31 per cent of total patents
sealed in. 1986-87. But it has been stated

that major percentage of the process
patents in this sector have been granted
to foreigners.2’ In fact percentage of
patents to foreigners in foods, drug and
medicines is 74.8 per cent in 86-87 and
above 70 per cent since 74-75.30 Of the 75
per cent market share as on year-end 1989
about 35-40 per cent is by MNCs in drug
formulations tin 1989-90).31 Since most
of the important MNCs have been includ­
ed in this list, the remaining 25 per cent
cover mainly the Indian companies and
that too small companies. Thus about 60
per cent of the market share in drug for­
mulations is with the Indian companies
and the Indian companies are a major
force to reckon with. As can be seen in
Table 20, in our sample of companies
covering about 53 per cent of total market
share, MNCs with 33 per cent market
share have been granted 407 patents bet­
ween the years 19/2-1989, while the Indian
big companies with 16 per cent market
share have only 59 patents (of which 41
patents have been granted to the two
public sector companies). Though our
sample is not a representative sample giv­
ing representation to different groups of
companies based on the share of these
groups to total market share, and though
we know that it is the value of sales of
patented items which is the real indicator,
rather than the number of patents, the
results at least indicate the. following:
(1) The patents granted to big indian
companies especially private companies
are surprisingly low. This seems, to be a
reflection of their poor R and D effort.
(2) While the MNCs seem to dominatein terms of process patents, four.small
companies have 24 patents, which seems
to be relatively higher compared to the big
Indian private companies. Of course, we
do not know the type of relationship of
small companies given here with the big ■
companies or MNCs. While it is known .

Table 16: Prices and Price Indices of Selected Indian Drugs
(in Rs)

Drug/Dosage

1 Cholamphemical
(Z50 mg/10)
2 Amoxycillin
(500 mg/4) caps
3 Cefadroxil
(500 mg/6) caps
4 Cephalaxin
(250 mg /4) caps
5 Doxycycline
(100 mg /10) caps
6 Norfloxacin
(400 mg/4) tabs
7 Ibuprofen
(400 mg/10) tabs
8 Flurbiprofen
(50 mg/10) t?bs

May 22, 1993

1990

Prices
1991

1993

8.32
(100.0) '
17.90 '
(100.0)
5820
(100.0)
13.27
(100.0)
19.50
(100.0)
15.20
(100.0)
4.84
(100.0)
12.69
(100.0)

8.74
(105.0)
17.90
(100.0)
58.20
(100.0)
14.38
(108.4)
19.50
(100.0)
15.20
(100.0)
6.43
(132.9)
12.69
(100.0)

20.00
(240.3)
N.A. -■
(N.A.)
65.85
(113.1) .
15.52 .
(117.0)
25.50
(130.8)
19.00
(125.0)
6.43 •
(132.9)
15.00
(118.2)

Brand Name
Paraxin

Moxilium

Kefloxin
Alcephin.
Biodoxi

Norilet
Emflam-400
(Merck)
Arflur

(Contd)

1047

that MNCs market products made by
small-scale companies,32 the benefits due
to patents to these companies may also be
cornered by MNCs due to such arrange­
ments. Table 20 also shows that a substan­
tial number of patents granted to Indians
are actually in the name of the parents of
the MNCs operating in India, which in ef­
fect reduces the number of patents granted
to Indians. Thus in process patents, the
importance of MNCs can be seen. But a
note of caution is needed here. Table 21
gives the percentage of pharmaceutical
sales to total sales of some MNCs and
Indian companies for which data are
available. The percentage in the case of
MNCs is very small, while for Indian
companies it is very high, at even 100 per
cent in one case. In the light of this fact,
we can infer that a major portion of the
patents granted to the MNCs are for non­
pharmaceutical items and in the case of
the Indian companies, it is mainly for
pharmaceuticals. So ultimately even pro­
cess patents granted to MNCs in phar­
maceuticals may not be really high.
In Table 22 the profitability ratios of
selected MNCs and Indian companies are
given. The different profitability ratios are
broadly similar in the case of total MNCs
and Indian companies, and in the case of
most of the companies profits to net
worth indicators are quite high, while pro­
fits to sale indicators are quite low. Here
again, for reasons explained earlier pro­
fitability of Indian pharmaceutical com­
panies reflect profitability in pharma­
ceuticals, while profitability of foreign
companies reflect profitability in non­
pharmaceuticals. Even imports of raw
materials to total sales and dividend
remittances to sales are not high and the
possibility of disguising profits in these
forms by MNCs seems to be less. While
there is truth in the argument that pro­
fitability to sales in pharmaceutical sector
is quite low, we cannot argue (as is being
currently done by many) that the profita­
bility in this sector should be allowed to
be as high as in other sectors by decontrol •
of prices. We should note that this is a
sector affecting social security and many
developed countries are giving medical­
care free of cost or at concessional rates
and India should not allow prices to rise
I beyond permissible limits. Moreover, pro­
fitability to net-worth in these companies
is quite high and is comparable to pro­
fitability to net worth in other sectors.33
Earlier we had noted that there is no need
to fear product patents. Since we do not
have any esthtate of the value of phar­
maceuticals under process patents as a
percentage of total value of pharmaceuti­
cals in India, we cannot be very sure of
the extent of the impact of strengthening
process patents in India on the pharma­
ceutical sector.

104g

Table 16: (Contd)
Drug/Dosage

Brand Name

9 Piroxicam
(10/10)
10 Diclofenac
(50/10) tabs
11 Naproxen
(250/10) tabs
Anti-Ulcerants
12 Cimetidine
(400/10) tabs
13 Rantidine
(300/10) tabs
14 Sucralfate
(lg/10) tabs
15 Famotidine
(40/10) tabs
Cardiovasculars:
16 Nifedipine
(lOmg/10) caps
17 Atenolol
(50/10) tabs
18 Acetntoloi
(200/10) tabs
19 Pentoxifylline
(400/30) tabs
20 Cylandelate
(400/10) caps
21 Diltiazem
(30/10) tabs
22* Enalaprilmaleate
(5/10) tabs
A nttviral/Fungai
23 Acyclovir
(5%cream) 5g
24 Ketoconazole
(200/10) tabs
25 Clobetasol prop
(O.OS'yo cream) 10g
26 Minoxidil
(60 ml)
Anti-Histamine
27 Astemizole
(10/10) tabs
Antdi-Auxiolylics
28 Alprazolam
(0.5mg/10) tabs
29 Diazepam
(2mg/10) labs
30 Lorazepam
(lmg/10) tabs
31 Trazodone Lcl
(50mg/10) tabs
Anti-Cancer
32 Vincristine
(Img/vial)
33 Vinblastine
(lOmg/real)
Miscellaneous
34 Allopurinol
(lOOmg/10) tabs
35 Haloperidol
(0.25mg/10) tabs
36 Domperidone
(l0mg/10) tabs
37 Gemfibrozil
(300mg/10) caps
38 Nalidixic Acid
(500mg/4) tabs
39 Stanozolol
(2mg/l0)

Toldin-10

_____________ Prices_________
1990
1991
1993

5.35
(100.0)
9.90
(100.0)
16.35
(100.0)

5.35
(100.0)
9.90
(100.0)
16.35
(100.0)

8.90
(166.4)
9.90
(100.0)
N.A.
(N.A.)

1734
(100.0)
36.50
(100.0)
13.68
(100.0)
39.80
(100.0)

17.34
(100.0)
36.23
(99.3)
13.68
(100.0)
34.00
(85.4)

14.14
(81.5)
3633
(99.3)
13.68
(100.0)
34.00
(85.4)

5.40
(100.0)
7.00
(100.0)
18.10
(100.0)
138.00
(100.0)
14.40
(100.0)
12.00
(100.0)
9.50
(100.0)

5.40
(100.0)
7.00
(100.0)
18.10
(100.0)
138.00
(100.0)
14.40
(100.0)
12.00
(100.0)
9.50 ■
(100.0)

6.75
(125.0)
10.70
(152.9)
26.49
(146.4)
173.40
(125.7)
20.00
(138.9)
17.68
(147.3)
16.20
(17035)

39.40
(100.0)
57.90
(100.0)
16.00
. (100.0)
. 125.00
(100.0)

39.40
(100.0)
57.90
(100.0)
16.00 '
(100.0)
125.00
(100.0)

49.90
(126.6)
57.90
(100.0)
16.00
(100.0)
138.15
(110.5)

Alestol

9.75
(100.0)

9.75
(100.0)

10.70
(109.7)

Alzolam 50

530
(100.0)
2.18
(100.0)
2.00
(100.0)
1430
(100.0)

8.00
(145.5)
237
(104.1)
2.00
(100.0)
14.50
(100.0)

11.67
(212-2)
3.86
(177.1)
2.00
(100.0)
14.50
(100.0)

48.00
(100.0)
92.00
(100.0)

48.00
(100.0)
N.A.
(N.A.)

48.00
(100.0)
N.A.
(N.A.)

' 8.60
(100.0)
1.90
(100.0)
9.50
(100.0)
34.50
(100.0)
10.61
(100.0)
16.00
(100.0)

8.60
(100.0)
2.25
(118.4)
9.50
(100.0)
38.50
(111.6)
11.60
(1093)
16.00
(100.0)

12.04
(140.4)
2.90
(152.6)
15.90
(167.4)
N.A,
(N.A.)
18.00
(169.7)
29.65
(185.3)

Diclomax

Naxid
Ta gamed

Lydin
Ulcekon

Facid

Calcigard
Altol
SectraJ

Flexital
Cyclasyn

Angizem

Envas
Cyclovir

Funazole

Dermotyl
Skin Cream
Mintop

Valium
Trapex

Trazonil

Vincristine
Vinblastine

Zyloric

Depidol
Domstal

Gempar
Gramoneg

Stromba

■

Note : The figures in parenthesis are index numbers.
Source: MIMS India (various issues).

Economic and Political Weekly

May 22, 1993

However, strengthening process patents
will mainly involve the following aspects,
which are likely to affect the pharma­
ceutical sector. (1) Duration of the patents
granted; (2) Considering imports as tanta­
mount to working of patents in the
patents granting country; and (3) Rever­
sal of the burden of proof.
While the first issue can be allowed to
be bargained upon, if needed with a quid
pro quo from developed countries in the
issue" of Multi Fibre Agreement (MFA)
(which we will discuss in Section IV), the
second aspect can never be accepted as it
would adversely affect the Indian drug in­
dustry, making it lose the gains already
done. Even when the production is under­
taken by MNCs, it should be undertaken
in India. Otherwise, not only will the
Indian drug industry suffer directly, but
also the higher linkages of this sector will
be reaped outside India as we will see in
the next sub-section. In our zeal to cleanse
the old system, we should not throw away
. the baby with the bath water. However,
benefits to the Indian companies should
be given in the form of tax benefits,14
special benefits for exports which has
been used well by Indian companies
vis-a-vis foreign companies,35 benefits for'
R and D investment, etc. As noted earlier,
R and D investments in India in pharma­
ceuticals is very low by international stan­
dards. The exact break-up is not available
to us. On the whole, while decontrol of
prices has to be done judiciously, the
Indian pharmaceutical sector including
the public sector companies should be
strengthened by other measures suggested
above. Further the Indian pharmaceutical
industry should shift more to the produc­
tion of drugs which are off patent. In fact
in the US the sales of generic drugs has
increased from 9.2 per cent in 1980 to 19.1

in 199136 and definitely India should
move more towards the production of
generic drugs.
Effect on Other Sectors via Linkages-.
The drugs and pharmaceuticals sector will
also affect the economy through linkages
of this sector with other sectors. The study
of Prasad A C P37 shows that medical
health has a high backward linkage effect.
This sector falls in the IV classification
of Chenery-Watanabe, i e, high backward
and low forward linkages. The high back­
ward linkages of this sector imply that
other sectors supplying inputs to the
medical health sector will be affected
greatly when the medical health sector is
affected. But we should remember that
pharmaceuticals form a small percentage
of total medical care and also that the ef­
fect of backward linkages hold good here
as far as the growth of other sectors are
concerned. However, in the case of price
effects, the changes in prices of other
sectors will affect the drugs and pharma­
ceuticals rather than vice versa. The price
effect of strengthening the patent system
of pharmaceuticals in India therefore does
not affect much the other sectors, while
the strengthening of patents or any .other
changes in other sectors can greatly affect
this sector via the linkages (assuming
however that the linkages of the medical
health sector is representative of the
linkages pf the drugs and pharmaceutical
sector, which forms a part of the medical
health sector). But if growth of the phar­
maceutical sector is adversely affected due
to strengthening the patents regime, then
it will have an adverse effect on other sec­
tors due to the high backward linkages.
This however will not happen just by ac­
cepting product patents in pharmaceuti­
cals. However, if the clause that "impor­
ting is tantamount to working the patents

in the patent granting country” is accepted
while strengthening the patents regime,
then the pharmaceutical sector will be af­
fected adversely as the high backward
linkages of this sector will be reaped out­
side the country. Devoid of" this clause,
strengthening the patents regime will not
have much impact on pharmaceuticals via
linkages.
Effect on Technology. At present, we do
not intend to deal in detail with this
aspect, but only state that, while
strengthening of patents regime can harm
the dissemination of technology, in the
present situation, when all countries in­
cluding communist China have streng­
thened their patents regime (especially
they have accepted product patents) and
our dependency on developed countries,
especially the US for technology is in­
creasing, refusal on the part of India to
strengthen the patents regime will definite­
ly affect the fbw of latest technology and
the quality of drugs. This adverse effect
can be mitigated only if the Indian com­
panies, inducing the government com­
panies devotea larger amount of resources
for R and D and identify good substitutes
which are off patent. While as such the
investment on R and D in drug industry
is a poor 2 per cent of its turnover in India
compared to 12 per cent in the interna­
tional drug industry,38 to further invest
on R and D and mitigate the above men­
tioned effects the Indian companies will
further emphasise their long-standing de­
mand for decontrol of drug prices, which
if done without much care will adversely
affect the interests of consumers.
' Effect on Balance of Payments: The
balance of trade of India in drugs and
pharmaceuticals is positive as can be seen
in Thble 23. The balance of payments of
figures including non-trade items like

Table 17: Prices of Important Indian Bulk Drugs over the Years 1990-93

Name of the Drug

Antibiotics
1 Gentamicin (D)(NA)

A/c Unit

\ Kg

2 Penicillin (D)(NP)

MMTs

3 Ampicillin (DXNP)

MT

4 Streptomycin (D)(NP)

MT

Sulpha Drugs
1 Sulphamethoxazole (DXP)

MT

2 Sulphadiuridine (D)(P)

MT

3 Sulphagnamidine (D)(NA)

MT

'

Indigenous
Production
(88-89)

Imports

Total

883.00
(0.51)
330.47
(4.63)
332.56
(11.8)
243.79
(2.11)

2966.00

3849.00

657.42

981.89

16.09

348.65

10.04 .

253.83

1445.56
(13.56)
465.72'
(1.37)
219.66
(0.39)

9.40

1454.96

—

465.72

• _

219.66

"

___________Price
1990
1991

Brand Name/
Dosage

Biogaracin
(40mg/2ml)
Pentids/
(Pentids/200/6 tabs)
Basipan
(250 mg/4 labs)
Streptangna
(10 tabs)
Olrim
(10 labs)
. inseptin
(10 tabs)

7.90

7.90

8.15

3.37

3.37

3.40

6.40

6.40

6.92

5.32

5.32

7.10

7.10

7.10

,6.79

6.79

.

1993

7.62

(Contd) ■

Economic and .Political Weekly

May 22, 1993

1049

Table 17: (Contd)
(in Rupees)

Name of the Drug

A/c Unit

Vitamins
l Vitamin C (D)(NP)

MT

2 Vitamin Dj (NP)

Kg

3 Nicotinamide (NP)

MT

4 Vitamin BJ2 (D)(NP)

MT

Analgenics/Antipyretics, etc
1 Analgin (NP)

MT

2 Aspirin (D)(P)

MT

3 Pethidine (NP)

Kg

4 Ibuprofen (D)(NP)

MT

5 Methyl Salicylate (D)(NP)

MT

Cortico Steroids
1 Dexamethasone (D)(NA)

Kg

2 Betamethasone (D)(P)

Kg

3 Predvisolone (D)(NP)

Kg

Anti TB Drugs
1 INH (NP)

Indigenous
Production
(88-89)

868.77
(2.02)
249.00
(0.11)
115.95
(0.31)
101.63
(0.17)
271.80
(0.88)
1532.70
(0.68)
515.00
(.009)
124.55
(2.40)
410.51
(1.02)

343.00
(0.58)
932.00
(2.28)
1923.00
(0.59)

MI

Imports

Total

875.74

-

-

-

-

—

-

-

—

1.92

117.87

19.65
(300 ml)
- ..

19.86
(300 ml)

318.38

Kinetonc
(200 ml)
-

13.68

216.75

Novalgin
(500 mg/10 tabs)
Asabut
(10 tabs)

4.46

4.46

4.80

2.74

2.74

5.94

-

- .

6.43

271.80

-

1532.70

48.00

563.00

-

14.59

139.14

Affam
(400 mg/10 tabs)

12.00

6.43
—

—

Idizone
(0.5 mg/10 tabs)
Betacort ril
(0.5 mg/10 labs)
Dcltacortril
(5 mg/10 tabs)

1.51

1.51

1.51

2.00

2.35 ’

3.18

3.34

410.51

521.20

864.20

348.00

1280.00

-

1923.00

140.29
(0.39)
407.99
(5.42)

-

140.29

-

—

-

-

—

407.99

Combutol
(400 mg/6 labs)

6.76

6.76

6.76

Emgmin
(155 mg/10 tabs) •

3.29

MT

130.08
(1.01)

26.98

157.06

MT

436.28
(3.41)

12.61

448.89

2 lodochlorohydro-xyquinlotine (D)(NP)

MT

204.87
(0.50)

—

204.87

Anti-Diabetics
1 Tolbutamide (NP)

MT

3.00

135.88

2 Insulin (D)(P)

MU

132.88
(0.24)
2486.00
(0.81)

153.00

2999.00

371.06

3107.06

-

335.00

.

3 Theophyline (DXP)

MT

Immunological Agents
1 Tetanus Anti Toxin (NP)

MU •

2 Diphtheria Anti-Toxin (NA) MU

Castro Intestinals
1 Aluminium Hydroxides (DXNP)
Other Drugs
1 .Hydralazine (D)(NP)
2 Heparin (NP)

2736.00
(1.49)
J35.OO
(0.17)
135.91
(0.69)

7700.00
(0.09)
219.00
(.004)

132.02

267.93

Aristogyl
(200 mg/10 tabs)
Sladmed
Euirozyme Plain
(10 tabs)

Rastinon
(500 mg/10 labs)
Insulins
(40--/10ml)
Salbetol
(2 mg/10 tabs)
Bricanyl
(2.5 mg/12 tabs)
Hiphylin
(2 ml)
Tetanus Anti Tonin
(750 ru)
Diphtheria Antitonin
(10000 iv, 5ml amp)

—

7700.00

33.00

252.00

1378.80

Mucaine
(175 ml)

224.00

Corbetazine
(10 tabs)
Beparine
(1000 iv/5 ml)

MT

. 1378.80
(1.829)

—

Kg

224.00
(.004)
7439.00
(0.09). '

—

MU

—

—

Anti-Dysentery Drugs
1 Metronidazole (DXP)

Kg

1993

249.00

-MT

Kg

Price
1991

6.90

2 Ethanbuid (D)(NA)

2 Terbutaline (D)(P)

1990

—

Anti-Malarials
1 Chloroquin (D)(NA)

Anti-Asthmatics
1 Salbutamol (D)(NP)

Brand Name/
Dosage

7439.00

3.08 .

■

2.35
’

-

4.45

7.97

3.08

3.75

3.78

4.1!

5.50

2.50

3.00

3.77

16.85

16.85

29.80

1.70

1.92

1.92

3.33

2.88

2.94

0.94

0.94

0.94

1.76

1.76

1.76

34.88 •

34.88

34.88

12.29

12.29

20.57
(200 ml)

4.29

4.29

4.29

12.27

12.27

12.77

Notes : (1)P = Patented; NP = Not Patented; NA = Not Available, and D = Drugs under Price Control,
• (2) Figures in parentheses under indigenous production show percentage share in total value of indigenous .production.
Source. Calculated by us by using (i) MIMS India (various issues), (ii) IDMA Annual Report 1992, (iii) Drugs Under Patent 1989 edition, Published
'by FOI services, USA.
Economic and Political Weekly

May 22, 1993

payments/receipts of royalties, technical
know-how fees, etc, of the pharmaceutical
sector as such are not available. The com­
panywise balance of trade and balance
of payments figures are not dependable
as firstly, we have data only for few
pharmaceutical companies and secondly,
because some pharmaceutical companies
especially the MNCs are more involved in
production of non-pharmaceutical items.
The strengthening of the patents regime

on balance of payments will depend on
the type of strengthening of the regime
and the way the Indian companies res­
pond to the challenges. If it is merely ac­
cepting product patents, the effect will be
less but if the clause of considering
imports as tantamount to working the
patents in the patent granting country is
accepted, then the effect on balance of
payments would be very high. While ac­
cepting product patents and furthering the

flow of technology and qualitative drugs
can help our exports, accepting ’imports
as tantamount to working patents in
India’ will not have any positive effect on
balance of payments.
The above discussion highlights the fact
that while India has to follow a judicious,
price decontrol policy, it need not fear
strengthening the patents regime in phar­
maceuticals by accepting product patents
in pharmaceuticals. However, there are

Table 18A: International Prices vis-a-vis Indian Prices for Latest and Important Drugs

Anti-bacterials Co-trim axazole tabs
Amoxycillin-500 caps
Cafadroxil 500 mg
Cephalexin 250 mg
Ciprofloxacin 250 mg
. Norfloxacin
Amoxycillin + .
Cioxacillin 125 mg
Doxycycline 100 mg
Anti inflammatory
Ibuprofen 400 tabs
Flurbiprofen 100 tabs
.Diclofenac 50 labs
Piroxicam 10 tabs
Naproxen 250 mg
Anti-ulcerants
Cimetidine 400 labs
Ranitidine 300 tabs
Sucralfate 500 tabs
Famotidine 40 tabs
Mesalazine 400 mg
Cardiovascuiars
Nifedipine 10 labs
Aienolol 50 labs
Acebutalol 200 labs
Pentoxyphylline 400 tabs
Cyclandelate 400 mg
Dilliazem 30 mg
Enalapril Maleate 5 mg
Anti virai/fungai, etc
Acyclovir 3 per cent cream

Times
Costlier
in USA

UK
(Rs)

Times
Costlier
in UK

71.18
39.03
177.69
55.63
105.89
99.14

13.71
1.42
2.05
3.64
1.65
5.52

38.84
53.70
—
16.50
81.00
—

7.02
2.33
—
0.38
1.03
—

—
0.08

44.78
21.01

2.82
0.12

52.11
125.82

3.45
5.73

8.80
46.67
45.00
37.50
■—7

1.57
2.68
4.91
12.02
—

O. ’20.20
—
105.60
149.20
.92.90

4.89
—
12.86
50.81
4.68

16.49
23.85
47.49
40.55
33.70

3.81
0.88
5.23
‘ 13.00
1.06

_ 65.00
210.00
22.00
—
37.99

2.75
7.03
1.83
—
0.81

153.04
348.70
——
348.75
—

7.83
12.33
—
12.91
—

79.74
234.07
32.00
243.93
38.58

3.60
7.95
3.11
8.73
0.84

3.88
5.60
18.10
29.57
8.22
12.00
9.50

38.50
63.25
20.00
40.00
24.35
26.73
24.00

8.92 •
■ 10.29
0.10
0.35
1.96
1.23
1.53

60.38:
89.38
—
57.50 '
57.22
37.73 86.62'

14.56
14.96
—
0.94
5.96
2.14
8.12

31.20
50.19
39.12
43.00
55.84
22.27
75.77

7.04
7.96
1.16
0.45
5.79
0.86
.6.98

98.00
(5 per cent)
41.28
10.16
125.00

133.30

0.36

271.98

1.78

229.55

1.34

179.00
.
16.00
— iy -fi

3.34
0.57
—

. 272.94
•
—
, 722.50

5.61
—
4.78

121.69
21.85
540.00

1.95
1.15
3.32

9.50

—

—

185.64

18.54

47.25

3.97

3.55
2.18
2.00
2.74
14.50

_
—
2.19
18.37
—

—
—
0.09
5.70 ’
—

54.40
40.36
54.64
—
95.93

14.32 .
17.51
26.32 ■
—
5.62

18.72
5.10
4.54
5.83
32.46

4.27
1.34
1.27
1.13
1.24

113.40
96.39

1.52
0.05

—

—
—

252.72
277.83

4.62
2.02

—

16.32
21.01
—
525.98
40.50
52.82

0.90
10.06
—
0.52
2.89
2.65

24.98
2.89
22.05
648.00
21.97
42.91

1.90
0.52
1.32
0.88
1.11
1.96

Pakistan
(Rs)

Times
Costlier
in Pakistan

; 10s
6s
. 6s
4s
4s
' 4s

4.84
16.14
58.20
11.98
40.00
15.20

10.50
21.00
—
—
—
30.00

1.17
0.30
—
—
—
0.98

6s
I0s

11.71
18.70

—
20.25

10s
10s
10s
10s
10s

3.43
12.69
7.62
2.88
16.35

10s
10s
10s
10s
6s

17.34
26.16
7.78
25.08
21.00

10s
10s
10s
10s
10s
10s
10s

5 gm

10s
Kelaconazolc 200 tabs
10 gm
Clobetasol 10 per cent cream
60 ml
Minoxidil 60 ml
Anti-histamine
< 10s
Aztemizole
Anti-Anxiolytics
10s
Alorozolam
10s
Diazepam 2 mg
10s
Loarazepam 1 mg
Nitrazepam 5 mg
10s
Trazodone hcl 50 mg
< 10s
Anti-cancer
..Vincristine 1 mg
Vial
Vinblastine 10" mg
Vial
Miscellaneous
Allopurinol 100 mg
10s
,
Haloperidol 0.5. mg
10s
-Domperidone 10 mg
10s
Gemfibrozil 300 mg
100s
Nalidixic Acid 500 mg
4s
Stanozolol 2 mg
10s

(in Rupees)

USA
(Rs)

India
(Rs)'

Pack

45.00

92.00

8.60
1.90
9.50
345.00
10.40
14.48

-

'

—
19.57
—
—

.

1.06
—
—
• .>
—

.

Sourer. B M Keayla (1989).

Economic and Political Weekly

May 22, 1993

1031

controversial issues like “considering
imports as tantamount to working the
patents in the patent granting country”
and “reversal of the burden of proof”.
One possible danger is that the drugs not
to be patented in the WHO list may slowly
be forced to be patented. However as of
present, this danger does not exist and the
Table 18B: Drug Prices: An Inter-Country
Comparison. 1986
(Price to the consumer in Rs)
Name of the Drag

India

UK

Chloramphenicol (antibiotic) 6.87 21.30
Metronidazole (anti-diarrhoeal) 2.76 25.54
Ferrous Sulphate (anti-aneamic) 8.46 12.03
Ibuprolen (analgesic)
6.13
7.67
Propranolol Hd (Anti­
hypertensive)
48.78 70.95
Salbutamol (anti-asthmatic)
1.11
4.57
Nifedipine (cardiac drag)
6.00 29.59
Cimetidine (anti-ulcer)
7.96 35.59

Note : Even if allowance is made for the
_
15-20 per cent increase in consumer
prices as a result of DPCO 1987,
Indian prices still compare very
favourably with prices in other
developing countries where also prices
have gone up since 1986.
Source: OPP1 - 1DMA.

Table 19: Percentage of Indigenous
Production of Drugs Covered under
Patents Abroad by Various Therapeutic
Groups as Per I DMA and
Government of India
Drug Groups

IDMA
(Percen­
tage)

1 Antibiotics
2 Antibacterials
3 Cardiovascular
Drugs
4 Non-Steriod AntiInflammatory
Drugs (NSAIDS)
^tranquillisers
^BRnti-Asthmatics
7 Systemic
Antifungals
8 Anti-leprotics
9 Anti-ConouJsantr
10 Antipeptic Ulcer
Drugs
11 Oral Anti-Diabetics
12 Anti-Histamines
13 Cyfostatics and Anti­
hen Remies
14 Contraceptive
Hormones

40.23
98.80

16.00

40.18

51.00

22.16
74.42
47.53

20.00
17.00
11.00

25.66
69.96
65.93

NA
NA
NA

65.92
55.30
21.42

NA
NA
NA

Governmenl of
India
(Percen­
tage)

32.41

NA

88.79

NA

Sources: (1) For 1DMA: IDMA, 'Intellectual
Property Rights and Patent Pro­
tection's 1992.
(2) For Govt, of India: Answer to
Question No 235 in the Rajya
Sabha by the Minister of State in
the Ministry of Chemicals and
Fertilisers, Government of India,
dated March 12, 1992.

1052

already competitive Indian drug industry
can cope up in the case of any eventuali­
ty. Thus the basic issue here is not whether
India should strengthen its patents regime
in the pharmaceutical sector, but how it
should strengthen it. To this issue, we will
’ turn our attention in the next section.

Issues relating to policy matters.
Issues relating to implementation and
administration.
The main issues related to policy mat­
ters in the negotiations on strengthening

(I)
(2)

the patents regime in the Pharmaceutical
sector, especially for India are: (1) Gran­
ting product patents, (2) Duration of the
patents, (3) Considering imports as tanta­
Modus Operandi of Strengthening mount to working patents and continuing
non-exclusive compulsory-licensing,
India's Patent Regime
(4)
Reversal of the burden of proof and
(5)
Pipeline protection.
Our analysis in the previous section has
The main opposition against granting
shown that India need not fear streng­
product patents in the pharmaceutical sec­
thening its patent regime in the pharma­
tor by countries like India, was the fear
ceutical sector by introducing product
that it would increase the prices of phar­
patents and in Section II we have seen that
maceuticals and that domestic production
India’s increased dependency on the
would suffer. We have seen that there is
developed world in general and on the US
no’need to fear the introduction of
in particular and the fall of the Soviet
product-patents on these counts. What we
Union has made it increasingly necessary
should guard against is that under any
for India to toe to the general line follow­
circumstances the non-patentable drugs
ed by the developed and other developing
(especially the ones in the WHO list) are
countries. In this situation and in the light
not included under the list of patented
of our study, we will see what changes
drugs. One should also be aware of the
India can make without foresaking its
fact that developing countries including
interests.
India’s close and potential competitors in
Al the outset, we would like to make
Asia like China have accepted product
three things clear.
patents. While there is no need to. fear
(1)
We are not of the opinion that
granting product patents in pharmaceuti­
India’s Patent Act 1970 was not useful. In
cals, India need not hesitate, but take the
fact, we are of the opinion, that it was
initiative and accept granting product
useful and helped the Indian pharma­
patents in pharmaceuticals in order to
ceutical sector to be competitive But
bargain against such patents in other
changing this Patents Act, now in a way
sectors, where such a thing should not be
that will .strengthen the patents regime
done 'and/or for bargaining, on other
need not necessarily be harmful for the
issues in the pharmaceutical sector.
Indian pharmaceutical sector.
The duration for which patents are
(2)
The fact that we advocate streng­
granted in India’s pharmaceutical sector _
thening of the patents regime in the phar­
is seven years from the date of applica­
maceutical sector, does not automatically
tion
or five years from the date of grant,
imply that the same holds good for other
whichever is shorter while it is 14years in
sectors of the economy and for other
most of the other sectors. The criticism
countries at present, even in the phar­
against the short duration of patents in
maceutical sector. This needs sector­
India in general and pharmaceuticals in
specific and country-specific studies.
(3)
The fact that we are of the opinion particular is that the time is too short for
the patentee to gain the fruits-of his in­
that the patents regime in the phar­
ventions, as R and D is very costly in this
maceutical sector of India should be
sector and it presently takes a minimum
strengthened, does not automatically im­
of five years for a patent to be granted so
ply that we should accept all the condi­
that the effective term gets reduced to Only
tions put forth by the advanced countries
about two years. For introducing a new
or by Dunkel in his Draft Text.
drug it takes about that long to conduct
The second aspect is beyond the scope
clinical trials by which time it is all
of this paper and the third aspect is the
over.40 The arguments against a longer
subject-matter of this section.
patent term in general4' are that if a
longer patent term is given the patentee
Issues Involved in GATT Negotiations
may not have any incentive to start pro­
on TRIPS
duction as soon as possible., the lead time
There are many important issues involv­
between an invention and its commerciali­
ed in the discussion between developed
sation is getting shorter... and due to
and developing countries on strengthening
technological or economic obsolescence
the patents regime.39 Here, we will con­
most of the patents do not last their full
sider only those issues related to pharma­
term. The shorter duration of patents
ceutical sector in the Indian case. They can
especially in the pharmaceutical sector is
be grouped under the following heads:
justified on the grounds that it affects

IV

Economic and Political Weekly

May 22, 1993

the common man and is a social security
issue.
Let us now put the facts squarely. The
duration between the date of application
and grant of patent is rather high in India.
Thble 24 shows that for the patent applica­
tions to become fructuous in the case of
all countries together and also individual­
ly, it took two-three years in the period
1970-79, with three years being the modal
year while it became three-four years in
1980-88 with 4 years turning out as the
mode Though we do not have the fre­
quency ratios particularly for pharma­
ceutical sector, there is no reason to believe
that the patents were granted quickly in
this sector. Therefore there is truth in the
argument that the effective years .for
patents is very less (usually three years if
we follow the results in our table). With
only three years left, it would be difficult
to popularise the product and recover the
cost on R and D, leave alone gaining pro­
fits forcing the pharmaceutical companies

to shift to production of cosmetics and
related-items. While the optimum dura­
tion for a patent is debatable and depends.
on the trade-off between the costs of
monopoly and provision of incentives,
there is definitely a need for increasing the
effective term. This can of course be done.
by suitable administrative measures
without touching policy measures. If a pa­
tent is granted within one year of applica­
tion, even though one doubts whether pa­
tent office in India can be activated to
such an extent, then also the effective
period would only be five years, as under
the Patent Act 1970, patents in pharma­
ceuticals can be granted seven years from
application or five years from granting the
patents, whichever is shorter. While we
fee) that there is no harm in India gran­
ting a higher duration, it can fix the exact
number of years for the pharmaceutical
sector (say around 8-14 effective years) for
bargain, though not 20 years as given in
Dunkel Draft Ttext (DDT).42 In fact, it

has been reported that the I DMA which
has been opposing the strengthening of
patents regime has been reported to have
accepted that the life of a patent for a
pharmaceutical product can be extended
from the existing seven years to a uniform
14 years as in the case of other products
and industries.43
In the Dunkel Draft Ttoct nowhere has
it been mentioned that imports are tanta­
mount to working patents in the patent
grinting country and also people like
Cliidambaram44 say that the text does
net warrant such an interpretation ft e, im­
ports are tantamount to working patents).
Though the text says that imports cannot
be allowed by othersrwithout the consent
of the patentee, this necessarily does not
mean that the patentee can himself import
it. Yet the draft is slightly tricky in this
issue and as stated by Chidambaram,43
the US and less so European countries
and Canada, clearly regard the text as
meaning that importation is equal to local

Table 20: Patents and Market Shares of Indian and Foreign Affiliated Pharmaceutical Companies

SI No

Name of the Company

1 Glaxo India Ltd
2 German Remedies
3 Bayer India
4 Bools Co (India) Ltd
5 E Merck (India)
6 Hoechst (India)
7 Pfizer Ltd
8 Rallis India
9 ■ Sandoz Ltd
10 Searle (India)
U Cynamid (India)
12 Hindustan Ciba-Geigy
13 Eskayef
14 Burroughs Wellcome
15 Parke Davis
16 Reckitt & Colomn .
(India) Ltd
BF/ Warner Hindustan*
18 Hindustan Antibiotics
19 Indian Drugs & Pharma
20 Ranbaxy Laboratories
21 Unichem Laboratories
22 Alembic Chemicals
23 Cipla
24 JB Chemicals
25 Lyka Labs
26 Ambalal Sarabhai
27 Jayant Vitamins
28 East India Pharma
29 Jalaram Chemicals
30 Ortho Pharma Pvt Ltd
31 Armour Pharma
32 Kontiki Chemicals
33 National Pharma­
ceuticals Pvt Ltd
34 Rachho Pharma
35 Ralliwolf Ltd

PUC
(Rs Crore)

FE
(Per Cent)

Nature
of the
Company

Size of the
Company

Parent
Total No
of Patents Companies
(1972-89) Patents under
Indian Name

. i
Nil

Market Share (As on
Year Ended *89)
Drug
Formu­
lations

■20.00
6.53
16.22
8.10
5.94
9.57
11.72
9.50
5.30
5.21
4.55
' 17.70
5.00
3.00
12.05

40
36.95
51
40
40
40
40
29.25
51
39.16
40
40
40
40
40

Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign
Foreign

Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Big

8.39
2.98
38.42
110.99
9.14
1.35
4.11
1.57
3.51
2.99
22.19
4.37
98.9 lakh
8.0 lakh
7.5 lakh
3.0 lakh
3.0 lakh

39
40
Nil
Nil
Nil
26.38
Nil
Nil
Nil
16.06
Nil
Nil

Foreign
Foreign
Public Sector
Public Sector
Indian
Indian
Indian
Indian
Indian
Indian
Indian
Indian

Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Big
Medium
Medium
Medium
Small
Small

i
• - 17

0.5
0.8
NA
2.9
71
1.2
3.0
2.1
1.4
14
4.0
0.9
0.8
NA
NA
NA
NA

Small
Small
Big

1
5
6

NA
NA
NA

1.4 lakh
13 lakh
1.82

Subsidiary

23
228

44
8
I
168
103

2
17
7
66
1

3

27
14
g
10
Nil
Nil
Nil
Nil
Nil
Nil

2

3.49

0.67

1.7
I 5
1’4
16
30

2
35

6.0
2.0
0.5
1.6
1.2
4.5
2*5

Bulk Drugs

2
57 .

0.9
.2.1
1.8
1.9
2.r

36.68

0.99

7.1

Note : * Merged with Nicholas Laboratories India.
Source: CalcuBled by us from the 1SID database.

Economic and Political Weekly

May 22. 1993

1053

working, that it is a substitute for local
manufacture. Developing countries have
strongly argued against the non-working
of patents stating that if a patent is only
used for import purpose, non-nationals
can exercise monopoly power over the
protected market. Moreover there are no
benefits for the importing developing
country in the sense of extra production
facilities.44 Industrialised countries have
argued that “it may be very uneconomical
for a company to exploit its patent in all
countries where the patent is recognised.
Supplying foreign markets from a central
production plant could be far more cost
effective. Industrialised countries perceive
prevention of the unauthorised copying of
a protected product or process in the im­
porting country one of the core functions
of the patent. They therefore challenge the
above-mentioned definition ofworking of
a patent by stating that working also in­
cludes importing the product”.4’ Our
study has shown that even if product
patents are granted and even if MNCs
manufacture the commodity using the
patented technology, the production
should take place in India and not out­
side India. If imports are considered
tantamount to working patents in the
country then firstly, the very purpose of
patenting for transfer of technology will
be lost, secondly, the import bill will be
higher leading to adverse balance of pay­
ments; and, thirdly, the high backward
linkages of the pharmaceutical sector will
be reaped outside the country. Thus, on
no account can India accept this clause
at the present stage of its development. We
cannot accept the argument of Chidam­
baram that one way of addressing this
concern is to provide for compulsory
licensing for non-commercial public use
without consulting the patent holder.48
This is because “compulsory licences are
not exclusive and the licensee is not put
in a monopoly position and therefore
1 lacks a reliable basis for investment and
also compulsory licenses do not include
know-how”.4’
One point to be noted here is that the
developing countries advocate exclusive
compulsory licensing, wherein the patentee
loses the right to import and to market
the product in the country, as he did not
work the patents within a period of three
years from the date of the sealing of the
patent and was not able to give genuine
reasons for it. Here, of course, flexibility
is called for and we should not exclude the
patentee from working the patent even
when a compulsory licence is issued.
While the patentee would not have been
debarred from working the patent if he
were to work it before the stipulated date,
there is no need to be hard on him and
prohibit him from working the patent
after the date and he should be allowed

1054

to compete with others for whom com­
pulsory licences have been issued. What
however has to be guarded against is the
imports by the patentee. Here the same
policy of not considering imports as work­
ing of patents should hold good and thus
non-exclusive compulsory licence devoid
of imports can be advocated in such cases.
Another issue hotly contended between
developed and developing countries is the
question of ‘reversal of the burden of
proof. The advanced countries contend
that if the competitor did really use an
alternative process, he is normally the only
one able to give evidence for that and
therefore the burden of proof should be
on the alleged infringer. This means that
the latter must show that he has used an
unprotected process to manufacture the
challenged new product. The developing
countries however contend that reversal of
the burden of proof is at odds with basic
legal principles in many countries where
it is up to the plaintiff to provide proof
and evidence; it relieves the (usually
foreign) patentee from producing proof of
infringement of his process patent and
gives him a lot of coercive power and third
parties will become less willing to invent
or invest in alternate processes in develop­
ing countries because they might be sued
for infringement.50' According to
Chidambaram51 “the problem of reversal
of burden of proof has been addressed in
India by pointing out to Section 106 of
the Indian Evidence Act, which already
provides that when a fact is within the
special knowledge of a person the burden
is upon that person to prove that fact”.
In this context one has to be quite careful
as the Dunkel Draft Text is a little mis­
chievous when it says in Article 47: Right
of. Information that ‘Parties, may provide
that the judicial authorities shall have the
authority, unless this would be out of pro­
portion to the seriousness of the infringe­
ment, to order the infringer to inform the
right holder of the identity of third per­

sons involved in the production and distri­
bution of the infringing goods or services
and of their channels of distribution.52
Under this clause not only the burden of
proof lies on the alleged infringer, but also
he has to inform the identity of other
possible infringers and the burden of pro­
of lies on these third parties as well! This;
can result in a lot of mud-slinging and.
some parties- can become scapegoats ■
sometimes at the instance of the patent
holder, who may be a multinational witii ’
his own vested interests. In this context
one can broadly agree with the views of
Pravin Anand53 who says that “as
regards the burden of proof, it is the ex­
isting law of India that the plaintiff, in an
infringement action, would discharge his
preliminary burden by stating certain) ■
basic facts and the onus of establishing!
recipe details would be on the defendant I
who alone has special knowledge ofl
them”. We fee) that the plaintiff should)
produce basic evidence for the infringe-^
ment and a high penalty should be charg-l
ed on him in case his allegation proves to|
be false. The alleged infringer should also]
be asked to supply details before the case,
is decided. However this should be ap-:
plicable only for companies or producers
who market the product with the inten­
tion of earning profits and not on any
single individual (or research organisa­
tion) who may infringe with non-profit
motives like basic research. Otherwise an
extension of this principle to copyrights
in software will lead to undue difficulties
for individual users of software.purely for
research purposes. Again our view holds
good only for pharmaceutical sector and
need not necessarily hold good for other.
sectors like agriculture and software where
the situation is quite different and doubts
still exist as to whether the plaintiff
himself is an alleged infringer of the
technology which he might have modified.
This is because as said by Narasimhan “the
so-called ‘inventions’ always ride piggy-

Table 21: Share of Pharmaceutical Products in Total Sales of Selected MNCs
and Indian Pharmaceutical Companies
Name of the Company

Nature of
the Company

Gross Sales
(Rs Crore)

Alembic Chemical Works
Rallis India Ltd
Cyanamid India Ltd
Unichem Laboratories
Cipla
Ranbaxy Laboratories
Jayant Vitamins
Glaxo India Ltd
Pfizer Ltd
Eskaycf

Indian
Foreign
Foreign
Indian
Indian
Indian
Indian
Foreign
Foreign
Foreign

123.33
356.94
66.36
51.21
91.34
90.85
30.64
2089.14
692.80
432.27

Gross Sales of
Share of
Pharma­
Pharma­
ceuticals
ceuticals
in Total Sales
(Rs Crore)
(Per Cent)

106.34
60.00
31.24
42.91
73.50
75.14
30.64
160.89
77.21
58.10

86.22
16.81
47.08
83.7?
80.47
82.71
100.00
7.70
11.14
13.44

Source: For- gross sales: ISID database
For gross sales of pharmaceutical products: CM1E, Market and Market Share, 1989, 1991.

Economic and Political Weekly

May 22, 1993

back on-prior ideas and frequently not all
programming techniques are published,
but are transmitted by word of mouth, or
presentations at conferences, making it
difficult to identify the true inventor.54
The Dunkel Text says55 that no party is.
obliged to apply the provisions of the
agreement before the expiry of a general
period of one year following the date of
entry .into force of this agreement. They
are also entitled to delay for a further
period of four years from the date of applicatiom Thus all countries get a transi­
tion period of five years. Further the text
also says that the developing countries ex­
tending product patent protection to areas
of technology not hitherto protected can
get a further five-year period transition.
Thus total transition period for them ex­
tends to 10 years. Least developed coun­
tries can get a transition, period of II

years. However, in the course of the GATT
negotiations, the US is insisting on ‘ex­
clusive marketing rights’ for pharmaceuti­
cal and agro-chemical products. This is
called ‘pipeline protection’. Thus as.
observed by Jeroen van Wijk and Gerd
Junne.56 “In spite of transition period,'
patent applications may be filed for phar­
maceutical and agro-chemical products as
from the date of entry into force of the
agreement. These applications remain in
a ‘black box’ until the expiry of the tran­
sitional period. In respect of the products
covered by these applications, there will
be a five-year period of marketing ex­
clusivity after marketing approval, while
awaiting the delayed grant of the patent.
The exclusive marketing rights reduce the
transition period for the protection of the
pharmaceutical and agro-chemical pro­
ducts to zero”! Chidambaram5’ has

argued for a 10-year clean transition
period for countries like India without in­
trusion by what is called pipeline protec­
tion before they come under the new pa­
tent regime. He also quotes the example
of the issue of Multi-Fibre Agreement
(MFA) where “the advanced countries
want a 10-year transition and during that
period of 10 years the argument is back
loaded, the integration percentage are in­
adequate and the coverage is Sought to be
extended to products which are not under
coverage today”. China which has made
extensive reforms in its Patents regime,
however considers that pipeline protection
“does not conform with the principles of
territoriality and independence in respect
of the Paris convention. It will put the
technically backward developing countries
in disadvantageous circumstances”.58
While we hare no reason to argue against

Table 22: Profitability Ratios of Selected Indian and Foreign Affiliated Companies in Pharmaceuticals

1 8586
■ 8687
8788
2 8586
8687
8788
3 8586
8687
8788
4 8586
8687
8788
5 8586
8687
8788
6 8586
8687
8788
7 8586
8687
8788
1 8 8586
8687
8788
9 8586
8687
8788
10 8586
8687
8788
11 8586
8687
8788
12 8586
8687
8788
43 8586
8687
8788
14 8586
8687
8788
15 8586
8687
8788

Nature

Profits
Profits
to
to Gross
Networth
Sale

Alembic Chemical Works Co

Indian
Big

-9.54
11.67
3.32
15.71
18.76
15.53
14.39
7.69
10.06
8.57
6.74
5.28
24.78
14.69
15.12
64.39
43.63
12.54
4.66
11.63
8.63
14.18
14.56
18.75
14.73
13.58
14.70
18.51
5.84
2.25
19.15
18.27
4.89
9.63
2.50
1.45
10.25
— 4.7?
12.47
10.81
,-6*.55
6.00
23.84
29.70
26.59

Rallis India Ltd

Foreign
Big

Cyanamid India Ltd

Foreign
Big

Unichem Laboratories Ltd

Indian
Big

Ranbaxy Laboratories Ltd

Indian
Big

Jayant Vitamins Ltd

Indian
Big

Cipla

Indian
Big

JB Chemicals

Indian
Big

Glaxo Laboratories (1) Ltd

Foreign
Big

Hoechst India Ltd

Foreign
Big

Parke Davis & Co

Foreign
Big

Pfizer Ltd

Foreign
Big

German Remedies & Trading

Foreign
Big

Burroughs Wellcome

Foreign
Big

Eskayef Ltd

Foreign
Big

-2.58
3.27
0.81
1.78
2.09
2.11
4.60
2.37
3.55
2.39
1.81
1.33
4.89
2.56
2.63
14.73
9.15
3.44
1.39
3.61
2.59
2.80
3.05
3.66
4.22
3.66
3.54
4.17
2.38
0.80
3.49
3.41
0.95
4.42
1.08
0.57
1.86
-0.90
2.62
3.72
-2.00
1.69
7.18
9.47
9.36

Total
R Mate­ Dividend
PbT
PUT
PUT
Profits
rials
Per Cent
to Net Per Cent Per Cent Per Cent Import
Sale
(cif) Per Per Cent
Net
Sale
Networth Gross
Sale Cent Sale Sale
Sale

-9.35
-2:53
-2.73
3.27
3.46
11.67
1.00
0.85 - 4.09 ’
3.38
29.88
1.82
3.51
2.14
31.38
2.87
21.17
2.16
7.44
4.62
23.25
12.41
3.83
2.38
4.24
12.03
3.58
12.48
3.48
2.74
9.38
2.52
2.00
1.86
1.46
7.38
5.77
29.22
5.12
16.58
2.89
2.63
2.71
18.01 . 3.13
14.73
64.39
14.73
10.70
51.00
9.15
14.05
3.85
3.49
2.44
8.20
1.54
16.07
4.99
3.86
3.24
10.81
2.76
3.26
16.49
2.83
16.48
3.45
3.13
4.40
3.80
22.53
26.54
7.60
4.95
20.56
5.54
4.34
4.14
21.98
5.29
4.44
20.65
4.65
6.18
2.53
2.52
2.25
0.85
0.80
4.27
47.21
8.60
4.26
35.42
6.61
2.60
13.43
1.19
15.99
7.35
5.04
4.30
1.85
1.23
5.17
2.04
0.63
2.11
23.24
4.23
-1.01
-4.22
-0.90
2.96
14.76
3.10
22.27
4.21
7.67
.-2.18
-6.55
-2.00
6.88
1.78
1.94
11.47
68.63
20.66
51.48
15.03
16.41
43.87
15.07
15.45

-2.68
3.46
1.05
3.45
3.59
2.94
7.46
3.84
4.28
3.99
2.78
2.03
6.03
2.97
3.22
14.73
10.70
3.92
2.71
5.33
3.46
3.29
3.54
4.57
8.93
6.57
6.19
4.95.
2.67
0.85
10.53
827
3.28
8.36
2.11
2.26
4.78
-1.01
3.50
8.68
-2.18
2.04
33.03
26.05
24.86

5.70
3.00
4.12
4.86
4.21
4.56
5.39
3.37
4.12
3.43
3.86
3.77
23.65
25.74
21.00
0.83
5.60
1.79
5.90
6.05
6.11
6.26
5.26
5.50
2.52
1.47
1.32
6.88
12.22
9.63
2.72
2.31
2.58
3.22
2.94
2.83
9.31
14.03
9.49
7.10
10.06
9.47
2.50
2.31
3.13

5.36
2.72
3.98
3.19.
3.34
3.53
4.51
2.83
' 3.65
3.09
2.61
3.37
2.30
23.85
20.36
0.35
3.62
0.44
5.68
5.67
5.89
6.26
5.26
5.19
1.12
1.11
0.99
6.19
10.93
7.89
2.72
2.23
2.16
2.96
2.73
2.70
9.28
13.91
9.40
6.95
9.79
9.08
2.32
2.26
3.02

0.000
0.000
0.000
0.076
0.150
0.141
1.265
1.169
0.428
0.000
0.000
0.000
0.000
0.000
0.003
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.981
0.627
0.517
0.407
0.393
0.351
0.644
0.656
0.653
1.717
1.625
0.761
0.347
0.360
0.000
0.609
0.479
0.000
0.000
0.555
0.000

Source: Calculated by us from the data available at 1SID.

Economic and Political Weekly

May 22, 1993

1055

this view and while we are aware that the
question of “pipeline protection’ has not
even been mentioned in the original text
of Dunkel, there is also the fact that we
have nothing to fear in accepting pipeline
protection in pharmaceuticals as we have
seen that the effect of introducing product
patents in the case of pharmaceuticals in
India is not much and a five-year pipeline
protection will not make much of a dif­
ference in this regard especially when the
patents of most of the American drugs are
expected to expire in 1990-95, and the
Indian companies have already identified
their ‘target drugs’ and are on the process
of drawing up plans for an assault on the
US market when the patent concerned ex- ■
pires.” However we need not hurry in
this issue and can use it as a bait in our
negotiations to get the pipeline protection
granted to developed countries under
MFA removed or lessened.

Table 23: Total Value of Imports
ano Exports of Drugs and
Pharmaceuticals from
1973-74 TO 1988-89 AND 1989-90
(Value in Rs crore)
Year

Total
Imports

Tblal
Exports

TYade
Balance

1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
.1987-88
1988-89
1989-90

34.16
46.90
46.02
54.17
82.42
95.33
120.03
112.81
136.77
148.48
163.34
215.62
267.40
287.59
349.44
446.91
652.12

37.33
43.14
42.27
54.13
60.77
69.02
71.16
76.18
95.41
111.06
161.82
217.49
19437
222.95
289.69
467.60
856.90

3.17
-3.85
-3.75
-0.04
-21.65
-26.31
-48.87
-36.63
-41.36
-37.42
-1.52
1.87
-73.03
-64.64
-59.75
20.69
204.78

Sourer. I DMA Annual Report, 1992.

with the patent holder to charge some
There is the allegation against India
that not only do its patent laws violate
‘pardon-amount’ and allow the infringers
IPRs.but also that these laws are not pro­
to use the patented process or product of
perly implemented and consequently
popular drugs and medicines which have
countries like the US are incurring heavy
been copied on a wide scale.
losses. Since the then USTR Carla Hills
(3)
Confusing clauses in the law which
herself had said that granting product
make administration and implementation
patents will affect only 5 per cent of
of patents difficult have to be removed or
Indian drugs, the losses to the US are
modified e g as mentioned by Pravin
presumably not due to this factor. Then
Anand,62 “There are horrendous provi­
the implementation of the process patents
sions such as Section 43, by which an op­
which we have granted seems to be the
posed patent cannot be sealed in appeal
most important reason leading to the
even if the appellate court refuses to stay
alleged losses. But here also there is no
sealing. Thus in a case relating to Orissa
clear-cut picture, as people like Bhai
cement, even through the Delhi High
Mohan Singh® have said that American
Court refused to stay sealing, the con1
companies estimate losses from the very
trailer considered himself bound not to
basic stage and not the spin off stage. Fur­
seal and despite a provision in the act that
ther, as also pointed out by Bhai Mohan
the appeal should be heard within one
Singh61 “when the advanced countries
year, 12 out of the 14 years have already
like the US, Japan and EC countries were
gone by and the appeal is still pending”.
in the stage of development India is in
Similar cases may be found even in the
today, their laws and implementation were
pharmaceutical sector. Thus a serious at­
not any better, possibly worse’’. However,
tempt should be made to streamline the
there are certain aspects related to imple­
procedure of the Patents Act and the
mentation and administration that needs
working of the patent office to make the
to be attended to:
patent right a meaningful one.
(1)
The time between applying for a
(4)
While the list giving what are not
patents and granting the patent should be
inventions can be pruned as opined by
reduced. This is good from India’s point
Daruwalla63 certain conditions are not
of view as well, as, having decided to grant
needed e g, licensing of related patents64
patents, it is better to do it quickly, in
which says that “at any time after the seal­
order to get the benefit of the new tech­
ing of a patent any person who has the
nology quickly. So the administrative
right to work any other patented invention
machinery has to be geared up to meet the
either as a patehtor or as a licensee thereof
needs and a complete face lift has to be
may apply to the controller for the grant
given to rhe Patents Office and its work­
of a licence of the first mentioned patent
ing. In fact, the highest office sanctioning
on the ground that he is prevented or
hindered without such licence from work­
transfer of technology to India seems even
to lack in giving a semblance of the latest
ing the other invention efficiently or to the
technology and expertise which it is help­
best advantage possible”. These issues
ing to transfer to India.
should be settled before sealing the patent.
(2)
In the case of wide scale infringe­ Moreover the aggrieved parties can lodge
ment of the patents granted, while the
the complaint before the patent is sealed
government should take action and even
within a given stipulated time.
co-operate with the patent holder in bring­
Thus the Patents Act has to be carefully
ing the infringer to book, wherever possi­
modified to make its implementation and
ble, the government should also negotiate
administration smoother and efficient.

Table 24: Frequency Table of the Years Taken for Patent Applications to Become Fructuous
Years
Taken

Franc**
UK
USA
W Germany
1970- 1980- 1970- 1980- 1970- 1980- 1970- 198079
88
88
79
79
88
79
88

0 .

26
211
461
723
178
50
5
j
30
0
2
2
0
1

2
3
5
6..

8
10
II
12
13

.

8
85
5
533
35 1214
343 1482
499
602
85 . 186
g
8
1
13
0
16
0
41
0
22
0
4
0
0
0
0

2
25
233
1267
1662
237
30
£
4
0
0
0
0
0

27
261
620
678
283
85
5
0
31
0
0
0
0
0

I
6
104
555
589
58
2
1
0
0
0
0
0
0

14
80
229
252
124
39
2
2
20
I
6
0
0
0

10
■2
24
247
409
42
6

0
0
0
0
0
0

Japan
India
Other DCs Other LDCs
1970- 1980- 1970- 1980- 1970- 1980- 1970- 198088
79
88
88
79
79
88
79
14
70
186
198
86
22
0
0
0
o^0
0
0

0
9
59
265
258
22
3
0
0
0
0
0.
0
0

51
686
1445
1979
466
128
6

5
2
3
1
0
0

5
39
355
1319
1164
167
22
10
0
0
0
0
0
0

44
294
734
951
402
108
• 5
4
.30
13
2
0
0
0

0
9
107
687
883
111
0
0
0
0
0
0
0

10
106
236
221
79
21
3
2
0
2
0
0
0
0

0
2
35
132
135
28
0
0
0
0
0
0
0
0

1970- 198079
88
1
55
147
162
55
9
0
0
0
0
0
0
0
0

0

37
160
85
10
0
0
0
0
0
0
0
0

Sourer. Calculated by us from the 1SID data base.
1056

Economic and Political Weekly

May 22, 1993

Other Issues
Statement: Comparative Loss-Benefit Analysis for Indian Pharmaceittical Industry
in Joining Paris Convention
Some other issues can be listed below:
(1)
Whether negotiations should take Indian Patents Act Advantages
Paris Convention Disadvantages
place under the auspices of GATT or
WIPO.
To People of India
No product patent on drugs, foods etc, 1
Patented products can be imported except
(2)
Whether unilateral action can be 1
at exorbitant monopoly prices.
and hence can be available at lower costs.
allowed.
Revocation of patents in public interest. 2
Patented products cannot be produced in
(3)
Whether India should join the Paris 2
Government
can
ensure indigenous
the
country except with the premission
convention.
production in public interest.
(licence) from the patentee (exorbitant
WIPO vs GATT. This was an impor­
cost).
tant, issue when the TRIPS negotiations
3
Rigorous provisions of compulsory
were beginning. But now even those peo­
licensing.
ple who have advocated that negotiations
4
Power to government to use inventions
should take place under WIPO seem to
(for people).
5
Government can import patented drugs
have lost interest in pursuing their idea.
(public use).
While WIPO is considered to represent
the interests of developing countries and
GATT those of advanced countries there
is no need to make much of a fuss on this
issue now and the negotiations can be
completed under the GATT.
Unilateral Action: The US has been
resorting to unilateral action by involving
the Special 301 provisions of its trade act
hand have targeted many countries includ­
ing India for alleged shortcomings in their
IPP legislations. The Special 301 provisions require the USTR to negotiate speci­
fically on IPP with countries whose IPP6
standards are prejudicial to American
trade interests. This unilateral action is
taken side-by-side with the pressure ap­
plied in the multilateral negotiations
under GATT. In fact the US is threatening
to link the issue, of IPRs with .GSP
(General Scheme of Preferences). We are
of the opinion that no country should be
allowed to follow such unilateral actions
while negotiations under the multilateral
forum of GATT are underway. The ques­
tion of unilateral actions should come
only if GATT talks fail. Of course the
GATT negotiations should be completed
speedily and successfully to avoid such
embarrassments. This needs a positive
outlook and sincere effort on the part
|pf both the developed and developing
"countries.

Joining the Paris Convention: There are
people who feel that ’it is high time that
India became a member of the Paris con­
vention of 1883 as a lot of foreign tech­
nology is accidentally lost, as owners har­
bouring a wrong impression do not apply
in India prior to publication and by the
time the fact is discovered, it is too late’.65
But there is also great opposition by
economists in India joining this conven­
tion. The disadvantages for India in join­
ing the Paris convention and the advan­
tage of the Indian Patents Act has been
summarised by Mehrotra66 and has been
given in the Statement.
'
While some of the disadvantages in the
list mentioned, above can no longer be
considered as disadvantages, in the light
of our study, there qre some disadvantages.

Economic and Political Weekly

To Industrial Development
1
Drugs not being under patent can be
indigenously produced.

Compulsory licensing; revocation of
patent in public interest; power of govern­
ment to use invention—even licence to third
panics—indigenous production.
3
Can import drugs/tcchnology for
indigenous production from wherever
available (cheaper).
4
Can also export technology/patented
products to non-PC countries.
... <

2

1 Compulsory licensing very
difficult and hence monopoly market
of MNCs.
2 Effective protection against unfairf?) com­
petition by indigenous industry (helps
maintain monopoly of MNCs)

3 Cannot obtain technology except under
lincence from patentee (exorbitant cost).
4 Can’t export patented products/technology.

5 Can’t import patented bulk/technology.
6 Difficult to break blocking/comprehensive
repetitive patents.
and T Development
Scientists can patent incremental
innovations/inveritions.
2
Indian scientists can still continue to
obtain patents anywhere in the world
and get same rights available to others.
3
Because of bilateral agreements and
membership of WIPO, etc, can still get
all infomation on patents.
S
1

1 Indian scientists can t patent because of (6)
above.
2 Restriction in industrial/technological
development’ doesn’t provide climate for
further S and T development.

Source: Mehrotra N N: ‘Patents Act and Technological Self-Reliance: The Indian Pharmaceutical
Industry’, Economic and Political Weekly, Vol 24, No 19, May 13, 1989, p 1063.

like the difficulty irf break blocking/com
prehensive repetitive patents which al^6
hinders the development of S and T.
Besides, the issue of joining the Paris con­
vention can be decided only after making
sector-specific studies of other sectors.
Moreover if the reforms suggested by us
are followed, then the question of join­
ing the Paris convention will be less im­
portant from the point of the pharma­
ceutical sector.

V
Conclusion
In this paper we have made the follow­
ings facts clear:
(1) India’s dependency for technology
on the US in particular and the developed
countries in general has been increasing.
(2) In the pharmaceutical sector, India
is quite competitive and the prices will be
affected mainly due to decontrol of prices
rather than introducing product patents.

May 22, 1993

(3)
While there is no need to fear gran­
ting product patents by India in the phar­
maceutical sector, considering imports as
tantamount to working patents cannot be
accepted; duration of patents can be left
for mutual bargaining and pipeline pro­
tection can be used as a bait for cancell­
ing or reducing pipeline protection of
developed countries in sectors like textiles.
(4)
The administration of the patents
has to be streamlined and ftttents Act has
to be modified.
(5)
While unilateral action by the US
should be discouraged when. the
multilateral negotiation are making head­
way, joining the Paris convention is not
an importar t issue from the point of view
of the pharmaceutical sector if the
measures suggested by us are accepted.
(6)
Greater importance to R and D and
substituting non-patented drugs for
patented drugs are called for in the phar­
maceutical sector.
In conclusion we can say that the

1057

’

•patents regime has to be strengthened on
the lines suggested by us to promote
greater transfer of technology and join the
process of international harmonisation
without foresaking India's interests.
Sector-specific studies for other sectors are
the need of the hour.

Keayla 8 K, ‘Chemical-based Industries— 35
See: ‘As MNCs Pale the Locals Glow’ in
Fortune India, April I to 15, 1993, p 8.
Drugs and Pharmaceuticals and Pesti­
cides—Foreign Pressure for Changing the
36
See: Indian Express. April 24. 1993, d 14.
Indian Patents Act, 1970’ in National Work­ ■ 37 Prasad Ashok Chandra H: ‘Services in the
ing group on Patent Laws, Proceeding
Development Context’, IDS Discussion
of National Conference on Scientists on
Paper No 305, IDS, University of Sussex,
Science, Technology and Patents. December
England.
4, 1989.
38
Sec: ‘Emerging Trends in Bulk Drug
14
IDMA-OPPI: op cit, p II.
Industry. A Response Review’, Economic
Notes
15
World Bank: The World Bank Annual
Times, April 8, 1993.
[Our sincere thanks to S K Goyal, Chalapati
Report 1991, p 118.
39
For a detailed discussion on these issues sec:
Rao and other members of the ISID and
16
Staff correspondent of Business Standard:
Jeroen Vann Wijk and Gerd Junne: op cit,
Gopalkrishna Thdas of RIS, for their help and
‘Drug Patents to Have Greater Impact on
and C Niranjan Rao: ‘Trade Related Aspect
suggestions. But the responsibility for any
Prices than Feared’, Business Standard,
of Intellectual Property Rights Question of
errors is ours and the views expressed are our
April 26, 1992.
Patents’ Economic and Political Weekly,
personal views which need not necessarily
Vol 24, No 19, May 13, 1989, pp. 1053-57.
17
I DM A: Intellectual Property Rights and Pa­
reflect the views of the ISID.J
40
Pravin Anand, Protecting Your Clients In­
tent Protection, (mimeo) February 4, 1992.
1 For a detailed and latest discussion on tnese
tellectual Property Rights in India, EXPO
18
Answer to Question No 235 in the Rajya
aspects see: Jeroen Van Wijk and Gerd
93 (February 6-8, 1993), New Delhi.
Sabha by the . minister of state in the''
Junne: Intellectual Property Protection of
41
Niranjan
C Rao, op cit, p 1055.
ministries of chemicals and fertilisers,
Advanced Technology, October 1992
Government of India, dated March 3, 1992. ' 42 See: GATT: GATT Committee on
(mimeo).
Multilateral TYqde Negotiations: Uruguay
19
IDMA: mimeo (made available to us by
2 See: Department of Science and Techno­
Round: Documents, MTN, TNE/W/FA,
IDMA, New Delhi), January 13, 1993.
logy, Government of India: R and D
Deceipbcr 20, 199k (Dunkel Committee
20
See: Rane Wishvas: ‘Rising Drug Prices’,
Statistics 1990, p yijt
Report),_p 73.
Economic and Political Weekly, April 17,
3
Griliches,* Z has argued that ‘showing that
43
Sec: Chandra Mohan N, ‘IPR Irresistible
1993, pp 743-46.
patent statistics arc a good indicator of in­
Force, Movable Object’, Economic Times',
21
See: Emerging Trends in Bulk Drug In­
puts into inventive activity is a useful ac­
September 25, 1991.
dustry, Economic Times, April 8, 1993.
complishment on its own merit. It allows
44
Chidambaram
P, ‘India and Dunkel', Hin­
22
Mitra Sisir: Cheaper Drugs for the Com
us an insight into what is going on in more
dustan Times, March 18, 1993.
mon Man, Booklet published by OPPI,
areas and also in much more detail than is
45
Ibid.
p 9-10.
possible to glimpse from the available
Jeroen Van Wijk and Gerd Junne, op cit,
23
Planning Commission, Government of 46
R and D statistics’. Sec: Griliches, Z, ‘Patent
P31.
India: Eighth Five Year Plan 1992-97, Vol I,
Statistics as Economic Indicators: A
47
Ibid, p 33.
p31.
Survey’, Journal of Economic Literature,
48
Chidambaram, op cit.
24
IDMA-OPPI: op cit, p 10.
Vol 28, December 1990, pp 1661-1707.
49
Jeroen Van Wijk and Gerd Junne, op cit,
Mitra Sisir: op cit; p 8. ‘
4
This table is based on the figures given by 25
P34.
26
IDMA-OPPI: op cit, p 31(a)
department of science and technology,
50
See: Jeroen Van Wijk and Gerd Junne,
Centre for Monitoring Indian Economy
27
government of India.
op cit, pp 38-39.(CMIE)! Market and Market Shares for
5
See: Financial Express, April 23, 1993.
51
Chidambaram, op cit.
over
350
Industrial
Products/Product
6
Sec: Government of India, department of
52
GATT, op cit, p 79.
Groups,.February 1991, p xi.
science and technology: Pocket Data Book
53
Pravin Anand, op cit, p 3.
28
Controller General of Patents, Designsand 54
1989, p 81.
See: Ramachandran R: ‘Scientist Cautions
Trade-Markets: Patents EighteenthAnnual
7
See: (a) N N Mehrotra: ‘Patents Act and
against Signing Dunkel Draft on TRIPS’,
Report 1989-90, p 5.
Technological Self-Reliance: The Indian ’
Economic Times, January 6, 1993.
29
Sec: CM IE, op cit.
Pharmaceutical Industry’, Economic and
55
See: GATT op cit, p 86.
30
Sec: Annual Reports of Controller General 56
.Political Weekly, May 13, 1989.
Jeroen Van Wijk and Gerd Junne: op cit,
of Patents, Designs and Trade Marks,
- (b) Agarwal P S, P K Ramachandra, B V
p 52.
Government of India.
Rangarao, ‘Anomalies in Drug Prices and
57
Chidambaram: op cit.’
31
Annual
Reports
of
Controller
General
of
Quality Control’ Economic and Political
58
Sec: Li Yue: Chinese Potent Law—The Pa­
Patents, Designs and Trade Marks.
Weekly. Vol 7, Nos 46 and 47, 1972.
tent Aspects of the Trade Related Aspects
32
Set; for example: Abrol Dinesh and Amitava
8
Ibid.
of Intellectual Property Rights Negotiations
Guha, ‘Production and Price Controls: .The .
9
§ee: Patel D S, ‘World’S Envy India’s Pride*
of GATT and the Revision of the Chinese
Achilles’ Heel of National Drug Policy’ in
Indian Express, special supplement.
Patent Law, Extracts of the Presentation
Amit Sen Gupta (ed)r Drug Industry and
March 30, 1993, p 4.
made at the ‘International Convention on
the Indian People, p 161.
10
Mehrotra N N, ‘Patents Act and
People’s Approach to GATT Negotiations’,
Technological Self-Reliance: The Indian
33
For Profitability to net worth'ratios in other
National Workers Group on Patent- Laws,
Pharmaceutical Industry’ Economic and
■ sectors see:
February 19, 1993, New Delhi.
Political Weekly, Volume 24, No 19,
(i) Reserve Bank of India: ‘Finance of large
59
Sec: ‘Pick Ypur Targets’ in Murthy R C and
May 13, 1989, p 1063.
Public Limited Companies 1990-91’ RB!
Dasgupta Arundhuti: ‘A Patent Abuse’,
11
Shobha Ahuja gives RCAs anti RCDs for
Bulletin, December 1992.
Business Standard, May 26, 1991.
the pharmaceutical sector using only the
. (ii) RBI, ‘Finances of Foreign Controlled
60
Bhai Mohan Singh: ‘All Drug Patents.
market share approach (see: Ahuja Shobha:
Rupe? Companies 1988-89’ RBI Bulletin,
Should Be Worked in the Country’, Sunday
‘Potential for Generating Mutually Bene­
November 1992.
Observer, November 7, 1991, p 48, Ibid.
ficial Trade Flows between India and Pacific
(iii) —, ‘Finances of Public Limited Com­
61
Ibid.
panies 1989-90’, RBI Bulletin, November
Rim based on Revealed Comparative Advan­
62
Pravin /\nand, op cit, p 2.
1992.
tage*, Foreign Trade Review, Vol XXVI,
63
Daruwalla T N: ‘Intellectual Property
34
In the recent budget, the drugs and
Rights in India—Protection and Enforce­
No 4, January-March 1992, pp 271-96). But
the Bela Balassa approach is considered to
medicines sector have received both excise
ment’ in the Bombay Incorporated Law
duty exemptions (to the lune of Rs 581 lakh)
be better than the market share approach
Society: Doing Business in India, p 79,.
(see: Fernando de Mateo: 'Tadc in Services
and, customs duties exemptions (the exact
Bombay,
64
Government of India: Indian Patent Act
break up of which is not available to us at
and the Developing Countries’ in
• present). These changes arc likely to lead
1970, Section 96. Chapter XVI.
UNCTAD: Services and Development
' to a marginal fall in drug prices as almost
65
Pravin Anand, op cit, p 2-3.
Potential: The Indian Context, 1989,
all companies have decided io pass on the
pp 56-58.
66
Mehrotra N N: ‘Patents and Technological
benefits of excise reduction to consumers
12
See IDMA-OPPI: Pharmaceutical Industry:
Self-Reliance: The Indian Pharmaceutical
Current Status and Problems, May 1990,
(see: ‘Marginal Fall in All Drug Prices Like­
Industries’, Economic and Political Weekly,
ly’, Financial Express, March 19, 1993, p 12.
p 30.
May 13, 1989, Vol 24, No 19, p 1063.

W58

13

Economic and Political Weekly

May 22, 1993

Thus, most developed countries during their industrialisation phase had provisions
in their patent laws similar to those in the Indian Patent Act, 1970, so why this pressure
on us to change.'

4.2.1

Inequity between developed and developing countries in regard to patent protection:
In 1988, out of about 3.5 million live patents in the world less than 1% (about

3 0,000) were held by citizens of developing countries. And out of these 3.5 million patents,
less than 5% are likely to be commercialised in the developing countries; the restare

there just to block and prevent others from using this knowledge. In India, between 1947

and 1957, 1704 patents were granted for drugs and pharmaceuticals out of which almost
95% were held by foreign citizens and not even 1% of there were commercialised in
India. Thus, for developing countries the patent system is a very unequal relationship

and special provisions have to be made to protect national interest.

4.3 The Indian Drugs & Pharmaceuticals Industry

In view of the great social importance of the pharmaceutical industry, as it makes
available essential drugs and medicines needed for health care, the Indian Patents Act,
1970 has special provisions for this industry which include:
* Product patents not patentable;
* Term of process patents limited to 7 years from the date of filing or 5 years

from the date of sealing of patents;
* Licence of right and compulsory licencing.

4.3.1

Present status: These provisions have been important factors in the phenomenal

growth of the industry in the post-197 0 period, which is depicted in Table 1.
Table 1: Growth of Indian pharmaceutical industry
1970
1500
2500
500
230
97.5
a)
Formulations
72.2
b)
Bulk Drugs
25.3
c)
As X of production
40
d)
Some developed countries to which exported: USSR, USA, W.Germany,
UK, France, Japan. A number of Indian companies approved by F.D.A.,
USA for imports into USA.
5. Research 4 Development: a) Expenditure
40

1. Investment
2. Production: a) Formulation
b) Bulk Drugs
3. Imports

Dept, of Science 4 Technology.

(Rs. in million)
1988
8000
26900
5300
3490
4000
1570
2430
150

500

The achievements of the industry may be summed up as follows:
* Practically self-sufficient in formulation production with no import allowed or
necessary except for some very recently introduced life-saving drugs;
* Around 65-7 0St> of bulk drugs are indigenously made, exports of both of bulk drugs
and formulations have increased sharply, imports have also gone up but a sizable
portion of these are export related; export is to both developed and developing
countries;

* Self-reliant technology base established, hence new drugs introduced abroad made
available in India in
years by local production at affordable prices; in fact
prices of recent drugs in India are amongst the lowest in the world (Table 2).

Table 2: Comparative Drug Prices (1988)
(Wholesale price in Ind. Rs.per pack of 10’s)

Allopurinol
Atenolol
Cimetidine
Captopril
Diltiazem
Haloperidol
Mebendazole
Naproxen
Nifedipine
Piroxicam
Ranitidine
4.3.2

100 mg
100 mg
200 mg

60 mg
6x100 mg
250 mg
10 mg
6x20 mg

India
5.84
11.29
6.77
15.65
15.26
13.58
4.88
12.76
3.82
7.20
16.15

Competitive character of the industry
Due to great pressure for process innovation and modification the industry has

become highly competitive. A number of processes developed by it are novel, but on
account of the short term of patent protection allowed in India patents have not been
filed for all of them. Processes, for which patents have been filed in India, Europe and
U.S.A, include: amitriptyline, catapress, ciprofloxacin, colchicine, doxycycline, indomethacin,
norfloxacin, ranitidine.

The competitive character of the industry is also .shown by the lower prices of

most of the recently introduced drugs which are now manufactured in India as compared
to international prices (Table 2) and the short time-lag of 3-4 years between introduc­

tion of a drug abroad and its indigenous manufacture.
4.3.3

Self-reliant technology base: The Indian industry has been able to establish a strong

self-reliant process technology base (particularly for synthetic drugs and phyto-therapeutics)

and is able to manufacture and market drugs requiring multi-step synthesis/isolation from
basic stages by new innovative processes. Indian industry has introduced around SO new
bulk drugs, some of which are very recent discoveries, whose patents are still valid and

hence required development of alternative more processes. Out of a total of about 5 00

PEOPLE’S DEMOCRACY JUNE 6, 1999

Drug Price Decontrol On Anvil
1987. Any further dilution
TABLE2
would mean virtual abandon­
ment of price controls. If the gov­
International
Cost
Comparison of Drugs
ernment is to consider this, un­
HE ministry of chemi­ der the garb of encouraging
cals has constituted a R&D, it will only substantiate
committee to consider changes earlier fears that a change in the
Drug
Canada UK
India
in the Drug Price Control Order patent act can only lead to a spi­
(DPCO) of 1995. It may be re­ ralling rise in drug prices.
Amoxycillin
called that in 1995 the number
1.75
2.59
2.89
Today investment in R&D
of drugs whose prices were con­ in the drug industry amounts to
Ampicillin
2.42
1:75
3.18
trolled by the government had even less than two per cent of
Erythromycin
' 1.25
2.87
3.28
been slashed from 166 to 74. This sales. A dubious logic has been
Cephalexin
7.74
3.00
4.46
led to an immediate spiral in put forward that price controls
Propanolol
1.25
1.39
0.25
—
drug prices. The new move is have led to this situation. In the
Atenolol
2.65
1.29
designed to further slash price past decade the span of price
Prednisolone
1.32
1.50
1.09
controls and thereby allow controls has come down from
Paracetamol
0.32
1.25
0.49
higher returns to drug compa­ over 60 per cent of the industry's
Haloperidol
0.13
1.60
0.55
nies. In fact a few months back, turnover to around'30 per cent.
Phenobarbitone
0.25
0.28
0.5
Vijay Kelkar, finance secretary, If reduction in price controls is
had commented that not more to spur R&D activity, why has
Source: British Columbia Children’s Hospital Formulary, British
than 15 drugs should be kept there been no rise in R&D ex­
National Formulary, No. 35, March 1998; MIMS India, March 1998
under price control. These are penditure in the past decade? It
(prices are in Indian rupees).
not isolated events but con­ may be recalled that the 1995
stitute a chain of policy inter­ policy had a provision for keep­ prices of different brands of the in drug prices do not appear to
ventions that are designed to ing all drugs developed by in­ same drug, i e different compa­ be the determining factor in the
remove all controls over the digenous R&D outside price nies are charging different prices "marketability" of a drug.
Unlike in the case of con­
pharmaceutical industry.
controls for ten years. This too for the same drug. This is true
SPURIOUS LOGIC OF
does not seem to have spurred for most drugs, both under price sumer goods, there is no direct
R&D INVESTMENT
any significant R&D activity in control and outside price con­ relation between the drug mar­
When legitimate concerns the industry. The issue of price trol. Further, the top selling ket and consumers. Drugs are
were raised that an amendment controls have nothing to do with brand of a particular drug is not purchased by consumers on the
of the Indian patents act would infrastructure development for the cheapest brand. In fact,' in advice of doctors or chemists.
result in rise in drug prices, the R&D, and the two issues need most cases, the top selling brand Consequently, the marketing
ministry of chemicals and to be dealt separately. It appears is one of the most expensive of strategies of drug companies
fertilisers consistently claimed as though the issue of R&D is the brands available (Table 1). target doctors or chemists. Doc­
that any rise in prices would be being used as a "red herring" Top selling brands like Cifran, tors are not known to take deci­
kept in check through mecha­ by drug companies to lobby for Jbjorflox and R-Cin cost respec­ sions based on price of contend­
nisms provided in the DPCO. It price decontrol and thereby li­ tively 100.12,128.93 and 163.52 ing brands. Similarly, chemists
per cent more than the cheapest have no interest in selling
is amazing that barely three cence to profiteer.
brands of the same drug. If a cheaper brands. Rather, drug
months after amendments MYTH OF MARKET
large number of companies are sales are dependant on market­
made in the patents act, there COMPETITION
should be talk of diluting price
The government now able to sell the same product at ing networks of companies who
controls. The spurious logic that claims that there is sufficient varying prices in the market/the are able to manipulate the pre­
is now being offered is that drug competition in the market in the crucial factor that determines scribing habits of doctors.
An analysis of the prices of
companies have to be offered case of most drugs, and this their ability to sell their product
higher profit margins in order shall prevent drug prices from is obviously not the price of the 50 top selling drugs, in the pe­
to allow them to make invest­ going up. To make an estimate drug. The DPCO 1995 had ex­ riod February 1996 to October
ments in research and develop­ of the effectivity or otherwise of empted all those drugs from 1998, shows that the price in­
ment (R&D).
price controls under the DPCO price control in whose cases crease for brands under price
Price controls have already of 1995, an analysis of drug there was no monopoly in pro­ control is negligible while it is
been diluted in the past decade prices of top selling brands is duction. The underlying logic of about 16 per cent for those out­
and only 30 per cent of the turn­ presented here. A perusal of the this exemption was that compe­ side price control. The period
over of the industry is under results of this analysis would tition in the market would not mentioned above was taken as
price control — down from reveal the following broad allow unrestricted rise of drug the reference period to allow for
prices. However, the above any price escalation that may
about 60 per cent before 1995 trends.
and almost 85 per cent before
There is a wide variation in analysis shows that variations have occurred as an impact of
the new DPCO since January
1995. In the one year period
TABLEI
January 1995 to January 1996),
prices of almost all drugs went
up
substantially as’ a conse­
Relative Cost of Top Selling Brands
quence of increased mark-up
and
of many drug prices being
Brand
Drug
Company
Price in
Variation
Name
Nov 1997
decontrolled. Thus the price in­
from Lowest
crease that we see after January
Price (%)
1996 is the kind of continuous
SEPTRAN
Co-Trimoxazole
WELLCOME
7.72
increase one might expect to see
14.88
Ciprofloxacin
RANBAXY
CIFRAN
50.43
100.12
in the coming years. The in­
Erythromycin
ALTHROCIN
ALEMBIC
35.69
35.04
creases are thus not one-time
Ibuprofen
KNOLL
BRUFEN
6.76
4.32
price escalations but indicative
Ranitidine
ZINETAC
GLAXO
17.39
0.12
of the trends one might expect
Norfloxacin
NORFLOX
CDPLA
47.00
128.93
in drug prices.
Rifampicin
LUPIN
R-CIN
64.43
163.52
HIGHER DRUG
Cephalexin
SPORIDEX
RANBAXY
113.00
35.90
PRICES IN INDIA
There is a prevailing myth
Source: MIMS, Nov.1997
that drug prices in India are

Amit Sen Gupta

T

1

SCIENCE AND
DEVELOPMENT
ISSUES
among the lowest in the world.
This is at best a partial truth.
Drugs which are still patent
protected are much cheaper in
India due to India's earlier
patent act. It should be obvious
that we have lost this advantage
after amendment of the Indian
patent act of 1970. But off-patent
drugs (which anyway account
for 80-85 per cent of current
sales in the country) are not nec­
essarily cheaper in India. In
fact, generally, drug prices for
these drugs are higher in India
than those in Sri Lanka and
Bangladesh. In fact, as Table 2
shows, prices of some top sell­
ing drugs are higher in India
than those in Canada and the
UK. This clearly shows that the
benefits of the advantage that
the Indian pharmaceutical in­
dustry enjoys over all other third
world nations, in terms of the
availability of indigenous tech­
nology and a' large domestic
market, have not been passed on
to the consumers.
GLOBAL
TRENDS
Controls on drug prices are
exercised much more effectively
in many market economy coun­
tries. In spite of strong patent
protection, there are effective
measures in place that allow
regulation of drug prices. In
Australia since 1993, new drugs
with no advantage over existing
products are offered at the same
price. Where clinical trials show
superiority, incremental cost ef­
fectiveness is assessed to deter­
mine whether a product repre­
sents value for money at the
price sought. In Britain, the
House of Commons health com­
mittee has recommended that
the criterion of comparative cost
effectiveness (as is in vogue in
Australia) should be adopted by
the National Health Scheme
(NHS) before it agrees to pay for
new drugs.
Globally, drug companies
are being forced to reduce the
cost of medicines. Pressure is
being mounted by health insur­
ance companies, health man­
agement organisations and gov­
ernments (in countries like UK
and Canada where the state
provides health insurance
cover) all over Europe and North
America. These pressures have
become stronger in recent years
with the
realisation that spiralling
drug costs are making health in­
surance cover (whether state
funded or privately managed)
unsustainable. While this is the
direction in which price con­
trols are moving even in devel­
oped market economy countries,
our government is trying to
(On Page 14)

Science—
(From Page 7)

argue that market competition
will keep drug prices stable.
LICENSE TO
PROFITEER
At present price control is the
only real regulatory mechanism
in drug industry; all other regu­
latory mechanisms that were
designed to channelise produc­
tion of drugs in priority areas
have been abandoned under the
garb of liberalisation. But price
control alone, through the me­
dium of the DPCO, cannot mean­
ingfully achieve the objectives
laid out in the drug policy. Other
regulatory mechanisms which
lay emphasis on control of irra­
tional products and availability
of essential drugs are required.
In their absence in India there
has been a massive proliferation
of dubious drugs in the market.
Apart from price fixation, a large
number of drugs has adverse

consequences for all monitoring
mechanisms related to quality
control, adverse drug reaction
monitoring, etc.
The present move of the ministry of chemicals and fertilisers
must not go unchallenged.
Those who require medicines
most are least likely to be able to
pay for them. We already have a
situation where a major section
of our population is "costed
out" of the market. They cannot
afford necessary medicines
even if they are available. If price
controls are further diluted this
will only add to the monopoly
loot being perpetrated by drug
companies. These companies
have some of the healthiest balance sheets, and their profitability has been rising. Further license to these companies to
profiteer can only be provided
at the expense of the health security of millions of people.

,
i
(
|
,
<
,
<
,
r
t
c
a
c
jj
a
t
a
c
u

b
c.

Biodiversity, Intellectual Property Rights,
. and GATT Agreement
How to Address the Conflicts?
Ashish Kothari
R V Anuradha

This paper examines the impact of Intellectual Property Rights (IPR) on biodiversity in general and specifically
on the objectives of the Convention on Biological Diversity (CBD). It also addresses the broader issue of the
relationship between the GATT/WTO Agreement and the CBD. It then reflects on the choices available to ensure
that the objectives of the CBD are not undermined.
DECISION 11/12 of the Second Conference
of the Parties' to the. Convention on
Biological Diversity (CBD), requested the
CBD Secretariat to:
- undertake a preliminary study which
analyses the impact of intellectual property
rights (IPR) systems on the conservation
and sustainable use of biological diversity
and the equitable sharing of benefits derived
from its use;
- liase with the Secretariat of the World
Trade Organisation (WTO) to inform it of
the goals and the ongoing work of the CBD;
- invite the Secretariat of the WTO to assist
in preparing a paper for the Conference of
Parties (COP) that identifies the synergies
and relationship between the objectives of
the CBD and the TRIPS agreement.
The decisions at the Third Conference of
Parties carry forward the concerns reflected
at COP2 on the inter-linkages between IPR
issues and trade liberalisation on the one hand,
and the objectives of the CBD on the other:
- Decision L 18 of the Third Conference
of Parties2 draws attention to the need for
conducting case studies of the impacts of
IPRs on the achievement of the CBD’s
objectives, including relationships between
IPRs and the and the knowledge, practices
and innovations of indigenous and local
communities relevant to the conservation
and sustainableuseofbiodiversity.lt further
recognises the need for work required to
help develop a common appreciation of the
relationship between IPRs and the TRIPS
agreement and the CBD. in particular on
technology transfer and on the three-fold
objectives of the CBD, viz, conservation
and sustainable use of biodiversity and the
equitable sharing of benefits arising from
such use.
- Decision L 12 further states that the WTO
through the Committee on Trade and
Environment (CT E), should consider a better
appreciation of the relationship between
trade and agricultural biodiversity, and
collaborate with the CBD?
- Decision L 8 emphasises, on the need
for co-operation between the CBD pro-

2814

IPRs on biological resources and related
technologies/ knowledge arejustified much
as industrial invention IPRs are: that they
stimulate innovation by giving recognition
and rewards to inventors, that they encourage
investments in research, and that they make
possible the eventual disclosure and
dissemination of related knowledge.
Whether or not these goals are met is
however debatable, for the evidence that the
lure of private profits is the only or even
the most effective motivation for innovation
is by no means conclusive. For instance, the
development of hundreds of thousands of
varieties of rice by farmers in Asia, through
selection, on-farm breeding and cross­
breeding, had little to do with private
monetary profit; at another level, the public
sector seed breeding agencies in many
countries (for example, the Indian
Agricultural Research Institute) have done
considerable work motivated by the spirit
of public welfare. A recent study evaluating
the Plant Patents Act (PPA) of the US
concludes that the act has neither helped
breeding as a profession nor stimulated
species, genetic or even market diversi­
Intellectual Property Rights and CBD
fication? Moreover, even if it is true that
in an increasingly monetised world,
IPRs, as the term suggests, are meant to
'
personal profits are a powerful incentive,
be rights to thoughts, ideas, and information,
IPRs on life forms have serious ethical,
especially regarding new inventions and
social, economic, and ecological impli­
processes. The manner in which they are
cations which need to be addressed.
sought to be realised is by enabling an
For the purposes of our discussion, it
inventor to exclude imitators from the
market for a specified time. The effect of would be useful to keep in view the three­
fold objectives of the CBD, viz, (1)
IPRs therefore is monopoly over com­
conservationof
biodiversity, (2) sustainable
mercial exploitation The stated purpose of
use of its components, biological diversity
such rights is to stimulate industrial
and the equitable sharing of the benefits
innovation, by offering higher returns
derived from its use. Our contention is that
(profits) than the market would normally
IPRs would have impacts on each of these
offer. In its practical application therefore,
objectives. An examination of these i mpacts
the effect of IPRs is the commodification
is necessary to determine whether current
of its subject matter. Copyrights, patents,
IPR systems run counter to the objectives
and trademarks are commonly known
of the CBD, and thereby invoke Article
IPRs. While such IPRs are several centuries
16(5) of the CBD. At the outset we would
old, their extension to living beings and
like to point out that this paper does not seek
related technologies is a recent pheno­
to outright dismiss the notion of IPRs. The
menon, and one which has evoked
case we are trying to make, however, is that
considerable controversy.

cessand the WTO with regard to the
inter-linkages between Article 15 on access
to genetic resources and the TRIPS
agreement?
This paper has been prepared in view of
these decisions. It examines the impact of
IPR on biodiversity in general and
specifically on the objectives of the CBD.
It also addresses the broader issue of the
relationship between the GATT/WTO
agreement and the CBD. It then reflects on
the choices available to ensure that the
objectives of the CBD are not undermined.
Though the larger issue of relationship and
potential conflicts between the G ATT-WTO
agreement as a whole and the CBD, has not
been addressed in the C0P3 decisions, we
feel it is an equally important aspect that
requires detailed analysis.
This paper is in the nature of a preliminary
study. The purpose is to generate debate and
discussion on the issues raised. We look
forward to comments and criticism, as well
as further information which elucidates the
impact of IPRs and the GATT mechanism
on biodiversity.

Economic and Political Weekly

October 25, 1997

legal requirements for asserting the claim
for PBRs. An Inherent outcome of this
would be that repeated cycles of selection
would reduce the level of variation within
a plant population As pointed out in the
recent FAO Draft Report on State of the
World’s Plant Genetic Resources, breeders'
tendency to find new genetic material
withintheir own breeding lines leads to
(a)
Ethical Implications
dependence on an even narrower elite
germplasm base for crop improvement.1'
The ethic ofconservation is a fundamental
This can directly lead to widespread plant
objective of any treaty dealing with the
disease epidemics.'0
environment. The CBD recognises the
Farmers may also be forced to adopt the
intrinsic value of biological diversity and
homogeneous and genetically narrow base
its importance for evolution and for
of modern agriculture, and be unable to
maintaining life sustaining systems of the
innovate on even the seeds or livestock they
biosphere.6 Biological diversity is defined
buy. Companies will want to maximise their
under the CBD as the variability among
profits, since patenting is an expensive
living organisms from all sources.7 Although
process, and will therefore opt for as widely
it does not explicitly recognise the notion
adapted varieties as possible. In such
of the right to life for all living beings, it
situations, there would be loss of indigenous
can be said that the overall concern of the
CBD with biological diversity indicates that
crop and livestock diversity. On the other
hand, it could be argued that farmers may
it accepts that notion. It is here that there
arises a fundamental conflict between the
also be induced into reviving and innovating
on traditional diversity, as a means of
concept of IPRs and the objective of the
CBD to conserve biological diversity as a
reducing dependence on economicallycrippling patented varieties. But for a large
whole keeping in view its intrinsic worth.
IPRs indicates a move towards the notion
number of farmers who are deeply enmeshed
(b)
Implications for Biological Diversity
of‘might isright’.Itraisesthebasicqucstion:
in the market economy, dependent on
Do we as a species have the right to claim
The emerging IPR regimes have serious
governments and markets for their inputs
ownership over other species/ taxa; even
implications for biodiversity, both wild and
and sales, such escape routes may prove
domesticated. There may be no direct impact
more stark, docs any one individual human
extremely difficult. It is more likely that
being have the right to claim private
on wild plants and animals, provided these
seed companies would be able to displace
monopolistic ownership over entire other remain outside the purview of IPRs.
a wide diversity of traditional local varieties
species/ taxa? However inventive scientists
However, there could be severe indirect
by promoting a handful of hybrids and
are in engineering a new strain of bacteria effects in the form of increased exports of
homogeneous modern varieties, often
or a new variety of plant or animal, the . natural resources for the purpose of debt
through governmental agricultural extension
essential elements with which they are
repayments. Debt repayment is a major
services.'1 The development of new varieties
working - the building blocks of life, and
cause of environmental and social
by the formal seed industry, even if spurred
life itself - are not created by them; nor,
destruction in southern countries. This is
by IPR-generated incentives, would in no
unlikeindustrial inventions, is the replication exemplified by the fact of increased exports
way compensate the loss of diversity of
of the life form essentially dependent on
of natural resources from developing
local farmers’ varieties. Such a process has
these scientists.
countries to meet the obligations of debt
already characterised the introduction of
For the majority of the world’s
repayment. In the last few decades, attempts . new technologies such as the green re­
civilisations, especially indigenous and
to repay debts by tropical countries have
volution in the tropical countries, and would
traditional ones, where oneness with nature
consisted of exporting natural resources in
be greatly enhanced by the IPR regimes.
has been a part of their philosophy, and to
their raw form (timber, fish and other marine
Of course, a complex web of practices
an extent even daily practice, establishing
life, medicinal plants, orchids, etc), or in the
and policies, and not IPR systems alone, are
property rights over living beings is an
form of various processed products (agro­
responsible for the loss of agricultural
alien concept. What is also alien to them is
products, bird feather goods, medicines,
diversity. IPR systems would have the role
to treat a part of life as a commodity to
etc). More often than not, considerable
of compounding this effect: the incentives
be commercially exploited. It could be
over-exploitation of natural resources,
they provide would increase the thrust
argued that all notions of private property
including biodiversity, is the result. Added
towards commercialisation of agriculture,
violate these sensibilities too. In the
to the outflow of cash in the form of debt
oriented more towards industries and exports
interests of a focused discussion on IPRs
repayments would be the royalty payments
rather than towards domestic and primary
alone, it will not be possible for us to delve
arising from IPRs. It is feared that the consumption Such a thrust is inevitably
into that broader issue in this article.
imposition of IPR regimes over life forms
accompanied by the homogenisation ofcrop
However, we would like to point out that
and related knowledge, on third world
varieties, since agro-industries and export
the existence of the notion of private property economies, would significantly increase debt
markets prefer standardised products. This
cannot restrict the questioning of IPRs over
repayments.
would have serious implications for agro­
life forms, which we feel arc perhaps the
In the case of domesticated biodiversity,
ecosystem stability and sustainability.
ultimate violation of the sensibilities
the impacts arc both direct and indirect.
Promotion of monocultures has very
expressed above.
Seed companies look for the three
obvious negative implications for
Serious ethical issues arise even more characteristics of distinctiveness, unifor­
biodiversity. In this context a question raised
starkly in the case of attempts to patent
mity and stability, which are essential . by India at the meeting of the Committee

whatever the logic behind the notion of
IPRs, its extension to biological diversity
would have some very serious implications.
While there have been no conclusive studies
in this regard, there are strong indications
about the possible effects of 1PR systems.
Our case is that these have to be taken
seriously.

Economic and Political Weekly

human genetic material or information,
which has arisen as a logical extension of
the whole process of,claiming ownership
over life forms. The US commerce
department was the pioneer in this field
when it sought a patent on the human cell
line of a woman from the Guyami Indian
tribe of Panama which was potentially
looked upon as useful in medical research.
Although human genetic material falls
outside the purview of the CBD, it is
important to keep this in view as part the
process of commodification of life. From
the ethical point of view a number of
uncomfortable questions arise which have
not been given due consideration As
Kloppenburg asks: “Seeing ourown species
as a commodity, can we fail to see everything
else in the same way? And if the commodity
value is low, does that justify the
disappearance of that bird, tribe or micro­
organism?”8
Commodification and the accompanying
assignment of monetary value over life
forms, undermines the CBD’s ethical
approach towards conservation, which is
based on the intrinsic value ofall components
of biological diversity.

October 25, 1997

2815

farmer sales and exchange, and only the other inputs into the rural economy. In a
situation such as this, the extension of IPR
remainder through formal agencies like seed
regimes over crop and livestock varieties
corporations.
can only further trap farmers in a vice-like
Informal innovations by farmers are a
grip. Itundermines local peoples’ capacities
main reason for the stability and
to manage sustainable production systems.”
sustainability of the agricultural system in
(c)
Implications for Local Communities.
Moreover, even farmers who are able to
most developing countries. And this informal
retain adegreeof self-sufficiency byrelying
The impacts of IPRs are strongest on local
innovation is not a haphazard unscientific
on their own indigenous varieties, may face
communities who are directly dependent on
process. It is the result of keen observation
problems from patent holders who will
the use of components of biodiversity. This
and careful experimentation In view of this
increasingly claim rights not merely to
can be illustrated using the example of
it is difficult to find a rationale for a shift
varieties, but to characteristics which are
fanners. The form of IPRs relevant in their
in the locus of innovation from the farmers’
common to several varieties. For example,
case is that of patents over plants and plant
fields to the laboratories of breeders. Such
variety or breeders rights (PBRs or PVRs).
a patent has reportedly been granted to the
a shift is definitely not necessary to promote
The concept of PBRs was institutionalised
corporation Sungene for the characteristic
the ethic of conservation It seems unlikely
by the International Convention on the
that conservation and generation of new
“high oleic content” in sunflowers. Already,
Protection of New Varieties of Plants
Sungene has announced that the
crop varieties can be stimulated on as large
(UPOV). They provide limited monopoly
a scale as is required, by a scheme that
development of any variety high in oleic
to a plant breeder over the reproductive
acid will be considered a violation of its
focuses only on the generation of profits and
material of the variety, i e, control over by creating monopolies over such profits.
patent. If this stands up in the courts, it
multiplication and sale of the seeds. PBRs,
1PR systems would have the drastic impact
means that a patent holder could prevent
as provided for under the 1961 and 1978
of displacing the locus of innovation from
others from completing research even using
versions of UPOV, allow for exceptions in
the farmers’ fields, which in turn has serious
totally different genetic systems, and could
the form of farmers’ privilege and breeders’
implications for the objectives of conser­
perhaps also prevent farmers from
exemption The breeders’ exemption allows
vation and sustainable use under the CBD.
innovating on their own high oleic acid
scientists and plant breeders to use protected
The owners of the IPR-protected plant
varieties of sunflowers. The “species” patent
varieties for further breeding work without
varieties are mostly big companies. Given
granted in the US on genetically modified
asking for permission or paying royalty.
the power of corporate plant breeders to
cotton and on the soyabean crop,14 though
This was aimed at ensuring that the socially
impose these rights and restrict farmers’
likely to be revoked due to considerable
useful activity of breeding improved varie­
and breeders’ exemptions, the PBR regime
opposition, are further indications of the
ties continued unhindered. Farmers’ exemp­
becomes almost as monopolistic as industrial
ridiculous risks of the IPR system. There
tion gives farmers the right to save harvested
patents. It is of course possible to argue that
may, indeed, be no end to this; as Cary
seed fortheirpersonal reuse, and for“acrossfarmers do not have to use the patented seed
Fowler and others have stated: “Why not
the-fence” exchange with other farmers.
a patent for'tasty' bread or'high-yielding'
at all, and in fact that IPRs could force
However there have been increasing
farmers to revive traditional seeds and
rice or for ‘good’ kids?"13
demands by the biotechnology industry that
farming practices. There are, however,
This dramatic possibility may not be as
these exemptions be withdrawn. The
aspects of the dominant agricultural policy
far-fetched as one would imagine. In the
amendments of UPOV in 1991 responded
in many countries which would defeat, or case of the Harvard mouse, for instance, the
favourably by increasing the monopolistic
make very difficult, such attempts at being
patent claim in Europe is not only to the
nature of breeders’ rights, and considerably
self-reliant. One of these is the increasing
mouse, but to “a transgenic non-human
eliminating farmers’ and breeders’
power of agro-corporations and/or
mammal all of whose germ cells and somatic
exemptions. Whereas previously farmers’
governments to dictate the nature of cells contain a recombinant activated
exemption was guaranteed by the
agricultural operations on individual farms,
oncogene sequence introduced into the said
convention, now it is an optional exemption
especially in terms of pushing seeds,
mammal or an ancestor of said mammal,
which countries may or may not grant.
fertilisers, pesticides, livestock breeds, and
at an embryonic stage".16 Thus it is possible
Unless specifically granted exemption,
therefore, farmers may now have to pay
royalties for saving and reusing seeds on
their own farms even under PBR regimes.
This means that whiletheuserof a patented
Rs. 380
product would have the right to use the
: Women Struggle for Political Space
Sudhir Verma
product but not to make it; a farmer
Rs. 350
: Muslim Women: Emerging Identity
Saukath Azim
purchasing patented or PBR-protected seed
would have the right to grow it, but not the
Rs. 450
: Scheduled Caste Woman
P.C. Jain (eds)
right to save and replant it, unless specifically
given an exemption by the country in which
Rs. 450
: Culture, Gender and Ecology:
M. Nadarajah
he resides. The farmer would have to return
Beyond Workism
to the market each year to purchase seed,
as has to be done for hybrids at present. It
Rs. 300
: Gender Inequality
Ramegowda
would also be illegal for farmers to pass on
harvested seeds to neighbours, or to sell it
Rs. 500
Jasbir Jain (ed) : Women's Writing: Text and Context
on a limited scale, affecting a widespread
agricultural practice followed by farmers
all over the world. For instance, in India,
nearly two-thirds of annual seed requirement
3-Na-20, Jawahar Nagar, JAIPUR 302004
of farmers is reportedly met through inter­
on Trade and Environment (UTE) of the
WTO was, whether IPRs for plant varieties
militated against in situ conservation by
promoting monocultures. l!The clear answer
seems to be: yes.

latest in GENDER STUDIES

rawat publications

H

2816

Economic and Political Weekly

October 25, 1997

that Harvard could charge royalties on any
non-human mammal, which has been
developed for cancer research by injecting
its embryo with an oncogene.
The other aspect of IPRs which is
problematic from the perspective of local
communities is when their knowledge,
innovations and practices are used as the
basis for research that gives rise to a
patentable invention This is of significance
in view of the fact that the starting point
of most research related to the genetic wealth
of biological resources is often the existing
traditional ecological knowledge of
indigenous and local communities with
respect to those resources.'7 The CBD
mandates that where utilisation of the
knowledge, innovations and practices of
local and indigenous communities leads to
benefits, such benefits shall be equitably
shared with the holders of such knowledge,
innovations and practices.”
There are a number of problems and
conflicts that arise from the point of view
of local and indigenous communities. The
IPR model which is sought to be harmonised
under the TRIPS agreement, does not
recognise informal community innovation
Further, the notion of private, monopolistic
IPRs under the TRIPS is an alien concept
for many local and indigenous communities,
since for them most knowledge and
biological resources are communally owned
and are meant to be shared.” The notion of
collective IPRs is not recognised under
current IPR models, or the TRIPS agree­
ment. Regarding the traditional knowledge
and informal innovation practices of
indigenous peoples and local communities,
the CTE simply states that new forms of
protection adapted to the particular circum­
stances of local and indigenous commu­
nities do not fall within the purview of
TRIPS since they were not discussed
during the negotiations. 20
The TRIPS agreement is silent on the
issue of sharing of benefits with local and
indigenous communities. For instance, for
making sharing of benefits with local
communities feasible, it would be necessary
for IPR laws to have stringent norms of
disclosure on the country and the community
from which a patentable subject matter and
information regarding its use was obtained,
as well as proof of consent of the country
of origin Both these requirements are
mandated by the CBD. The CTE has stated
that TRIPS’ silenceinthis regard would not
preclude bilateral arrangements between
countries and companies to ensure such
sharing, provided these are compatible with
it.21 The standard of compatibility with the
TRIPS thus seems to be the material test.
A question which arises is: can a country
challenge another country’s IPR regime on
the ground that it fails to give adequate

Economic and Political Weekly

protection to informal innovations of
indigenous or local communities, and is
thus in violation of Article 8(j) of the
CBD? The Indian delegation to the CTE
posed this question at the June 1995
meeting, but there has been no response
to this as yet.22
A point worth consideration is that the
issue of extending IPRs over life forms
cannot be viewed in isolation. It has to be
seen as a part of a larger process of flow
of resources from one country to another
and the impacts this would have on the
former. This becomes all the more necessary
also from the point of view of assessing the
whole scheme of extending IPRs in the light
of its purported logic, i c, the logic behind
granting of patents is that this would be a
protection and incentive for the financially
and infrastructurally weak inventor, and
bringhimjusl financial rewards. But modem
mega-technological progress takes place
almost within the framework of institutions
heavily funded by rich countries or rich
companies from the north. Further
monopolies over these processes are sought
to be established under the IPR regime, thus
leading to a net siphoning out of resources
from developing countries. From the point
of view of the CBD, the objectives of
conservation and sustainable use are clearly
undermined by these processes.
Whatever be the justification for IPR
systems, their application and impact raise
important questions about the need for their
existence. The following comment requires
serious consideration: "The function of the
positive historical purposeof patents is being
perverted into a legitimisation ofcompletely
new structures. History is being rewritten
in such a way that the protection of the weak
is still being claimed, whilst protection of
thestrong is what is actually taking place.”2’
Exceptions Under TRIPS Agreement:
Matter of Interpretation?

While TRIPS does not contain specific
provisions to deal with each of the issues
already raised, it does provide for certain
exceptions in Articles 8(1), 27(2), and 27(3).
The ability ofTRIPS to answer the concerns
of the CBD would partly depend on how
these exceptions are interpreted.
Article 27(2) recognises that states can
exclude from patentability inventions the
prevention of whose commercial
exploitation is necessary to avoid serious
prejudice to the environment. There are
therefore two preconditions to exclude
inventions from patentability, viz, (i)
commercial exploitation of the invention
should be disallowed; (ii) such prevention
of commercial exploitation is necessary for
the purpose of avoiding serious prejudice
to the environment. There is a further proviso
to the Article according to which such

October 25, 1997

exclusion should not be made merely
because the exploitation is prohibited by the
law of that state. This therefore implies that
the WTO would have the authority to
examine, interpret and decide what would
constitute serious prejudice to the
environment. Further it also implies that
exclusion from patentability should be
preceded by prevention of commercial
exploitation This effectively rules out the
possibility of having non-monopolistic
alternatives to patenting which would require
exclusion of patents, but not necessarily
prevention of commercial exploitation
Article 8 ofTRIPS has been cited by the
CTE in its report as being a possible provision
through which developing countries can
take careof their interests. It reads as follows:
“Member states may, in formulating or
amending their laws and regulations, adopt
measures necessary to protect public health
and nutrition, and to promote public interest
in sectors of vital importance to their socio­
economic and technological development.”
The proviso to this article states that such
measures should be consistent with the
provisions of TRIPS. Were it not for this
proviso. Article 8 would have had much
wider scope than Article 27(2). The words
used, viz, “adopt measures”, provides the
opportunity to member states to analyse the
diverse implications of IPRs as discussed
above, and resort to alternatives to the current
IPR model. However, the proviso to a great
extent limits the ambit of those alternatives.
The proviso seems to clarify that Article 8
does not provide for exceptions to the
obligations under TRIPS. It suggests that
any measure taken under it has to be
commensurate with the other TRIPS
provisions, which would include Article 27.
But if this were the case, the very purpose
of including Article 8(1) under the TRIPS
seems a superfluous one, for states would
in any case have had the freedom to take
measures commensurate with the TRIPS
obligations, without having been reminded
by Article 8 to lake care of their socio­
economic and technological development.
Why then has the CTE implied in its report
the importance ofArticle 8? What is the scope
and ambit of the same? Could it be used as
the basis for excluding IPRs over life forms?
Another provision of interest is Article
27(3), which allows states to arrive at sui
generis forms of protection in the case of
plant varieties. This provision states: “Parties
may .exclude from patentability plants and
animals other than micro-organisms, and
essentially biological processes for the
production of plants or animals other than
non-biological and microbiological
processes. However, parties shall provide
for the protection of plant varieties either
by patents or by an effective sui generis
system or by any combination thereof. This

2817

provision shall be reviewed four years after
the entry into force of this Agreement."
The apparent flexibility of this clause
may be largely illusory. Two major points
have been raised by a number of critics.
First, that it forces on countries the
patentability of micro-organisms and
microbiological processes, leaving very little
scope for a nation which may not want to
patent any life forms. It is important to
realise here that the terms “micro­
organisms” and “microbiological processes”
have been recently extended to include the
genetically modified mouse patented by
Harvard, as mentioned above.24 The
European Patent Office, interpreting Article
53(b) of the European Patent Convention.
which is similar in structure to Article 27(3)
of TRIPS, ruled that the patentability bar
does not cover microbiological processes or
the products thereof. To quote from the
judgement: “...the general principle of
patentability under Article 52 (1) of the EPC
is restored for inventions involving
microbiological processes and the products
of such processes. Consequently, patents
are grantable for animals produced by a
microbiological process.”3
This case raises concerns regarding the
interpretation of Article 27(3) of TRIPS:
what would a patent claim over a plant or
animal genetically modified through a
microbiological process be treated as? One
possible argument could be that unlike the
EPC, TRIPS refers only to “microbiological
processes", and not to “products thereof’.
Hence the first pan of Article 27(3) could
be interpreted to cover all plants and animals,
whether or not they are produced through
a microbiological process.
Secondly, there has been a great deal of
debate to interpret the meaning of the term
sui generis, in the case of plant varieties.
Does it mean there is a possibility of actually
arriving at a non-monopolistic model of
protection for plant varieties, which
recognises the informal innovations of
farming communities and provides
incentives for the same, but does not
necessarily grant exclusive property rights?
The fact that some form of protection is
mandated under 27(3) means that the
question is more of whose protection and
whose monopoly. A scheme that allows for
free flow may not, therefore, qualify as sui
generis form of protection.
Further, the concept of Plant Breeders
Rights under UPOV (as discussed above),
is being put forward as the model for such
sui generis protection PBRs, it has been
noted above, are also another form of IPRs
which provide monopoly powers to the right
holder and would have similar consequences
as patents for biological diversity and for
local communities dependent on biological
diversity. Article 27(3) docs not lay down

2818

the parameters for the suigeneris protection,
apart from qualifying it by the ambiguous
term “effective". This could mean that any
sui generis system proposed will be open to
review by the WTO, to decide whether or
not this is effective. The whole provision on
plant varieties is to be reviewed in 1999. There
is also the fear that if countries like India
continue to disallow IPRs on plant varieties,
the US and other industrialised nations could
use their clout to push them to change. Such
pressure tactics have already been used
unilaterally by the US under Section 301 of
its Trade and Competitiveness Act of 1988.“
One is tempted to argue that every state
has the liberty to arrive al its own provisions
for sui generis system to deal with plant
varieties. And that this provides for the
space to develop upon measures that could
take the form of rewards and subsidies to
farmers to follow agricultural practices that
enhance agricultural diversity; but be based
on a model of free exchange of seeds, with
nobody having any exclusive monopoly.
Such a free exchange system could also
establish a rights system which is defensive,
by ensuring access to anyone provided it
is not used for monopolistic purposes. It is
doubtful, however, whether such a system
of free flow could qualify as sui generis for
the purposes of the TRIPS agreement, as
has been argued above. Another suggestion
would then be to re-define the locus where
the monopoly is vested, from the corporate
pl ant breeder to the local commu ni ti es. There
have been suggestions for forms of
protection such as Community Intellectual
Rights,27 andTraditional Resource Rights,2"
which would take into account the ecological
concerns of conserving biological diversity,
as well as the concerns of equity in
recognising the role and contribution of
local and indigenous communities.

potential impacts of industrialised
agriculture for biodiversity, in the form of
genetically uniform monocultures and
massive doses of chemicals which would
in turn have long-term impacts on soil
fertility and productivity.
* Another change sought is the lowering of
subsidies gi ven to various agricultural inputs.
On the one hand, this could have the impact
of reducing the spread of modem agriculture
(especially if fertiliser subsidies are re­
moved), and spur a revival of organic farm­
ing methods. However, positive incentives
including subsidies may need to be given
to help farmers switch to organic and highdiversity agriculture; under GATT, the pos­
sibility of such incentives could be reduced.
At best, the result on biodiversity of a cut in
agricultural subsidies would be mixed.
* Article XI of the GATT curtails the ability
of countries to restrict exports of products
except through duties, taxes, or other such
charges. This could have potentially negative
environmental consequences, since
countries would find it difficult to enforce
policies restricting exports of natural
resources, including perhaps even threatened
species of wildlife. Regulation of access to
genetic resources in fulfilment of Article 15
of the CBD, could also be undermined by
the GATT-based argument that it is an
unreasonable trade barrier.
* Government support for producers of
agricultural products has been essential in
most developing countries to off set

Other Aspects of GATT-WTO
Agreement vis-a-vis CBD

Volume—1
GENDER AND SOCIAL ORDER
A Survey of Major Economic
Issues and Challenges

Apart from introducing a uniform
intellectual property rights regime, the
GATT Agreement contains several other
aspects, which have a bearing on
biodiversity, and would affect the objectives
of the CBD.
* One thrust appears to be to free the
agricultural sector from most forms of ■
controls and interventions by governments.
A direct impact of this could be the easier
entry of powerful multinational agribusiness
corporations into third world countries,
corporations which would be able to push
their crop and livestock varieties onto the
farmer. The implications of this have been
discussed earlier in the context of IPRs. The
same would be relevant in terms of
implications for the farmer due to entry of
multinational seed corporations into agri­
business. Also equally troublesome are the

New Books from Kanishka
STATUS OF INDIAN
WOMEN
Crisis and Conflict in
Gender Issues

Volume—2
PROGRESSIVE WOMEN AND
POLITICAL IDENTITY
Volume—3
FEMALE EXPLOITATION AND
WOMEN'S EMANCIPATION
(Set in Three Volumes) Rs. 1550

KANISHKA PUBLISHERS,
DISTRIBUTORS
4697/5-21 A, Ansari Road, Daryaganj,
New Delhi 110002 (India)
Phones: 327 0497, 328 8285
Fax: 11-328 0028 (KANISHKA)

Economic and Political Weekly

October 25, 1997

competition from subsidised world market
prices. The Uruguay Round (UR) on Agri­
culture calls on GATT members to reduce
their spending, direct and indirect, for
domestic farm programmes. However, the
US and the European Union continue to use
export subsidies to maintain their position
in world markets. In effect, therefore, the
Uruguay Round on Agriculture enables
agribusiness to continue to enjoy exten­
sive export subsidies while farmers’ supports
arc slashed.2’ The impact of these on local
and indigenous communities is self-evident.
Theoretically it may be possible to argue
that if adverse environmental impacts are
felt, a country may be able to resort to the
Article XX exceptions, (particularly
Article XX, clauses (b),w (g),11) under
GATT. However, this may be easier said
than done. Firstly, Article XX does not
mention "environment” as a reason for provi­
ding for substantive exceptions to an obli­
gation under GATT. In the absence of this,
it is open to interpretation Secondly, in a
situation which is increasingly biased toward
the economic stakeholders, the concerns of
the environment often get obscured.

Space Under CBD: Article 16(5) and
Article 22
Article 16(5) of the CBD mandates the
Contracting Parties to co-operate to ensure
that IPRs are supportive of and do not run
counter to the objectives of the CBD. The
caveat to this provision is “subject to national
legislation and international law”. This
creates some kind of ambiguity about what
is to prevail over what. Are the objectives
oftheCBD paramount? Can non-compliance
with IPR obligations be justified if they
cannot be supportive of the objectives of
the CBD? The weakness of the provision
is enhanced in view of the fact that the
Contracting Parties are only obliged to “co­
operate"; there is no affirmative assertion
as to the substantive obligation in this
regard. It may however be argued that
Article 16(5) is further strengthened by
Article 22, which provides that the CBD
"shall not affect the rights and obligations
of any Contracting Party deriving from any
existing international agreement, except
where the exercise of those rights and obliga­
tions would cause a serious damage or threat
to biological diversity." Both together
provide a strong case forCBD to prevail over
the obligations under any other agreement.
Artide22 is ahighly interesting provision
whose effectiveness would depend upon
interpretation of the phrase “serious damage
or threat to biological diversity”. To justify
non-compliance with a GATT obligation
because of the adverse impacts on biodiver­
sity, may be a difficult task, because more
often than not, these adverse impacts are in
the nature of “possible effects". There may

Economic and Political Weekly

not be hard scientific data to substantiate
the same. While the environmental law
regime has confronted this issue of lack of
scientific certainty by means of new princi­
ples such as the “precautionary principle”,
the trade and economic regimes show no
signs of being inclined towards the same.
A Precautionary Approach?
The essenceof the precautionary approach
is embodied in Principle 15 of the Rio
Declaration which provides that: “Where
there are threats of serious or irreversible
damage, lack of full scientific certainty shall
not be used as a reason for postponing cost
effective measures to prevent environment
degradation”. The Preamble to the CBD
also recognises this when it states that “where
there is a threat of significant reduction or
loss of biodiversity, lack of full scientific
certainty shall not be used as a reason for
postponing measures to avoid or minimise
such threats.” The threshold terms for
application of the precautionary approach
in the context of the CBD would have to
be based on “threat of significant reduction
or loss of biodiversity”. The effectiveness
of the precautionary approach would depend
on how this is interpreted. What is the
threshold for "serious or irreversible
damage" or for “significant” reduction or
loss, and who will determine this? There has
been some discussion of this principle in
the context of climate change, 12 but it is yet
to be given serious consideration in the
context of the CBD. The effect of this
principle in the context of the CBD would
essentially be as follows:
(a) assessment of the potential impacts of
an IPR regime or aGATT obligation must be
carried out before, and not after such measures
are undertaken This, in any case, is a basic
principleofenvironmcnt impact assessment.
(b) the burden of establishing that no real
threat exists to the objectives of the CBD
should lie with the Party alleging that another
Party has violated GATT norms.
But again, it is difficult to say how the
trade regime under GATT would react to
these kind of arguments. It is always easy
to insist that each issue ought to be examined
in a harmonious manner in the context of
all related developments, i e: trade cannot
bedivorced from environmental arguments;
the IPR regime cannot be divorced from the
issue of rights of the farmers and local
communities; and so on But these arguments
based on how things “ought to be" may tend
to be mere rhetoric in the absence of some
kind of certainty about what is to prevail
over what, and who should decide the same.
Choices to be Made

In view of the above, discussion, and the
mandate of the COP decisions referred to
at the beginning of this paper, a number of

October 25, 1997

issues arise which need to be addressed
immediately:
* To begin with, case studies referred to in
COP3’s Decision L.18 should soon be
initiated to examine the potential conflicts
between IPRs and the objectives of the
CBD.” Such studies need to specifically
focus on the following propositions:
- Patents on life forms should not be made
compulsory.
-Article 27 oftheTRIPSshouldbe modified,
at or before the formal review in 1999, to
allow for exemptions on all life forms
including micro-organisms.
- The concept of sui generis under Article
27(3) of the TRIPS should be clarified to
allow for development of alternative nonmonopolistic IPRs.
* Studies also need to be initiated to
understand the impact of tradeliberalisation
foragricultural biodiversity, keeping in view
the impacts for agro-diversity, as well as for
local communities.
* The general proposition that the provisions
of the CBD should prevail over the GATT
agreement where the principles of
conservation, sustainable use and the sharing
of benefits arising from the use of
biodiversity are in question, needs to be
examined carefully. For this purpose there
has to be a clarification as to how to interpret
Article 16(5) and Article 22 of the CBD.
The precautionary approach should be
adopted in interpreting serious damage or
threat to biological diversity.
* Both national and international actions
taken as a follow-up to the GATT provisions,
including the TRIPS agreement, should be
monitored vis-a-vis the impacts of such
, developments on the objectives of the CBD.
* To facilitate the realisation of objectives
of the CBD, such as that of equitable benefit
sharing, the existing IPR model under TRIPS
should mandatorily specify that norms of
disclosure pertaining to an IPR application
should reveal the country of origin and the
community which provided the knowledge
about the resources pertaining to the
patentable subject matter,” as well as proof
of consent of such country and community
of origin. In other words, the applicant must
satisfy the requirement that the provisions
of the CBD have been fulfilled.
* Article XX of the GATT agreement should
be amended to specifically include concerns
relating to biological diversity. The pre­
cautionary approach should again be applied
here to assess threat to biological diversity.
The COPs till now have avoided confronting
the issue of conflicts between the CBD on
the one hand, and the GATT agreement and
the IPR regime on the other. The CBD
Secretariat’s papers on this subject have not
squarely taken up the analysis, choosing
instead to focus on the potential synergies
between the two regimes. The potential of

2819

Publication, New York, 1992 illustrates
numerous instances where the folk remedy of
tribal people has lead to the pharmacopoeia
of modern medicine; UNDP, Conserving
Indigenous Knowledge, an independent study
by the Rural Advancement Foundation
International. UNDP, Nairobi, 1994, where it
Notes
is explained that indigenous knowledge has
made important contributions to agriculture,
[We are grateful to David Downes from the Centre
pharmaceuticals, DNA research and other
for Environmental Law, Washington and Graham
industrial production; Pat Mooney, ‘The Law
of
the Seed’, Development Dialogue. 1983,
Duffield from the Working Group on Traditional
where the use of genetic resources from crop
Resource Rights, Oxford, for comments on an
plants ofindigenous fanners by seed companies
earlier draft of this paper.]
is discussed.
Convention on Biological Diversity,
1
Intellectual Property Rights. Decision 11/12, 18
Article 8(j), Preamble para 12.
UNEP/CBD/COP/2, adopted at the Second
19
D Posey and G Dutfield, Beyond Intellectual
Meeting of the Conference of the Parties to
Properly Rights, 1DRC, Ottawa, 1996.
the Convention on Biological Diversity,
20
Committee on Trade and Environment of the
Jakarta, Indonesia, November 6-17, 1995.
World Trade Organisation, Environment and
2
Intellectual Property Rights, UNEP/CBD/
TRIPS, WT/CTE/W/8, June 8, 1995, 23.
COP/3/L 18. adopted at the third meeting of
the Conference of Parties to the Convention
21
Ibid.
22
‘Relationships between Environmental Policies
on Biological Diversity, Buenos Aires,
and WTO Services and Intellectual Property
Argentina, November 4-15, 1996.
Agreements Examined’. WTO Trade and
3
Agricultural. Biological Diversity, UNEP/
Environment Bulletin, August 14, 1995.
CBD/COP/3/L 12. An earlier alternative text
23
C Weiszacker, ‘Biodiversity Newspeak’ in
on the same subject was stronger in its mandate
Baumann et al (eds). The Life Industry, supra
and stated that tht CBD Secretariat was to
conduct a study on the impact of trade
n 5, 61.
24
S Dutta, supra n 16.
liberalisation on agricultural biodiversity.
European Patent Office, Board of Appeal,
4
Access to Genetic Resources, UNEP/CBD/ 25
CI2N 15/00, October 3, 1990.
COP/3/L 8.
It is felt that the present GATT-WTO
5
Rural Advancement Foundation International, 26
Agreement actually legitimises such unilateral
‘Sixty five years of the US Plant Patents Act’,
t tactics through its provisions on cross­
RAFI Communique, November/December
retaliation: if a complaining party finds that
1995.
retaliating in the same sector as where vio­
6
Convention on Biological Diversity, Preamble,
lation is alleged will not be practical or ef­
paras 1 and 2.
fective, it can retaliate in any other sector. This
'7 Ibid, Article 2, para I.
basically means that retaliation against non8
J R Kloppenburg, ‘Changes in the Genetic
compliance with obligations under the TRIPS
Supply Industry’ in Baumann et al (eds),.77ie
could be done by withdrawing concessions in
Life Industry, Intermediate Technology
trade in another sector, say, goods, where a
Publications, London, 1996, 30.
9
FAO, The FAO Draft Report on the State of developing country like India is most likely
to be hurt.
the World's Plant Genetic Resources. Rome,
27
G S Nijar, Developing a Rights Regime in
1996.
Defence ofBiodiversity and Indigenous Know­
10
GRAIN, ‘UPOV: Getting a Free TRIPS Ride?’,
ledge, Third World Network, Malaysia, 1995.
Seedling, June 1996.
28
D Posey and G Dutfield supra n 19.
11
Ibid.
K Dawkins and S Suppan. Sterile Fields: The
12
‘Relationships between Environmental Policies 29
Impacts of Intellectual Properly Rights and
and WTO Services and Intellectual Property
Trade on Biodiversityand FoodSecurity, Gaia
Agreements Examined’, WTO Trade and
Foundation, Minnesota, November 1996, pp
Environment Bulletin, August 14, 1995.
10-12.
13
GRAIN, supra n 10.
Article XX (b), GATT provides for exceptions
14
Christine Noiville, ‘Patenting Life-Trends in 30
that may be resorted to when it is “Necessary
the US and Europe’ in Baumann et al (cds).
to protect human, animal and plant life or
The Life Industry, supra n 8, p 78.
15
C Fowler, E Lachkovics, P Mooney and
health”.
Article XX(g), GATT refers to measures that
H Shand, ‘The Laws ofLife: Another Develop­ 31
maybe resorted to when such measures are
ment and the New Bio-technologies’,
‘relating to the conservation of exhaustible
Development Dialogue, 1988.
natural resources, if such measures are made
16
S Dutta, ‘Patent Problems’, Science Reporter,
. effective in conjunction with restrictions on
January 1993, pp 40-44.
domestic production or consumption’.
17
See, for example, N Taylor, Plant Drugs that
Changed the World. George Allen and Unwin,
32
See for example, J Cameron and J Abouchar,
‘The Precautionary Principle: A Fundamental
London, 1965, where it has been explained
Principle of Law and Policy for the Protection
that without the input ofindigenous knowledge
of the Global Environment’, Booston College
many of the drugs we use would not exist;
International and Comparative Law.Review,
N R Farnsworth, ‘Screening Plants For New
Medicines in E O Wilson (cd), Biodiversity,
Vol 4, 1991, 1-27.
National Academy Press, Washington, DC,
33
Sec, supra-n 2 and accompanying text.
1988. where it has been pointed out that of 34
See. for example, M Gadgil and P Devasia.
111
commercially useful plant-based drugs,
‘Intellectual Property Rights and Biological
74 per cent were in prior use by indigenous
Resources: Specifying Geographical Origins
communities; D M Lewis, Millennium: Tribal
and Prior Knowledge of Uses’, Current
Wisdom and the Modern World. Viking
Science, Vol 69, No 8, October 25, 1995.

case studies, if thoroughly carried out, is
to provide a concrete basis for the CBD to
adopt a more pro-active approach. Whether
the next COP will live up to that expectation
remains to be seen.

2820

STUDIES IN SOCIAL
HISTORY/SOCIOLOGY
CONVERSIONS AND SHIFTING IDENTITIES
Ramdcv Pir and the Ismailis in Rajasthan
Dominique-Sih Khan

1997,

294p. Rs. 450

The study seeks to investigate Hindu “folk"
traditions in Rajasthan (especially cults
associated with Rnmdev, Jambha, Jasnath,
Ai Mata). It argues that followers of these
cults had been converted to Ismailismduring
thirteenth and fourteenth centuries and later
on broke away from the parent body. In
modern times they have come under
increasing pressure to adopt conventional
Hindu identity or to go over to Sunni or
Twelver Shia Islam.
UNDERSTANDING GANAPATI
Insights into the Dynamics of a Cult
Anita Raina Thapan

1997, 304p. Rs. 500
This study analyses the process by which
Ganapati evolved into a multifaceted
personality acquiring, over the centuries,
several distinct roles and attributes. These,
according to the author were largely
determined by the changing neerds and
perceptions of various castes and religious
groups in specific geographical areas.
Based primarily on actual field work,
the study brings out newer dimensions to
Ganapati’s role and the rituals associated
with him.

KING OF HUNTERS, WARRIORS, AND
SHEPHERDS
Essays on Khandoba
by Gunther-Dietz Sontheimer
Anne Feldhaus, Adilya Malik and
Hcidmn Bruckner (eds)
(IGNCA)
1997, 353p. Rs. 600
The collection brings together the German
Indologist Gunther Sontheimer’s articles
spanning two decades. The articles show
how his thoughts on Khandoba developed,
the great breadth of his understanding of
the cult and the traditions of castes and
tribes for whom Khandoba is an important
god. He makes use of a wide variety of
source materials like oral epics, songs,
statements and local literature.
Sontheimer understood the Khandoba
cult to be a ‘mirror of Hinduism’. His
writings on Khandoba proride an extra­
ordinarily rich glimpse into that mirror.

MANOHAR PUBLISHERS 8. DISTRIBUTORS
216, Ansari Road, Daryaganj. New Delhi-2
Phones: 327 5162 & 328 4848
Fax: 326 5162
email: MANBOOKS@GIASDL01 .VSNL.NET.IN

Economic and Political Weekly

October 25, 1997

COMMENTARY
America’s violation of India and Pakistans’
geographically indicated rights by using the
name basmati. That is the central issue of
the basmati patent, not whether the patent
awarded by the American Patent Office is
The Americans would not dare to call Californian wine, Champagne
valid or not, which of course it is not. Rice
Tech’?
that basmati is a generic name,
nor whisky produced in their countiy, ‘Scotch’. So why have they
attempted to purloin the basmati name and monopolise it by obtaining not aspecial name like Champagne, is asilly,
contrived argument. Basmati is about as
a patent?
genericas Champagne and Scotch and should
be as zealously protected.
Challenging the patent does not appear to
The Americans would not dare to call their
AN American company Rice Tech has
whisky Scotch or even American Scotch.
EcTpromising strategy.
received a patent on basmati rice. This blatant
The strongest, almost inviolate defence They would as little dare to label Californian
infringement of India’s rights and property
that
we
have
in
the
basmati
case
is
that
based
wines
as American Champagne or Cham­
has raised a furore in the media and justifiably
on the geographical indication clause of pagne. If they did this, they would be hauled
so. How should India respond? In planning
Trade Related Intellectual Property Rights
by France and UK to the WTO Dispute
its counter strategy, it would not be advisable
Settlement Court and made to retract or pay
(TRIPs). Geographical indication is a form
for India to merely rely on challenging the
penalties and face sanctions. Why then, it
of intellectual property right (IPR) included
patent as is being advocated. This is the
along with other IPR forms like patents and
becomes necessary to ask, do the Americans
easiest and least profitable line of action, as
dare to purloin the basmati name and even
also the most expensive. It would not be copyrights, in the TRIPs chapter of GATT/
WTO. This clause found in Articles 22, 23, go a step further and monopolise it by a
difficult to challenge the ‘novelty’ of the
24 of Section 3 deals with the protection of patent.
characteristics of the basmati that is patented.
goods that are geographically indicated. The ! The answer lies in the sheer incompetence
Any plant breeder could quite easily
geographical indicated protection has been
exhibited at the official level here. Oh the
demonstrate that the special qualities
specially conceived for well known speciality
whole question of IPRs on biological
supposed to be present in the patented basmati
products which are associated with a
resources, the patentability of life forms, the
are found in the normal diversity of basmati
particular region. So it is that the word
importance of biotechnology to the Indian
populations. Ifone had to analyse the basmati
'Champagne' is claimed exclusively by the
economy and other crucial issues, India has
strains of India and Pakistan, all the
Champagne region of France which is the
still not been able to get its act together.
characteristics described for size and quality
geographical region from which the wine I There is no understanding of the issues
of the rice grain or for the height and beha­
derives its world famous name. No other I among those supposed to make policy, and
viour of the plant, would be found. The
wine, even if it is made from the same grape I no policy has been formulated, much less
case can be effectively made that at best the
variety, by the same method, and is identical
implemented. A gaggle of assorted bureau­
patented variety has brought a combination
in taste, aroma and other qualities, can be
crats with little interest and even less know­
of favourable characters together but that is
called Champagne. The reason is that the
ledge, goesjunketing from Geneva to Jakarta,
the everyday stuff of plant breeding and
glamourandmystiquethat makes Champagne
bungling up negotiations and compromising
does not qualify for a patent.
an
exorbitantly
priced,
up-market
product
is
the national interest in our most crucial
But, just how many patents do we intend
associated with the name and not necessarily
sectors, j
tochallenge? It is clear that Indian biological
with the quality of the wine. French
A crassly ignorant beaurocracy is also
resources and products are under attack from
Champagne producers arc aggressive about
behind thedefeatist viewpoint currently doing
patents because these materials and products
protecting this name and derive every single
the rounds in theministriesof the government
enjoy growing international markets. A
ounce of trade advantage by claiming the
of India. The inexplicable view is being held
special product like basmati rice not only has
Champagne market exclusively for them­
out that we cannot do anything on geogra­
a huge market in the UK, Europe, the US
selves. Another well known instance of a
phical indication because we do not yet have
and west Asia, it also commands premium
prices there. There are other sought-after geographically protected product is that of a domestic law. Nothing could be further
‘Scotch’ whisky. No other whisky in the
from the truth. A very strong defence is
products like Darjeeling tea, Alphonso mango
world even if it were to be indistinguishable
possible given the nature of current trading
andShahi litchi. Apart from these agricultural
practices. Admittedly it would be preferable
products, there are herbal drugs and nutra­
in taste and flavour from Scotch whisky can
ceuticals which are attracting increasing
use the name. This name belongs exclusively
to have a law in place but its absence need not
to the whisky producers of the Scottish
attention...and patents. We should be fully
make us hesitate about asserting our claim.
highlands who derive the trade advantage of
prepared that thenumberof such patents will
In contrast to the government’s diffidence
selling their whisky for five times the price
in pressing its claim, India’s geographically
increase in the coming years. Can we really
afford to challenge every single patent?
ofordinary whisky. Geographically indicated
indicated rights are accepted and implemented
It is a sobering thought that despite the
rights are protected fiercely by countries like
by other nations including Saudi Arabia and
large amount of money spent and all the
France and UK because this protection
the UK. The Grain and Feed Trade Associa­
translates into monopolies in the market and
public acclaim of having successfully
tion in the UK, one of the largest importers
challenged the American patent on turmeric
high earnings.
of basmati rice in the world, have stringent
(haldi), the patent has still not been revoked
Similar to the exclusivity of Champagne
standards for using the term ‘basmati’. Its
in America. The patent holders have gone
traders can use this name only for the long
and Scotch is that of basmati rice. This very
into appeal and the case could drag on in
special longgrain.aromaticriceis specifically
grain, aromatic rice grown in India and
appeals and counter-appeals. Can we
associated with India and Pakistan. This is
Pakistan. Similarly, Saudi Arabia, the largest
afford-the cost of prolonged litigation in
their geographically protected name which
basmati importer in the world and one of the
American courts, and for how many
largest consumers of basmati, has labelling
no one else can use. The focus of India’s
challenges? Ten fifty, five hundred?
regulations that permits basmati from only
basmati challenge will have to centre around

Protecting Basmati

Suman Sahai

442

Economic and Political Weekly

February 28, 1998

India and Pakistan to be labelled as such.
American and Thai aromatic, long grain rices
are denied the use of this name. In view of
this clear recognition of our rights over the
basmati name, the coyness of the Indian
government to defend its case is difficult to
understand.
The time has come to take some hard
decisions with respect to the WTO and the
defence of Indian interests in this forum
which was touted as a multilateral one. This
supposed multilaterism implied that member
nations would abide by the same regulations.
In the si ngle most contentious issue i n GATT
and WTO, that of IPRs there has been an
effort to harmonise an 1PR regime for the
world. Patent regimes for drugs and agro­
chemicals, a sui generis system for plant
varieties and geographical indication arc all
parts of the same TRIPs section. It is under
TRIPs that the Americans have taken India
to court for violating the conditions fordrug
patents while they think nothingof themselves
violating with impunity, the conditions for
geographically indicated protection.

India should take the US to the dispute
settlement court of the WTO for violating
its geographically indicated rights over
basmati. In addition to this, India should
formulate a long-term strategy to protect its
bio-resources. It should mobilise the
biodiversity owning countries of the world
to demand that the two international treaties
dealing with the use of biological resources
be linked to one another. The biodiversity
convention cannot have a particular
framework for the use of biorcsources and
the WTO quite another, almost opposing
one. The US has refused to ratify the
biodiversity convention which acknowledges
the rights of rural and tribal communities and
their ownership over bioresources but it is
sparing no effort to push for compliance on
the biotechnology industry driven agenda in
WTO. The only response to this high­
handedness is to demand compliance across
the board. Either all countries comply with
the conditions ofthe two treaties or no country
does. There cannot be twodiffcrent standards
for America and India.

Role of Local Elected Leaders in
Lok Sabha Elections
Anitha K
Naveen H N
Kiran Kumar R

In the rural areas newspapers and the electronic media do not, as yet
play a significant role in influencing voters’ choice. Documented here
is how the zilla parishad leaders spend a great deal of time and
effort, systematically building upon their contributions towards area
development to campaign for their party candidates for the
parliamentary elections and the problems they face.
A LOK SAB HA election campaign provides
an opportunity for local representatives to
explain both macro and micro level issues
to local people. Local elected representatives
have a better rapport with villagers than state
or national leaders and are familiar with the
dynamics of rural politics, bridging the gap
between national and local politics. It would
be interesting to find out how these local
leaders handled the campaign and issues
concerning the masses at the rural areas. We
decided to accompany ZP members during
their election campaign. Dharwad district
was selected for this purpose as the team had
established rapport with ZP members and
had discussed different issues related to
decentralisation over the past one year.
The ZP president of Dharwad district is
a scheduled caste woman. She has contested
fromthe Janata Dal (JD) and was campaigning
for the JD candidate in Dharwad. The ex­
president of Dharwad district. V S Patil was
elected from JD but had joined Lokshakthi

Economic and Political Weekly

headed by Ramakrishna Hegde a few weeks
before the Lok Sabha election. We
accompanied theZPpresident, ex-president,
ex-ZP members, ministers and party workers
for four days during the election campaign.
During this period, we travelled extensively
in the rural areas of Dharwad district and
covered eight to 10 villages in a day.
In rural areas, newspapers and the
electronic media play a minimal role in
influencing the voters. Here politicians
mobilise party workers at district, taluk and
village level for canvassing. This process
was phased out. During the first phase, ZP
members established links with different
groups in the village through the existing
contacts. They try to solve the internal
difference in the groups and tried to explore
the possibility of seeking support from other
groups. In the next phase, ZP members along
with local popular leaders visited villages.
During this phase, they focus on meetings
with party workers and village heads. The

February 28, 1998

last phase ofcampaign was devoted to public
speeches by senior leaders and door-to-door
campaigns.
Local elected representatives feel that they
have better interaction with villagers as
compared to MLAs and MPs. The ZP
president of Dharwad explained that villagers
came to the office to discuss problems they
face. They asked her to sanction money for
the construction of roads, bridges or
classrooms. She sanctioned money for the
required work and in case of financial
constraints, she informs them about it and
promises to take up the work in the next
financial year. Problems may arise during
the execution of the work; people inform her
about the problems, which she refers to the
concerned officials. Villagers feel happy
about the treatment received by them and
remember this and respect her when she goes
to their villages for campaigning. Villagers
know that she has helped in the construction
of road or a classroom - and they are willing
to support the candidate she is campaigning
for.
Local representatives also visit the villages
often to get to know the problems faced by
the villagers, ensure the progress of works
or to attend social functions organised by the
villagers. This helps local representatives
identify themselves with local people and
during the campaigning processes they
believe it helps in getting votes for their
candidates.
Politicians want to concentrate on their
constituency in general and lheirnative village
in particular. ZP representatives visit their
respective constituencies frequently to
mobilise party workers to campaign.
According to a ZP president, ZP members
take up the responsibility of campaigning in
their constituencies. If a ZP member is not
efficient then the president of ZP has to
campaign in that constituency. In the process
of a campaign, most often public speeches
arc in the native place of the politicians.
Politicians are familiar with the political
links in their constituencies and can organise
people for public speeches. Politicians feel
happy that if they can convince 10 family
heads then they can be sure of gaining more
than a hundred votes. Hence they do not
bother to meet others in the village who arc
usually busy working in the fields. During
the speeches politicians address village
leaders, family heads and party workers.
They have built their vote banks over a
period of time and this is essential for their
career development. It is also true that people
recognise local representatives as their
leaders. Politicians feel that they are
answerable to the problems faced by them
and show interest in the infrastructure
development ofthe village. The ZP president
was listed out the activities taken up in her
constituency. Morab, "I have sanctioned
money for construction of bridges, now we
have three to four class rooms in all the
443

and sale of “farm produce", and does not
cover reproductive material, clause 17 could
in fact allow the seed industry from preventing
the farming communities from engaging in
seed supply and exchange amongst farmers.
The seed industry can attempt to interpret
clause 17 through case law like that of Asgrov
Vs Winterboer, or UK Breeders Vs Scottish
potato farmers to prevent direct sales
among farmers.Further.sindetheclausedoes
not set limits to the kinds of contracts the
seed industry could force farmers into,
contracts could totally undermine the rights
of farmers.
Farmers rights are also undermined by the
fact that the definition of “extant variety”
does not cover farmers varieties. According
to Def (ix), “extant variety” means a variety
noti tied under the Seeds Act 1966 or released
by the central seed committee or its
subcommittees and qualifies for protection
under the provisions of this act. The farmers
varieties that are a result of farmers breeding
and conservation do not qualify for
protection. Farmer-conservors have no rights
under this legislation. But once the seed
industry takes these varieties and changes
some characteristics, the variety becomes
protected. Even though the article 18 refers
to “on-farm innovation relating to the
enhancement or agrobiodiversity", there is
no “protection” of this innovation. Thus
while the innovation of farmers goes
unrecognised, the innovation of the seed
industry and researchers is recognised and
protected.
The difference i n treatment of farmers and
industry is also evident from the treatment
of essentially derived varieties which are
defined in Def (viii). The fact that while
varieties essentially derived from farmers
varieties are treated as varieties evolved by
industrial breeders, when varieties are
essentially derived from the protected
.varieties, the “rights of the breeder of the
initial variety extend to the essentially deri ved
variety also” according to clause 7.
If a variety ‘s’ is essentially derived from
a farmers variety, on the logic of protection
in clause 7. the farmer should have the
first right. This is the real'basis of farmers
rights. The inconsistent treatment of
rights related to derivation of varieties is
another example of the bias against farmers
and in favour of the industry in the draft
legislation.

UPOV against Agricultural
Biodiversity and Farmers’ Rights

In India. 70 per cent of the seed supply
is still from farmers, i e, it is based on farmers
role in breeding and conservation. In the
OECD countries, nearly all farmers are
consumers of seed supplied by the seed
industry. The industrial agriculture context
has led to the breeders rights system of

2584

UPOV, the International Convention for the
Protection of new Varieties of Plants. The
UPOV convention is rigid, requiring that
members adopt its standards and scope of
protection as national law. The UPOV
convention which has resulted in a high
degree of standardisation goes against the
reality of biological diversity and the socio­
economic diversity of different countries. It
is. therefore, inappropriate as a sui generis
system evolved to protect plants, people and
creativity in diverse realities. However, this
inappropriate system is being used in the
draft to produce a sui generis system for
plant varieties. The draft uses seed industry
criteria, for identification and protection
of varieties, rather than farmers breeding
criteria.
The standardisation is built into the way
plant varieties are defined in UPOV. To be
eligible for protection, a variety must be:
New - the variety must not have been
exploited commercially
Distinct - it must be clearly distinguishable
from all other varieties known at the date
of application for protection
Uniform - all plants of the variety must be
sufficiently uniform to allow it to be
distinguished from other varieties taking
into account the method of reproduction of
the species
Stable - it must be possible for the variety
to be reproduced unchanged

Clause 6 of the Draft Act reproduces this
criteria as the basis of protection of varieties
and hence the protection of rights.

This definition by its very nature rules out
farmers’ varieties and destroys biodiversity,
and produces uniformity as necessity. The
reward under such Plant Breeders' Rights
(PBR) systems does not go for breeding to
maintain and enhance diversity and
sustainability, but to the destruction of
biodiversity and creating uniform and hence
ecologically vulnerable agricultural systems.
Therefore, the PBR legislation like UPOV
and the present draft of the Indian legislation,
is inherently incapable of protecting farmers’
rights; as arising from the role of the farmers
as breeders who innovate and produced! verse
farmers’ varieties, which form the basis for
all other breeding systems.
While UPOV fails to recognise and
therefore protect farmers' rights as positive
rights, UPOV 1978 docs have a farmers’
exemption which gives the farmer the
right to save seed of protected varieties.
Similarly, the breeders’ exemption allows
researchers and breeders free access to a
protected variety to use for.breeding other
varieties. However, UPOV 1991 has removed
these exemptions. Breeders and researchers
will have to pay royalty to the PBR holder
to use the protected variety for breeding
other varieties. The farmers' exemption has
been made optional, article 15 of UPOV
1991 states:
Each contracting party may within
reasonable limits and subject to the
safeguarding of the legitimate interests of
the breeder restrict the breeders right in
relation to any variety in order to permit

CENTRE FOR STUDIES IN SOCIAL SCIENCES,

CALCUTTA will require a Registrar from February 1,
1998. The post carries a pay scale of Rs. 3700-125-

4950-150-5700/- with all allowances as applicable to

Central Government employees. The present gross

emolument at the initial stage is Rs. 11,390/- p.m.
Applicants must have a good Master’s degree and
be preferably below the age of 45 years. They should
have adequate experience in academic administration

in College/University/Research Institute of repute.

Applications with names of at least two referees

should be sent to the Registrar, Centre for Studies
in Social Sciences, Calcutta, 10 Lake Terrace,
Calcutta - 700029, by November 30, 1997.

Economic and Political Weekly

October 11. 1997

Biodiversity Totalitarianism
IPRs as Seed Monopolies
Vandana Shiva

In India's conditions of peasant agriculture, farmers are still the
major suppliers of seeds. The real basis offarmers rights is in the
recognition of the collective innovation by farming communities
embodied in farmers varieties, and evolving a jurisprudence that
protects and rewards this collective wisdom.
is the global instrument that the biotech
THE transnational seed industry is seeking
total control of seed, the first link in the food ‘industry has used for gaining monopoly
chain. And through control over seed, they j control over seed supply. As James Enyart,
control the food system. If all fanners, who ’ the Monsanto spokesperson has stated about
shaping the TRIPs agreement: “We were the
are the original breeders, could be forced
into the market every year, the seed industry
physician, the diagnostician, and patient all
will have a 7.5 billion dollar market.
in one” (RAFI Communique, September
1996). TRIPs states that all countries must
The Life Industry: Total Control
either give patents for plants or have an
"effective sui generis" system. While it has
Not only is the seed industry gaining total
control over seed supply, it is also getting
not been explicitly stated, the seed industry
increasingly concentrated. As Robert Farley
would like to see the Union for the Pro­
tection of New Varieties of Plant (UPOV)
of Monsanto has stated: “What you' re seeing
implemented in every country. Sui generis
is not just aconsolidation of seed companies,
its really a consolidation of the entire food
systems could also be legal systems
chain”. In the last year, Monsanto has taken
centred on farmers’ rights and on the
conservation of biodiversity, in accordance
over small start up biotech companies and
with principles of the Convention on
large seed companies. These include: (1)
Agracetus, a subsidiary of W R Grace with
Biological Diversity. Which sui generis
system India adopts will depend on how
species patents on cotton and soybean,
acquired by Monsanto for 150million dollar;
democratic the processes for evolving the
new legislation are.
(2) Calgene, California based plant biotech
firm which launched the ‘Flavr-Savr’ tomato.
Farmers’ Rights Undermined by
Monsanto now has a 54 per cent controlling
Seed.Monofolies
interest in it; (3) Asgrow seed, bought by

Monsanto for 240 million dollar; (4) De
Kalb, bought by Monsanto for 158 million
dollar; and (5) Holden, bought by Monsanto
for 102 billion dollar.
Holden, is aseedcompany with 45 million
dollar in annual sales. Monsanto has bought
it at 1 billion dollars, 23 times the annual
sales. Thus seed, the first link in the food
chain, will fall into the hands of a handful
of corporate giants who are accountable to
no one, whose functioning is totally non­
transparent and who control the entire food
and agricultural system (.RAFI Communique,
September 1996). As Bill Friebcrg, editor
of Biotech Reporter says,
Big agricultural company profits will need
to be squeezed out of farmers, one way or
the other. And there’s only so much blood
that can be squeezed out of the proverbial
turnip (The Biolech Reporter, January 1997).
The stronger the rights ofTNCs, the weaker
are thejights of farmers since it is the erosion
of farmers’ rights which creates TNC
monopolies.
The Trade Related Intellectual Property
Rights (TRIPs) agreement of GATT/WTO

2582

Farmers have been the original breeders
and seed supply has been based on farmers
contribution to conservation, breeding and
utilisation of diverse species and crop
varieties.
In India, 70 per cent of1 the seed supply
is still farmers’ seed supply. In most
industrialised countries, most farmers depend
on the seed industry. However, until recently,
they could save seed and exchange seed
among each other, under what was called the
‘farmers’ privilege’. Reccntchangcs in plant
legislation in Europe and the US have
however, allowed the seed industry to take
away the last remnants of farmers’ freedom
and enslaved them to the seed industry.
Farmers have been pushed into a.situation
of total lack of freedom to exercise their role
as breeders, or as members of a community
or producers, freely saving and exchanging
plant material.
On the other hand, seed legislation pushes
out farmers’ varieties and makes farmers’
breeding an illegal activity. The case of
farmer Josef Albrecht in Germany and potato
seed farmers in Scotland are examples of

how Seed Acts prevent farmers from
engaging in theirown seed production. Josef
Albrecht is an organic farmer in the village
of Oberding in Bavaria. Not satisfied with
commercially available seed, he developed
his own ecological varieties of wheat. Ten
other organic farmers from neighbouring
villages took his wheat seeds. Farmer
Albrecht was fined by the government of
Upper Bavaria because he traded in
uncertified seed. He has challenged the
penalty and the Seed Act because he feels
restricted in freely exercising his occupation
as an organic farmer by this law. During the
Leipzig conference on Plant Genetic
Resources, Josef Albrecht initiated a nonco-operation movement against seed
legislation that denies farmers the right to
freely breed and exchange their seeds in the
same church from which the democracy
movement against the erstwhile communist
state ofGDR was organised in Leipzig (Refer
to Bija, Nos 17 and 18).
In Scotland, there are a large number of
farmers who grow seed potato, and sell seed
potato to farmers. They could, until the early
1990s, freely sell the reproductive material
on toother seed potato growers, to merchants,
or to farmers. In the 1990s holders of plant
breeders’ rights started to issue notices to
potato growers through the British Society
of Plant Breeders, and made selling of seed
potato by farmers to other farmers illegal.
Seed potato growers had to grow varieties
under contract to the seed industry which
specified the price at which the contracting
company would take back the crop, and
barred growers from selling the crop to
anyone. The companies started to reduce the
acreage and reduce the prices. In 1994, seed
potato bought from Scottish farmers for 140
pounds sterling, was sold for more than
double that price to English farmers, whilst
the two sets of farmers were prevented from
dealing directly with each other. The seed
potato growers signed a petition complaining
about the stranglehold of a few companies
acting as a ‘cartel’.
They also started to sell non-cerlified seed
directly to English farmers. The seed industry
claimed they were loosing four million
pounds sterling in seed sales through the
direct saleof uncertified seed potato between
farmers (Tracey Clunis Ross. Growing
Problems: The Issue of Sovereigntv Over
Seeds).
In February 1995, the British Society for
Plant Breeders decided to proceed with a
high profile court case against a farmer from
Aberdeenshire. The farmer was forced to
pay 30,000 pounds sterling compensation to
cover royalties lost to the seed industry by
direct farmer to farmer exchange.
Existing UK and European Union laws
thus prevent farmers from exchanging
uncertified seeds as well as protected

Economic and Political Weekly

October 11, 1997

varieties. In the US also, farmer to farmer
exchange has been made illegal, as
established by the case filed by Asgrow Seed
Company, now owned by Monsanto, and the
Wintcrboers.
Dennis and Becky Wintcrboer are farmers
owning a 500 acre farm in Lowa. Since
1987, the Winterbocrs have derived a sizeable
portionoftheir income from ‘brown bagging'
sales of their crops to other farmers to use
as seed. A ‘brown bag’ sale occurs when a
farmer plants seeds in his own field, and then
sells the harvest as seed to other farmers.
Asgrow (which has plant variety protection
for its soybean seeds - A1957 and A2234)
started a court case against the Wintcrboers,
on grounds that its property rights were
being violated. The Winterbocrs argued that
they had acted within the law since accordi ng
to the Plant Variety Act, farmers had the
right to sell seed, provided that both the
farmer and seller were farmers.
The Federal Circuit Board interpreted
marketing as requiring “extensive or co­
ordinated selling activities, such as
advertising, using an intervening sales
representative, or similar merchandising or
retail activities”. The Supreme Court
disagreed and interpreted marketing as
holding forth property for sale, and hence
ruled against the Winterbocrs (refer to US
Supreme Court case no 92-2038, Asgrow
Seed Company's Winterboer, 1995). In 1994,
the Plant Variety Act was amended, and the
farmers’ privilege to save an exchange seed
was amended through Statutes 3136 and
3142, establishing absolute monopoly of the
seed industry by making farmer to farmer
exchange and sales illegal.
The absolute rights of the seed industry
and the absolute lack of rights for farmers
has been further established in Monsanto’s
“Round-Up-Ready Gene Agreement" for
Round-Up Ready soybeans. The agreement
is meant to enforce US Patents 4,535,060,
4,040,835 and 532,505. The agreement
prevents the grower fromsellingorsupplying
the seed or material derived from it to any
other person or entity or saving any of the
seed.
The agreement requires a payment of five
dollars per pound of ‘technology fee’ over
and above the price of seed and royalties.
If any clause is violated, the grower has to
pay one hundred times the damages, and this
is not deemed to limit the amount ofdamages.
Monsanto has a right to visit the fields of
the farmer at any time even without the
farmers' presence or permission for three
years after the agreement. Thus, the right to
property of the farmer is not respected. This
clause has made fanners extremely outraged.
As one farmer pul is, “We shoot intniders".
The agreement is binding even on heirs
and personal representatives of successors
of growers, but growers’ rights cannot be

Economic and Political Weekly

transferred without Monsanto’s permission.
Thus, Monsanto's rights exist over others
related to the farmer, but the farmer is denied
his/her rights to transfer the agreement.
In addition, the agreement has no liability
clause. It has no reference on the performance
of Round-Up Ready soybeans, and Monsanto
has no responsibility in case they fail to
perform as promised, or the ecological
damage caused by Round-Up. This is
especially relevant given the failure of
Monsanto’s genetically engineered cotton,
‘Bollgard’. In the 1996 season farmers were
forced to spray their fields to protect the
cotton crop from Boll worm, even though
the promotional material has stated that boll
worms could cause no damage to Bollgard
cotton.
The Round-Up Ready gene agreement is
thus the latest step in the seed industry
claiming far-reaching monopoly rights over
seeds and farmers, and bearing no ecological
or social responsibility associated with the
introduction of herbicide resistant or pest
resistant genes into crops. This one-sided
system in which seed companies have all the
rights and bear no social or environmental
responsibility, and farmers and citizens have
no rights but bear all the risks and costs, can
neither protect biodiversity nor provide food
security. It is a system of biodiversity
totalitarianism.
The Indian Plant Variety Legislation:
Will It Protect Farmers?

In the context of the global trends of
concentration of the seed industry and the
undermining of all aspects of farmers
freedoms through intellectual property rights
(IPRs), will the Indian draft legislation on
seeds and plants be able to protect the Indian
farmer?
The agriculture ministry has drafted a new
legislation entitled the ‘Plant Variety
Protection and Farmers Rights Act'.
However, the draft legislation is a ‘Farmers
Rights Act’ only in name. In substance it
totally undermines the concept of farmers
rights as it has evolved in the FAO
Commission on Plant Genetic Resources,
the International Undertaking on Plant
Genetic Resources, the Leipzig Global Plan
of Action, and above all, the Convention on
Biological Diversity (CBD). However, the
legislation has many elements which
reproduce the structures of the legislation of
industrialised countries, and hence can
undermine farmers rights in its name. The
first mechanism for undermining farmers
rights is in the definition of farmers.
Farmers are defi ned under Def(x) as Farmer
Cultivator and Farmer Conservor, but not as
Farmer Breeder. Def: (x)

Farmer, cultivator means a farmer who
procures seeds of new varietiesofcrop plants
for cultivation to whom the rights specified

October 11, 1997

in Clause 17 shall apply.
Farmer-conservor means tribal and rural
women and men or their communities who
have preserved wild species and folk varieties
of economically useful plantsand have added
value to them through selection and
identification of their useful properties.
The key role of farmers as breeders has
thus been negated in the draft legislation.
The legislation, therefore, reproduces the
northern bias. Instead of reflection the
position of the south, on the issue of farmers
innovation in the evolution of agricultural
biodiversity.
The industrialised countries have been
willing to recognise the role of farmers as
conservors, but they do not want to recognise
the role of farmers arc innovators. The
developing countries have been arguing for
the farmers role in innovation, and in the
FAO negotiations, they haye perceived
farmers rights as a means of regaining
control over the resources they arc losing
through the internationalisation of the 1PR
system. The draft act has been framed
from an industrialised country position, and
it is failing to use the progress made in CBD
and FAO on farmers rights to India's
advantage.
Farmers rights reflect farmers role in
breeding. Farmers varieties result from a
breeding stralegydifferent from the breeding
of seed industry. This breeding strategy is
different, not inferior or primitive to the
industrial breeding strategy. Recent work on
participatory breeding by International Crops
Research Institute forthe Semi-Arid Tropics
(ICRISAT) in India has shown that farmers
selection criteria are more ecologically
adapted than the criteria used by the seed
industry or by breeders.
The most frequently identified traits for
an ideal pearl variety by farmersin Rajasthan
were large panicle size and high tillering.
Tillering is of importance to farmers of
western Rajasthan as a component of both
grain and fodder yield, since tillering is
associated with better adaption to low water
availability and fertility conditions. Higher
tilleri ng varieties also provide better quantity
and quality of fodder.
Farmers breeding criteria thus focuses on
plant type or architecture for ecological
adaption and fodder yields, and also on taste.
Breeders neglect all these criteria that are
most significant to farmers breeding and
selection criteria.
Clause 17 on Fanners Rights states,
Nothing shall affect the farmers’ traditional
rights to save, use, exchange, share and sell
his farm produce of the protected variety
except sale for reproductive purpose under
commercial marketing arrangements. This
would not apply to contractual production
of different stages of seed by fanners as
contract farmers.
Since the right is restricted to exchange

2583

45

Patents: Issues
Confronting India
Biplab Dasgupta
I.

INTRODUCTION.

The parliamentary debate on patents and the anti-Patents
Amendment Act campaign conducted by the Left parties in recent
months has brought the issue of patents to public attention. But
even now the ideas about patents and about various long term
consequences of the changes (some already passed and some pro­
posed) in the patent legislation are far from clear in public mind.
While issues like rising prices, unemployment, the closure of indus­
tries, or those relating to privatisation evoke immediate interest, the
patent issue has so far eluded popular concern. Yet, the fact remains
that these changes in patent legislation have the potential to inflict
incalculable and irreversible harm to India's long term goals of selfreliant industrialisation and economic development. These would
make India perpetually dependent on foreign countries and their
multinational corpora tionsiMNC) for technology, and would rule
out any chance of ever catching up with the Western industrialised
countries. Whatever development would take place following these
legislation would be within the framework defined by the Western
■ _Cd»Ptries and their multinational companies, and under terms that
would be primarily to the advantage of the latter.

In fact, we are dealing with not one but four types of patent
issues: (a) the requirement under the TRIPs (Tr^e-relatedTntellectual Property Rights) agreement of April 1994, at Marakesh, to recast India's own patent legislation of 1970 to conform to the pre­
scribed universalised patent format, by 2005 AD, (b) to ginform to
transitional rules relating to EMR ( Exclusive Marketing Rights)
now, as a condition for India's membership of World Trade
Organisation (WTO), (c) to enact a bill on bio-diversity in order to

conform to the 1993 Covention on Biodiversity (CBD); this bill is
bfing prepared by the Ministry of Environment, and (d) townform
to TRIPs agreement provision for the protection of plant and animal
varieties, by way of patents or something suigeneris or a combination of both, to be sponsored by the Ministry of Agriculture. Of these
(b)
hasalready been passed by the Parliament and (c) and (d) are
also likely to be moved during the latter part of the current budget
session, (a) has become superfluous as (b) has, for all practical pur­
poses, brought forward the agenda for the year 2005 to the year
1995.
' \

In this paper we are dealing with some of the broader issues
that have arisen in the course of this debate. In Section II we are
critically examining the capitalist rationale behind patent right, in
Section HI the factors that led to the internationalisation of patent
regime under TRIPs agreement of 1994, and in Section IV the major
changes that have been forced on the national patent laws by the
TRIPs agreement. Section V deals with transitional rules, effective
from January 1995, and treated as preconditions for WTO member­
ship, while Section VI focuses on 'bio-piracy' being committed by
the MNCs. Sections VII and VIII examine various implications of
the proposed plant varieties and bio-diversity bills. Section IX dis­
cusses why MNC participation in Indian agri-business has pos­
sible fearful consequences Section X underlines India's possible role
in the coming review of the TRIPs agreement, while Section XI
summarises the main findings.

II. PATENT RIGHTS: THE RATIONALE
Patent right, like copyrights and trade marks, is an 'intellectual
property right'. This right relates to the mental work involved in the
invention ot products or of processes for making those products,
such as machines or medicines, but not to products themselves. To
qualify for patent right, an inventor has to prove that (a) his inven1
tion is unique, no one else has done before hi m whajhe has achieved,
(6)Tus invention is~non-obvious, that is not triviairnofsometlung
that can be easily deduced from what is already known, and (c) it is
somethingofpractical use; ari idea, a theory or a mathematical for­
mula cannot be patented, but the embodiment of these ideas in the
form of a product or medicine can be. If these three conditions are
met tothe satisfaction of the patent office after due verification, then
the application for the patent right is approved.

46

The patent right is a time-bound monopoly. Tjie right is an
exclusive one, that is given only to him and no one else. It excludes
others from the enjoyment of such right, and is valid for a specified
number of years, say 1U years. Within those ten years no one else
can produce this product without the permission of the patent holder.
It is a property in the sense that, like any other property, land, car,
house, the right can be bought and sold in the market, can be leased,
gifted away, mortgaged or transferred and disposed of in other forms.
The right is essentially a negative one, that is denying~others-the
righttcTdoanything with his patented product without his~cohcurrence, during the period of patent.
It has b'een found that about two-thirds of patented products
are never produced. They are patented to keep rivals away from the
field, while the firms concerned continue to produce similar prod­
ucts catering to the same type of consumer need. In terms of tradi­
tional welfare economics, patent right has the effect of reducing con­
sumer welfare on several counts—being a monopoly, by charging
monopoly prices, by not allowing the rivals to produce the same
product; and, Tn some cases, not producin^lTe^p roducFat~all: "

Although most national patent laws provide for 'compulsory
licensing', that is forcing the patent-holder to permit use of patented
product by others, that is not easy to implement. At the end of the
patented period any one can produce it without his permission, but,
as we shall see below, by then the patented product might become so
out of date that no one would be interested in it, while the patent­
holder might invent, develop and patent new products catering to
similar needs, thus maintaining his monopoly over the market.

The patent right is essentially a capitalist property right Tn the
pre-capitalist days inventions were treated as parts of an 'intellec­
tual common' without barriers to dissemination of information about
new art or technology. From the days of the invention of wheel or
stone tools, or the discovery of rice or wheat crops, or of metals such
as iron, brass and their uses, such technological information had
been more easily accessible. In many cases, as in the case the crop
varieties and handicrafts, micro communities concerned evolved
those over centuries, made regular incremental changes and adapted
those innovations to local environment and human needs. Acquisi­
tion and dissemination of knowledge were axiomatic and became a
common heritage of mankind from which the inventor profited as
much as any one else.

47

With capitalist development, many of those collectively owned
properties, whether a village common or a particular way to design
clotties, or land under communal cultivation, cameTobe privatised.
PaTenting, historically, is a part of that process. The underlying philosophy is that no one would undertake invention for its own sake,
and would require to be motivated by giving him a monopoly right
over his invention for a given period. Such patenting, it is argued,
would allow the inventor to recoup his cost of developing this prod­
uct and would compensate him for the risk he undertook, and, thus,
would encourages invention and development of new things and
new ways of doing old things. By rewarding the inventor in this
way, it was expected, patents would encourage others to go for in­
vention at the frontiers of scientific and technical knowledge.

On the issue, how far and to what extent patents provide in­
centive to invent, no clear and unambiguous answer can be given.
Overall, therejs no direct statistical association between the existence of patents and private R & D investment. Though stronger
patent laws usually encourage more patent applications, it can not
be said definitely whether those inventions would not have
materialised had there been no patent protection. As we have al­
ready noted, the history of mankind is replete with inventions hav­
ing deep impact on the course of development, for which the inven­
tors were not commercially rewarded. Many would argue that the
inventor, as a human being, is not solely driven by the urge to make
money. The satisfaction that his psyche enjoys following an inven­
tion is a much stronger motive force than the money it brings by way
of patent right.
Many of the earth-shaking discoveries have been made by men
of no apparent consequence but completely preoccupied and ob­
sessed with the quest for a particular invention, such as the flying
machine of the Wright brothers, or the concept of wireless by our
own Jagadish Chandra Bose. Later, many of these inventors, with
little resources and marketing opportunities to make their invention
a commercial success, have sold themselves and their patented prod­
ucts to MNCs.

In India's case, the green revolution technology in agri­
culture—that tripled food production in three decades—involved
no patent regime. The government agents purchased a few kilo­
grams of 'foundation seeds' from CYMIT of Mexico in cases of wheat
and maize,, and from IRRI of Manila in case of rice, both research

t

49

48

institutions, cross-bred and adapted those to the Indian environ­
ment in the agricultural universities, notably the one located at
Ludhiana, and then, after a period of 3-5 years, released those vari­
eties to the Indian 'seed farmers' who multiplied and sold those to
the Indian agriculturists. Though the technology of green revolu­
tion itself contains many of the ills of capitalist development in agri­
culture that we have discussed elsewhere, patent regime was not
one of those. While the MNCs spend a high proportion of their gross
profit on research and development, their main research direction
is towards development of profitable commercial use; more of the
fundamental research is undertaken by publicly owned institutions and universities.

I

i
|
■
'•
'

Along with capitalist development and individualisation of
other rights, rights on inventions have also been transferred from
the communities to individuals and companies. Each country has
passed its own patent law that is in conformity with its own require­
ments, given its level of development and technological advance,
and human and other resource endowments. Paiajfs laws have
also been guided by the national objectives of self-reliance or
industrialisation. Some have allowed unrestricted copying of for­
eign technologies, while some o thers have not. Some of the countries
have applied patent laws more or less strictly than others, in line
with their own development needs. But for each nation a different
patent law was enacted. A patent holder in country A had to apply
separately for patent rights in countries B, C,D, and so on, and subjected his application to scrutiny by the national authorities.

The fact is that, as evidenced by the global history of industrial
revolution, practically all the countries of the world, some more and
some less, have borrowed technologies of other countries and have
adapted those to suit their own conditions. Britain being the first
country to expprience-industrial revolution has probably borrowed
less from others, while Japan, at the other end, has probably borrowedmost. In 1945, at the end of the Second World War, that took a
toll of20mHlion lives and an equal number of handicapped youth,
Japan, a country poorly endowed with natural resources, having
no mines or plantations, with its towns razed to the ground and
with its factories reduced to rubble, began its journey back to
industrialisation in a novel way, by relying nearly exclusively on its
skilled manpower. 'Reverse engineering' made it possible for them
to start with the finished imported product, then to trace its elements
'find the relationships between those, and, thus, to find the technol­

ogy and using it to replicate the imported machines by improvising
with cheaper local material. In the process of 'copying' foreign tech­
nologies for 15 years, the Japanese skilled manpower acquired a
vast knowledge of technologies, and then translated that knowl­
edge into a series of inventions that in due course made it the second
largest industrial power in the world. Later South Korea and Tai­
wan , along with Singapore and Hong Kong, replicated the Japa­
nese technologies with their own local material and craftsmanship,
while, following the 'flying geese' model, these then spread to the
Southeast Asian countries beginning with Thailand.

This has always been the way technology has been dissemi­
nated in the past. In later years this practice was condemned by the
MNCs of US origin as 'piracy' and as a serious infringement of their
intellectual property rights. What is and what is not 'piracy' is of
course a matter of national law. As long as the national laws of these
countries did not describe the copying of foreign technology as ille­
gal, they were not violating any law, and the pejorative terms such
as 'piracy' could not be applied to them. To take such actions as acts
of piracy would be to take a Euro-centric view of culture and values,
as some have argued.
HI.TRIPS: INTERNATIONALISATION

OF PATENT RULES
It was in this context that the idea of an international patent
regime was mooted. The MNCs argued strongly that they were losinga great deal of money because of such piracies; only an uniform,
international patent system, monitored by a strong global authority,
could protect them from massive losses they were incurring due to
piracy. Some estimates were made in the late eighties to show that
the US firms were annually losing around $61 billion from such
piracy of their intellectual property; around $3-6 billion of those by
the chemical and pharmaceutical industry alone. [Lesser, 1991:1]
They felt that that their position at the cutting edge of technological
progress was being eroded by unauthorised copying of their intel­
lectual property. And while'export-back' of the'pirated products'
to USA could be restricted by US law, they felt that, such piracy
restricted their markets in the other countries. A globalised patent
regime was the only way to protect themselves from such 'piracy',
they argued. It was also argued that, by granting and enforcing
patent rights internationally, the owners of patents would no longer

50

require to keep details of their inventions secret, since such details
would form a part of their patent application, and, thus, the knowl­
edge itself would be disseminated more freely. On the other hand,
those opposed to it claimed that patents encourage a culture of
secrecy, as companies try to keep their inventions secret and safe
from poaching by rival companies. Industrial espionage is a fact of
life in the developed countries.
In 1990, these MNCs persuaded the government of the United
States to put eight less developed countries on Super 301 'hit list',
for violation of intellectual property rights; that is on the basis of
section 301 of US trade legislation that prescribed economic retalia­
tion against countries that discriminated against US companies. In
1988 IBM induced the government of USA to put Brazil on 'super
301' hit list, following allegations over a National Informatics law
that was designed to protect the national computer industry; the
threat was withdrawn only after Brazil agreed to amend that legis­
lation. In 1987 and 1988, similar disputes with South Korea and
Thailand on software protection were resolved after the 'offending'
legislation were amended. China too came under the threat of Super
301, and was asked to introduce patent laws, and to compensate
the US companies for the losses they suffered from piracy, a request
that was coldly ignored.
'Super 301' is actually the section 301 of US trade legislation,
under which the US Trade Representative (USTR) is authorised to
initiate economic sanction against countries discriminating against
the US companies. It usually starts with the publication by USTR of
the list of such 'offending' countries ('hit-list'), which is usually
followed by negotiations and, ultimately, capitulation by the coun­
tries concerned. [Low, 1995: 64, 87] One expert has described it as
'gyinboat diplomacy' [Watkins,1992^81], and another has found
this procedure closely resembling a criminal trial.
Another section of the US trade law, section 1303, known as
'special 301', only dealswith violation of intellectual property rights.
It requires the trade representative of the United States to identify
countries that "deny adequate and effective protection of intellec­
tual property rights, or deny fair and equitable market access to US
persons that rely upon intellectual property protection." [Low, 1995:
64-65]
Eventually, the MNCs pursuaded their government to take up
their cause during the Uruguay round of GATT negotiations (1987-

51
93), and to propose an international agreement on intellectual prop­
erty rights. There was, however, one major snag, since one inte'mational organisation, an affiliate of the United Nations, called World
Intellectual Property Organisation (WIPO) already existed in this
field. Therefore, to make intellectual property negotiable by GATT,
it was argued that only the 'trade-related' part of intellectual prop­
erty right would be discussed in GATT. The justification given was
that the protection of intellectual property rights would enhance
trade. The MNCs helped the United States Trade Representative in
the GATT negotiations by doing the home work for the government
and by leasing out their own quality manpower..Pfizer, Monsanto
and Du Pont, and Cargill Corporation were^mong the MNCs that
played a key role in advising US government on this issue.J5e
agreement signed at Marakesh, in April, 1994, on this subject, came
to he known as TRIPs (Trade-related Intellectual Property Rights).
WTO, the implementing agency for TRIPs, supplanted WIPO in due
course. This was no unique experience for an establishedUN agency.
Several other UN agencies have been similarly sidelined in the past
byJheJWoridBank associates, such as UNEP, UNCTAD and UNIDO,
in their own respective fields of environment, trade and develop­
ment arid industries. The signing of TRIPs agreement signaled the
victory of the sustained campaign by the MNCs for years against
what they described as 'piracy' of their intellectual property.
Through the TRIPs agreement an international patent regime
has been created. Its universal, standardised trade rules would
apply to all the meiriber countries irrespective of their levels of devel­
opment, natu ra 1 and human endowments and history. And, through
the founding of WTO in 1995 January, an agency hasbeen created
for monitoringits implementation. Every member country bias
been asked by WTO to amend its national patent law to conform to
that universal, globalised format. Under article 65, the developed
countries have been asked to change their laws within one year, and
the less developed countries within another five years, and an addi­
tional five years for legislation relating to pharmaceuticals, agro­
chemicals, fond^alloys etg/The least developed countries have been
asked to make those changes by 2005 AD.
Asjm international agreement, the TRI ?s agreement stands in
contrast with another international agreement—the Convention on
Biodiversity (CBD), signed in 1993 by 170 countries. The vasFmajority of the countries, including India, have signed both, oblivious
of their mutual inconsistency. While CBD declared that diversity

52

was the essence of life. TRIPs prescribed uniformity. And while CBD
assigned a key role to the collective rights of the micro communities,
to TRIPs the principal concern was individualisation of rights. In its
article 16.5, CBD specifically asserts that intellectual property rights
must not be in conflict with conservation and sustainable use of bio­
diversity, a provision that has been totally ignored by TRIPs agree­
ment.

Questions have been raised, how far this new patent regime
would allow effective competition or dissemination of information.
Some have taken the view that it departs from the competitive ideals
and further restricts the access of the poor countries to technology.
While the main thrust of GATT negotiations in the past had been
against protection of domestic industries by way of tariff or quota
restrictions, TRIPs is by its very nature a.protectiye arrangement. Its
article 39 provides for the protection of undisclosed information,
except where necessary for public good.
Another aspect of this globalised patent regime is its differen­
tial impact on countries at different levels of development. Vaitsos
estimated in 1972 that, in case of the less developed countries, 8085% of the patents are held by foreign interests, a figure confirmed
by a subsequent UNCTAD study in 1975. It is more than likely that
the proportion remains the same now or has actually increased.
According to a more recent document of WIPO, the citizens of
developed countries hold 95% of African patents, 85% of LA and
70%"6FSsia. According to another source, the vast majority of biofech patents are in the name of the companies originating in the
west—in 1990,36% of those were in the name of the US companies,
32% in the name of the European Community companies, and an­
other 23% in the name of their Japanese counterparts—an aggregate
of 91%.
(Given that an overwhelming proportion of patents originate
in the developed world, patent protection is likely to lead to a trans­
fer of income from the less developed to the more developed coun­
tries and , thereby, to widen income disparities between the two.
The less developed a country is, at the beginning of the globalisation
process initiated by WTO, the greater would be its difficulty in
pushing exports and in competing with products supported by the
international patent regime. Therefore, for these countries "although
the export market remains an important option, it can not be the sole
route." [Fishlow and Gwin, 1994:9]. As one Fund-Bank document
concluded , in 1994 : "Countries with less immediate scope for af-

53
tracting high-technology investment or exporting intellectual prop­
erty tend to regard TRIPS as a mechanism for transferring economic
rents to technologically advanced countries." [Development Com­
mittee, 1994: 71],

Another consequence, would be a shift away from the public
domain, as public funding of research and development for the
overall benefit of citizens would be replaced by private companies
solely concerned with their own profit.[Dommen, 1993:10] Gener­
ally speaking, most basic scientific research are undertaken with
public-fnnci7maihly~by the universities and researchjhstitutions
patronised by the goyemment. With public subsidy "once discovered, an invention can be disseminated yirtuallywithout cost"; and
it can be shown that such 'common knowledge 'products are effi­
cientto^finance publicly. On the other hand, as we have already
noted, MNCs use the fruits of such basic research by making further
investment on adaptive research for their commercial use' They cover
only a small part of the total cost of research but then claim patent
(that is monopoly) rights in order to exclude others from the fruits of
such research.

Constantine Vaitsos sees in the patents a a 'defensive strategy'
by foreign companies:"... to preserve markets that were once cap­
tured through exports and are subsequently threatened by competi­
tors and/or by the import-substituting strategies of the host coun­
tries. In this context, patents, far from providing a stimulus to for­
eign investment, appear to be a critical factor in blocking invest­
ments." [Vaitsos, 1972: 71] Nadal sees patents as a 'powerful instrument to achieve control over markets, even without direct investment? [Nadal, 1577: 229; Lesser, 1991759] Talkmg~abi5unhe
impacfofpateritsoh agriculture, Vellve sees possibilities of higher
agricultural costs and less welfare as a consequence of patenting of
agricultural technologies.

TRIPs forecloses for the less developed countries of today the
industrial strategy adopted by all the developed countries of today,
in the course of their development in the past, Japan and East Asian
countries particularly in recent years, of liberally using foreign tech­
nologies or resorting to reverse engineering, for their own techno­
logical and industrial advancement. For instance, Taiwan had loose
or no international patent or copyright law, and followed the tech­
nology curve and product cycle of Japan, often purchasing second
hand technology. As one leading scholar on East Asia commented:

55

54

"it is impossible to calculate how much of Taiwan's early growth
was fueled by the learning that went on while trying to reproduce
products protected elsewhere in the world." In the early 1980s US
Trade Representative's office accused Taiwan of being responsible
for 60% of counterfeit and pirated items in the world market
[Brautigam, 1995:170]
That option, good or bad, right or wrong, moral or immoral,
does not exist any more. In case of Japan and other East Asian
countries 'reverse engineering' was nearly always the first step
towards technological self-sufficiency, a path that India can no longer
take. 'Local content requirement' was another that the former used
to protect their nascent indigenous industries and to keep foreign
predators away; that too is banned under TRIMs (Trade Related
Investment Measures). In other words, India will have to do without
the two major props these East Asian countries used in their jour­
ney towards industrialisation.While the western countries and their
companies are generally shy about transfering technology to the
poor countries, there is a fear that IPR would further reduce such
transfer and access to sophisticated western technologies.
IV.

MAJOR CHANGES TO

NATIONAL PATENT LAWS

As we have already noted, patent legislation has a long history
in India. Beginning in 1856, the Indian patent law has been revised
a number of times. The latest, the Indian Patent Act of 1970, recognises
patent rights for a period of seven to fourteen years. Article 5 of the
Indian Patent Act provides that in case of inventions (a) claiming
substances intended for use or capable or being used as food or
medicine or drug, (b) relating to substances prepared or produced
by chemical processes (including alloys, optical glass, semiconduc­
tors and intermetallic 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. Even in
areas where patent is permitted, the government is empowered to
reject patent applications in national interest. Further, to prevent
acquiring patent rights solely with the objective of keeping the rivals
out, the government retains power to reject patent and/or to make
patented products compulsorily available to users.
One major change, introduced by the TRIPs agreement, has
been in relation to product and process patents. In Indian patent

legislation a distinction is made between 'product' patent and 'pro­
cess' patent. The Indian Patent Law of 1970 allowed process patent
but not product patent, for food, medicine, agro-chemicals etc.
'Process' means, say for a medicine, the combination of various in­
gredients—chemicals, medicinal plants, herbs and other biological
products, and so on—in specified proportions, and by using a tech­
nique or a way of combining those, that makes the production of
such medicine possible. It was, therefore, possible for an Indian
pharmaceutical company to buy a 'process' of making a particular
medicine, in exchange of royalty paid to the patent holder in a for­
eign country, but then to produce the medicine by using cheap, local
material. This way life-saving drugs could be sold in India at a
price that is one-twentieth of their price in the developed countries.
But this can not be any more, after 2005 AD, when the Indian
patent legislation would be recast according to the universal format.
Under article 28 of the TRIPs agreement, this distinction between
'process; and 'product' patent has been abolished. It is the product
that is patented, while the process directly used for making that
product is also implicitly patented at the same time. After 2005 AD,
the 'product' can not be made locally with cheap materials, and will
have to be purchased from the foreign companies at exorbitant prices.
If that patented product is produced by following a different pro­
cess, the onus of proving that lies with the company concerned,
while the assumption would be that the existing patented product
has been pirated (article 34). The hardest hit from this change would
be the pharmaceutical industry and its low income consumers. As
Economic Commission for Latin America and Caribbean commented:
"The rules on intellectual property are a particular cause of concern,
since they may raise the prices of medicines and other patented
products in the short run, but may also limit access to new technolo­
gies in the longer term." [ECLAC, 1994:44]. As another expert com­
mented: "As for the impact of life patents on the welfare of Third
world farmers, it is evident that patented agricultural technologies (
seeds, biocides, etc) will increase production costs." (Vellve, 1989]

Thirdly, under the Indian patent law the maximum period for
which patent right can be exercised in 14 years. Now TRIPs has
made it uniform and universal at 20 years. This change has come at
a time when there are weighty arguments for doing just the opposite
—of revising the period of patent rights downwards. These days
technologies change much faster, in a matter of three or four years.

57

56

To give an example, while radio and gramophone lasted for de­
cades, the black and white TV, coloured TV, cable TV, VCR, multi­
media, have come in quick succession, after every four or five years.
In this situation, by the time the patent period of 20 years expires,
there would be no takers for the obsolete technologies. Even comput­
ers do not last beyond 4-5 years, while software packages are re­
vised every two years or so. To revise patent period upwards to 20
years now implies that the MNCs would continue to control techno­
logical advance for ever. These MNCs have sufficient money power
and brain power to invest in research and development and to per­
petually maintain their lead over the less developed countries, so
that long before one period of patent would be over another - better
and more attractively packaged - product would be launched cater­
ing to similar needs.

Fourthly, whereas life forms are not patentable under the In­
dian 1970 law, after it is amended in line with the TRIPs agreement,
it would have to provide patent protection for the plant and animal
varieties or to take recourse to a sui generis system that would serve
more or less the same objective. Sui generis means something unique
ordigtjnct, but serves the same purpose. Among the rich countries
nearly all, including USA and Japan opted for patent system in case
of plant and animal varieties. The European Parliament was the
last, as late as May 11,1998, to adopt patents on life when a new law
on patents on biotechnology was passed. The Indian government is
also thinking along those lines.

practical use—by the country/government concerned. Nor would
the country/govemmentbe permitted to impose conditions that safe­
guard the interests of the domestic industry, e.g., by way of compul­
sory licensing rights. Every country is bound to give exclusive mar­
ketingrights to that patent holder, who has obtained patent any­
where in the world, as long as thaFcountry is a member of WTO.
Given that the overwhelming majority of patents are owned by the
rich country companies, the benefit of this provision would accrue
overwhelmingly to the multinational companies of rich country ori­
gin.
The second condition for WTO membership is popularly known
as'mailbox'. Under transition rules the members are asked to set
out application procedures as if such protection are already avail­
able. After the transition period had expired, those countries are
expected, under article 70.8 of the TRIPs agreement, to grant appli­
cations that were filed during the transition period patent protec­
tion for the remainder of the patent term, counted from the filing
date. This mailbox provision—meaning an arrangement for receiving patent applications, mainly from the multinational coun­
tries—assumes that our patent law would be amended by the year
2005TAD, arid until then this the government will receive patent
applications in order to determine the position of a company in the
queue. This is an extra-ordinary piece of legislation that is based on
the probability of the passing of another legislation in some future
date.

THE ISSUE OF BIO-PIRACY.
A major issue concerns patent rights on seed varieties.
Under the TRIPs agreement, plant varieties are expected to be protected in one of the following three ways—by patents, by a sui
generis system, or by a~combination of the two.

VI.

V.

TRANSITIONAL RULES

While, formally, under the Marakesh agreement, the amend­
ment of patent legislation for pharmaceutical and agricultural chemi­
cal products can wait until 2005AD, the members of WTO have been
asked to make certain transitional changes, as conditions for mem­
bership, that would have the effect of practically negating that con­
cession and making the universal format instantly operative. Under
Article 70.9, countries are required to grant exclusive marketing
rights (EMR), for five years. Under EMR, it would no longer be
necessary for a patent holder to apply separately to each country for
patent rights. Once a product is patented in any one country, it be­
comes automatically and universally applicable to all the member
countries of WTO, even without any examination of the validity of
their claims - in terms of their novelty, non-obviousness and having

Ever since the conclusion of the Marakesh agreement,
prompted by this provision, there has been a mad rush from the
large multinational firms to collect germplasms of wild plant variet­
ies located in the less developed countries. Hordes of such multina­
tional agri-business and pharmaceutical firms are descending on
India and other countries that are economically poor but rich in
biological wealth, and are scouring the countryside, forests and
bushes for plant varieties. These MNCs are taking selected speci­
mens out of the country, by means legal or illegal, and then, after
some tinkering and cross-breeding with other varieties, producing
new varieties that they are claiming to be unique and distinct, and

.
■'
4 ?

a
■ <■ 58
<G

■

- i then Patenting those in their own countries. Once patented such
° c varieties become the private property of die patent holder until the
c ->
(S time when the patent right expires. Under EMR, if the amendment
J ?
•
discussed above is passed, the patent holders of a product patented
w ’£ -?
any where in the world would drive out indigenous competitors
A
p ® ^om the Indian market.
£

This process of stealing and plundering the biological wealth
the tHrdwbrld countries, which accounts for nearlytwo-thirds
the total, by the multinational firms originating in the West, has
r ■p
come to be known as 'bio-piracy'TThe countries rich in biological
I®
~ wealth and poor in economic terms account for top ranks in terms of
C 'A
b mammal, bird and plant varieties. India figures eighth in rank in
c £)
' terms of both mammal and bird species, but no developed country
1 p ■ C - figures among the first eight. Countries topping these lists, such as
I Q -V Y IndonesiaTBrazil, Reru, Mexico, or Columbia, are also ahead of the
/ Q, _4-: developed world in terms of diversity of plant variety. Since 1971, a
£ p P? network of gene banks and international centres for the assembly of
J (p
gegnplasnigollection are operatmgrantf^yTrudmlneties the num­

o

'3 "
A ?
ip 'k

ber of such centres became 227, spreading over 99 countries that
account for 90% of landraces of such crops as wheat, cron, oat and
potatoes. But this does not take away the need for the conservation
of plant varieties in situ. Ex-situ preservation is possible only fora
fraction of the species, and preserve selected species not the eco­
system, and thus risks the loss of speices that are reliant on the
symbiotic relationship within an eco-system.

The most talked about case of bio-piracy has been the patent­
ing of neem tree, which isa part ot the Indian folk culture and
wTiose medicinal and other propeffieshad been known to tire In­
dian people from time immemorial.. Nor is such patenting confined
to Indian medicinal plants: e.g., the male sterile variety of Quinon, a
high protein cereal of Andean countries was patented in the United
States in 1994, though it was only a discovery. The irony of such
patenting is that patented products, processed by the foreign com­
panies, would now have to be purchased by Indians who are used
to getting those free in nature. Similar patent rights have been
claimed on other medicinal plants—e.g., haldi, salal, dudhi,
gulmendhi, bagbherenda, karela, amla, jar amTa, anar (pomegranate), rangoon ki bellcastor, vilayeti sisham, chamkura—whose prop­
erties had been known to Indians, as in the case of neem, from time
immemorial. However, in case of haldi, another highly important
plant with medicinal properties, the US medical school was forced

59

to revoke patent on its use for healing wounds, in 1987, after Indian
protest.

Recently Ricetec, a Texan seed breeding company collected some
specimens of the basmati rice plants from India and Pakistan, then
cross-bred those with some high yielding varieties, and claimed
that it had produced a new rice variety. Earlier they were selling
their products as 'texmati' (that is basmati of Texas) or 'kasmati'
(basmati of Kashmir), playing on the word 'mati' to attract consum­
ers. Now they have dropped those pretensions and are selling their
rice as 'basmati' and have patented their product in the United States.
Thedeveloped world's double-speak is also revealed~nTthe
way they refer to the 'common heritage of mankind'. The developed
countries demand that all germplasms be recognised as a public
resource and a part of the herirtage of the mankind. That would give
them the right to collect germplasm in the wild or as landrace vari­
eties without compensation on the ground that these belong to the
'common heritage of mankind'. But, after improving the variety
through research and experimentation, they do not hesitate to sell
these against payment, to poor countries including those from which
such germplasm had been originally collected. This developed coun­
try attitude has led the less developed ones to make two specific
demands: first, that the companies collecting those germplasms
should pay for those to the local communities to which they belong,
and, second, in line wi th the 1993 Convention on bio-diversi ty, that
these should be treated as coming under the sovereign right of a
nation and not as something 'international' and belonging to no­
body in particular.
One way of countering this type of bio-piracy is to take recourse
to the concept of 'prior art', that is some evidence that what is being
claimed as 'novel' in the patent application had been known al­
ready. The major difficulty here is that the US courts insist on docu­
mentary evidence of such 'prior art' that is difficult to find in a
society where 'oral tradition' dominates. Another solution to the
problem of bio-piracy that suggests itself is to patent the Indian
plant varieties in India itself, before it is done by any one else, to
save those from poaching. That is to play the game by the rules of
these predator firms, but quickly and more efficiently before further
damage was done. The snag in following such a step is that patent­
ing involves individualisation of rights, whereas plant varieties like
those relating to neem, haldi or basamati were evolved by a large

61

60
number of small communities of farmers, spread over a large area,
working collectively and sharing their discoveries with others, and
over a period of several centuries. How would one find the 'owners'
of those plant varieties in terms of intellectual property rights, when
all those who played some role in their development—through
selection and adaptation of plant varieties, but without erecting any
barrier to the flow of information within or between these communi­
ties—constituted what could be described as, following Vandana
Shiva, 'Intellectual common' ?
Many argue that life can not be patented, or otherwise sub­
jected to individual ownership; companies like Ricetec are not 'in­
venting' anything, but are merely 'discovering' what had been
known in India or Pakistan from time immemorial. These are not
like machines to be invented, but life forms that can not be created.
Rights on those varieties belong to these communities. Obviously
communities, working separately and independently, can not exer­
cise their rights on their own and protect those against agencies
such as MNCs which are out to encroach on those. In a sense the
government of a country holds that sovereignty as the custodian of
the interests of those communities and individuals Jiving in those.
Several UN resolutions, such as the 1975 UN resolution on Towards
a New International Economic Order, and the 1993~~Conyentiqn on
Bio-diversity had recognised those rights of the governments over
natural, mineral and biological resources.

One opinion is to work out a balance between the right of ac­
cess by foreign firms for the purpose of what they describe as 'bio­
prospecting' and the recognition of the right of the commnity to this
biological resource. About a quarterofthe pharmaceutical products
marketed by the US firms are plant-derived, but thecommuhrties
remain unpaid despite such massive~use~of their resource. Sbme
would prefersome compensation, or benefit-sharing or royalty to be
paid for this use to the community. [Swanson, 1997:103] Some oth­
ers are skeptical that adequate compensation can be estimated or
paid given the gross disparity between the two sides—the commu­
nity and the company in terms of resources, knowledge and influ­
ence.
On the other hand, there are those who feel that, without some
form of recognition of individual rights—in the form of patent or
some suigeneris system—given the international climate, India
would lose out. The international climate was not that unfavourable

until recently as, unlike United States and Japan, Europe did not
recognise patent onsite form/The European patent law, under ar­
ticle 12(la) excluded fortenyears from joining convention, food and
pharmaceutical products as such and horticultural and agricul­
tural processes in general. India and other third world countries
could seek and possibly obtain the powerful support of the Euro­
pean countries during TRIPs review in 2000 AD. Patent laws in
every European country, based on European Patent Convention
(EPC), excluded in absolute terms patents on plant and animal vari­
eties in order to preserve free access to research and develop a di­
verse range of options. But, since 11 May 1998, Europe has accepted
patenting of life form.
---------- "
VII.

SUI GENERIS, PLANT VARIETY

LEGISLATION AND UPOV

As things stand now, following the TRIPs agreement, India
will have to provide patent protection to plant varieties by 2000 AD,
or choose a sui generis system, or a combination of both. Sui generis
systemTs some tiling; that is unique, that a country has adopted on
its own, but which provides protection to plant varieties. This
provision sounds quite generous, but when it comes to brass tacks,
it does not make much difference from the patent system. As in the
patent system, the understanding in Fund-Bank-WTO circle is that
sui generis too would allow for individualisation of rights on plant
varieties. Establishment of private property in'village common, wa­
ter, plant and other major inputs of agriculture, and even on na­
tional parks and highways, in place of cpmmunal ownership, is
considered by this trinity to be essential for safeguarding environ­
ment. A combination of privatisation of rights, appropriate pricing
that reflects the scarcity value of a product, and an efficiently func­
tioning market, they claim, can solve all.the environmental ills. Since
we have elaborately discussed tliis issue elsewhere, here we are
desisting from engaging ourselves in an analysis that would show
why this view is wrong, and is indeed dangerous to our biological
wealth.

One alternative usually suggested in India, as a kind of sui
generis, is to adopt.UPOV (International Plant Breeders' Rights Con­
vention), a soft patent regime that arose from an international con­
vention in 1961, supported by 37 countries. UPOV was twice
amended, in 1978 and again in 1991, and the option to join the

62

63

1978 option closes in April, 1999. The official arguments given in
support of UPOV are as follows: (a) that it would give the country
two alternatives—UPOV and WTO-led TRIPs—to choose from ,
that
(b)
this would encourage investment in plant breeding from
domestic and international sources, as breeders would get protec­
tion with minimum formalities and costs, and (c) that it would help
to avoid numerous bilateral agreements, while the need for a sui
generis in place of patents would be satisfied.
A major criticism of UPOV is that i t protects the interests of the
plant breeders, by giving it monoply rights that are analogous to
patents, while ignoring those of the farmers and making those sec­
ondary to the former. Under its 1991 version, if the farmer fails to pay
royalty his harvest can be seized by the breeder. The right of the
breeder over the plant variety is an individualised one, while the
community rights have been ignored and the right to reuse and
exchange seed by the farmers has been severely restricted. UPOV too
is in conflict with CBD, as uniformity ofseedsisa criterion for the
recognition of the rights of the breeders. A major reason for concern
is that already 40% of the seed market is in the hands of ten compa­
nies, and UPOV might reinforce this tendency towards concentra­
tion. This would give MNCs legal ownership of plant varieties that
contain genetic information obtained from farmers' own fields, ob­
tained in many cases without paying any fee.

There are complains that plant breeders are charging high prices
under UPOV. This international agreement has allowed plant breed­
ers to claim exclusive marketing rights in varieties developed them
by crossing the previously existing ones. This has revealed a seri­
ous dichotomy - whereat access to raw germsplasm, gathered from
the poor countries and stored in gene banks is virtually free, the
improved germplasms patented in the rich countries by rich coun­
try companies are being sold to the less development countries at
high prices. This controversy led, in 1986, to the less developed
countries' seeking recognition of 'farmers' rights', and for an inter­
national mechanism to give effect to it, though so far nothing con­
crete has been done to achieve this.

The first draft prepared by the Ministry of Environment, after wide
consultations, was brushed aside and a new draft was prepared on
the basis of the report of an expert committee, headed by Dr. M S
Swaminathan, the famous agricultural scientist. The draft gives
easy access to foreign firms, including those to 7500 highly valued
indigenous medicinal plants, in exchange of a fee to be paid to the
community in the name of 'benefit-sharing'. Though it is projected
as an attempt to balance the rights of the foreign firms to have access
with those of the communities where such plant varieties are lo­
cated, as in most other cases , there can be no level playing field
between the two sides. The idea of benefit-sharing would allow the
all-knowing and powerful multinationals to pay a small amount to
the innocent and unknowing communities having no idea of the
economic price of their resources, in order to gain the right of 'bio­
prospecting' and thus to arrogate to themselves the rights of these
communities. In the long run, this benefit-sharing might force India
to pay out a great deal more in the form of royalties for buying those
plant varieties, now patented elsewhere, .than what the country
would obtain from such paltry 'compensations'. One suggestion is
to force the companies concerned to compensate the farmers from a
fund created from royalties earned from such patents by the compa­
nies.
Further, this draft does not explicitly recognise communities,
'
but talks about 'persons' with whom benefits would have to be shared
by the companies. The amount of compensation for access, to be
paid by the foreign companies, would be decided by a national bio-,
diversity authority to be set up under the bill. It also stands in con- / ~
trast with an article in Panchayat (extension to the scheduled areas)
Act of 1996 that provides that state legislation should be in tune
with traditional management practices relating to community reV
sources. Worse still, it does not explicitly take into account national
sovereignty and indigenous knowledge, and, in the name of conser­
vation, might even be used (as in the case of forest legislation) to
deny access to the local communities.
IX.

VIII.

BIO-DIVERSITY LEGISLATION

A bio-diversity legislation is expected to fulfil two require­
ments : (a) conforming to Convention on Bio-diversity (CBD) of 1993,
and (b) safeguarding Indian biological wealth against bio-piracy.

ROLE OF MULTINATIONAL

AGRI-BUSINESS FIRMS
In India, there is still little awareness of how powerful, and
how potentially harmful, these multinationals are. These are very
large entities, the largest among them having annual turnover fig­

64

65

ures that are close to the national income of a country as big as India
with 96 crore people. They offer the highest salaries and, therefore,
attract the best of brain-power in the world: engineers, mathemati­
cians, chartered accountants, managers. Because their tentacles are
spread to practically all the countries of the world, through affiliates
and subsidiaries, they aim at profit maximisation at the global level,
often at the cost of the interests of the host nations, and can effec­
tively hide their illegal transactions in terms of 'book-keeping' trans­
fers between affiliates.

They also operate vertically—in case of an oil company, from
searching for oil to its marketing through development, production,
refining and transporting—and also horizontally, in collusion with
other oligopolistic corporate giants operating in their fields. Empiri­
cal evidence amply confirms their refusal to transfer technology or
in bearing risk in entirely new areas. The Indian enterprises would
be no match for them in competition, and there could be no level
playing field between these giants and the Indian dwarfs, as ob­
served by Mahatma Gandhi in another context.

The new patent regime would provide them with monopoly to
sell their commodities in Indian market, and no Indian or compet­
ing foreign enterprise would be able to market those in India. Prod­
uct patent rights together with the monopoly marketing rights in the
hands of the multinational companies would become a lethal com­
bination that would destroy Indiar). industries and eliminate any
hope of achieving self-sufficiency or development The period of
patent, at 20 years, would be too long, and, by the time it ended, the
multinational companies would be ready with some new, more fash­
ionable, more attractive and more user-friendly to reduce the release
of patent right to a matter of no consequence. In East Asia the gov­
ernments carefully kept these predators out of the way of the na­
scent indigenous enterprises in the same field, by invoking 'local
content requirements' that made heavy demand on the foreign en­
terprises in terms of deployment of local manpower, material and so
on, or by high tariff, prohibition or quota restrictions. Such local
content measures can not be implemented now by India, as TRIM
(Trade related Investment Measures) under Marakesh agreement
rules out those and demands that the foreign companies be accorded
'national treatment' and no discrimination be practiced against
them.
Even during the British colonial rule the British economic

interests seldom directly participated in agricultural production,
except in plantations located in sparsely populated areas. Now
they are planning to enter India's countryside in a big way, by tak­
ing part in waste land development and also by linking their pro­
cessing activities (e.g., with respect to tomato) with direct agricul­
tural production. As they have done in other countries, they will
follow two parallel systems - plantation and contract production. In
plantations they will work with their own hired labour, while under
the contract system they would give inputs and technology to the
contract farmers, would expect them to operate under their specifi­
cation and norms, and to deliver their products to the company. The
prices of both inputs and outputs would be determined by them and
imposed on the farmers, who would lose their independence.

Apart from production directly linked to processing, for the
rest of the agricultural economy the multinational agribusiness firms
wish to become the main supplier of seed and other inputs. Here too
they would try to make the farmer completely dependent on their
supply. Recently, these agree-business companies have developed
what is significantly known as the 'terminator technology'. This
technology makes the seeds sterile, that is incapable of being used
for the second time for germination. The objective behind develop­
ing this technology is not to allow the peasants to use the same seed
again and again and to force them to go back to the multinational
companies for new seeds every year. While agricultural is synony­
mous with regeneration, renewal and reproduction, this teclinology
strikes at the base of such predominantfeatures of agricultural life
making seeds infertile and unsuitable for multiple use. More dan­
gerous is the fear that, even in cases of those who do not use this
'terminator' seed, pollens from the latter would spread over a very
large area and would make even other seeds infertile.

Apart from the terminator technology, those relating to fertiliser
and chemicals are also making the peasants further dependent on
MNCs for supply in place of self reliance practised in the past. They
are developing weedicides that are specific to a particular seed va­
riety that it would not harm. Such weedicides would make it pos­
sible for the farmers to spray chemicals even when the crop is stand­
ing. Similarly, fertiliser and pesticides specific to a particular seed
variety is being produced. In other words, the farmer would be forced
to depend exclusively on a package of seeds, chemicals and fertilisers
supplied by a particular MNC.

67
Over time, the concerned MNC, by investing an enormous
amount on R & D, will do everything to make the peasants perpetu­
ally dependent on it, by producing new packages every few years.
As we have noted, in the background of the spate of suicides in
Punjab and Andhra, many of the chemicals are spurious and adul­
terated, while often these MNCs push the farmers to use chemicals
more than is good for the plant itself. In the mid-1980s, 30 farmers of
two of the most prosperous cotton growing districts of Andhra com­
mitted suicide because the pesticides killed off the main target pest,
which allowed other pests suppressed by the main paste grow at an
alarming speed and destroy the crop.

X.

TRIPS REVIEW IN 1999

What should India's position be on this issue? It is possible to
take a mini-max approach, striving to undo as much of the damage
done to us as possible, while keeping an eye on the minimum that
can be achieved even within the WTO framework should a drastic
revision of the Marakesh agreement becomes politically infeasible.
Much depends on the political will of the government. While con­
forming to the 1994 Marakesh agreement and recasting the domes­
tic patent law in line with the international patent regime, there is
some room for maneuver by making skillful use of some of the ar­
ticles of the agreement. Virtually all patent laws exclude mere ideas
or theories; patents are intended to apply to the embodiment of those
ideas. The national laws can be so drafted that the flow of ideas is
not obstructed.

Further, under articles 27.2 and 27.3 of the Marakesh agree­
ment, the countries may deny patent protection., for reasons of pub­
lic order, morality or for protecting human, animal or plant life or for
protecting environment. Protection can be denied for certain inven­
tions such as those which involve "diagnostic, therapeutic and
surgical methods for the treatment of humans and animals, and
plants and animals (other than microorganisms) and biological pro­
cesses (other than microbiological processes) for their production".
[UNCTAD, 1994:189; Schott, 1994: 118] Reference to public order
and morality virtually permits tire member countries to do what
they had been doing already, as being acceptable to public moral­
ity. 'Immorality' can means things like obscenity, blasphemy, breach
of peace and immoral activities, while the French counterpart of
'public order', 'ordre public' is closer to 'public policy' than to 'pub-

lie order'. The United Kingdom used this provision to refuse a patent
on contraceptive device twice. Until now there has been a tendency
on the part of the Indian government to go overboard in their enthu­
siasm in implementing the Marakesh agreement, e.g., on subsidy
withdrawal. This tendency has to be reversed.

Under the Marakesh agreement, article 27(3)(b) of the TRIPs
agreement was to come for review in 1999. Now that review has
been postponed till April, 2000. Still it is only about a year away.
This review will give the less developed countries the opportunity
to rectify at least a part of the injustice done to them during Dunkel
negotiations of 1991-93, and the Marakesh agreement of April, 1994,
and to create a momentum for further and more drastic changes in
their favour in the future years. The bargaining power of the poor
countries was at its lowest, following the disintegration of the
Soviet Union, when the Dunkel negotiations were going on, and the
third world countries including India played virtually no role in
pushing their own interests. Whatever negotiation was conducted
was between Europe and the United States, with Japan also playing
a vital role. Among the third world countries only the East Asian
ones—South Korea, Taiwan, Hong Kong and Singapore—were con­
sulted some times, but not India or other countries. The Marakesh
agreement was imposed on them as a fait accompli. By now, in 1999,
the world environment has changed, and the Southeast Asian cri­
sis has exposed the hollowness \f the theology of the unholy trinity
of World Bank, IMF and WTO. There is now a greater understand­
ing of the harmful implications of Marakesh and WTO among the
third world countries.

What India can do to rectify the injustice of 1994-95? The an­
swer is: India alone can do little. In world trade negotiations, more
than the number of countries on either side of the argument, what
counts is the share of a country in world trade. India's share is a
dismal half of one percent, between 0.5% and 0.6%. At the time of
independence it was 2.7%, that is five times more. The long reign of
the Congress party governments over the last half century has suc­
cessfully brought down India's share to this shamefully low figure.
But while India alone can do very little, it can combine with others to
do a lot. Rather than being brow-beaten by the United States and
WTO and bending our knees, the time available now should be
used to mobilise opinion among the third world countries so that
the TRIPs review of 2000 AD becomes favourable to the poor coun­
tries. India has to play a leadership role, a role that India played in

69

the Fifties, and one that small countries like Sri Lanka or Bangladesh
can not play. And pending that review India should not give in on
a crucial matter like these two WTO preconditions on EMR and
Mailbox, that will weaken our resolve and bargaining power.
The very first step should be to form a South Asian Common
Market or Free Trade Association (SAFTA). During the United Front
regime these countries agreed to make SAFTA operational by the
year 2000 AD, and a grea t deal of progress was achieved in terms of
identifying complimentary trade possibilities. A major fall out of
the mushrooming nuclear cloud of Pokhran has been to undermine
the efforts of the United Front government, to build bridges with
India's neighbours, leading to the establishment of a South Asian
Common Market by 2000 AD. The trust needed for such economic
cooperation has virtually disappeared since. Still, there can be no
retreat from such a goal. Such customs unions or trade blocks allow,
even within the framework of WTO, trade concessions to block mem­
bers that are not otherwise available. Such advantages are taken by
the developed countries who have formed their own trade blocks such as European Union or North Atlantic Free Trade Association
(NAFTA).
There are also similar trade blocks among third world coun­
tries, e.g., ASEAN of South-East Asian countries, Andean Pact of
some Latin American countries, CACM (Central American Com­
mon Market), Caricom(Caribbean Community), Mercosur (Mercado
Caomu del Sur), and, in Africa, PTA (Preferential Trade Area for
Eastern and Southern Africa), UDEAC (Union Douaniere et
Economique de 1'Afrique Centrale) and West African states. There is
no reason why we should not do what others are doing already, by
taking the leadership in forming a trade block of South Asian coun­
tries. Once such a block is formed it will be easier to negotiate with
ASEAN, Andean Pact or OAU (the Organisation of African Unity)
for forming a bigger trade alliance. Negotiations can also be initi­
ated within fora like G15, G77, and with countries like China, Brazil
and Russia, as well as the European ones such as Italy, Belgium,
Denmark and Holland, to create a new international climate to
amend, if not to eliminate entirely, injustice done to the poor coun­
tries by way of 1994 Marakesh agreement.

XI.

CONCLUSIONS
This paper, dealing with various implications of the proposed

changes in patent legislation under the TRIPs regime, underlines
the serious risk of total technological dependence on foreign MNCs
that India and other poor countries carry. It also proposes what
India can do, by mobilising third world opinion during the coming
review of the TRIPs agreement, to rectify, at least in part, the injus­
tices that have been done to them by the Marakesh agreement of
1994. A major implication of this paper is to reject the two major, and
mutually contradictory, rationale behind India's meek compliance
with TRIPs—that (a) India has nothing to fear from inter­
nationalisation; it is so full of intellectual power that, by taking ad­
vantage of the new patent regime, India can flood the world market
with its own patents, and (b) India is weak, can not take on the
economic might of the West, and has to take the transitional rules
and other aspects of the TRIPs as a fait accompli. The government
has carefully avoided a national debate on this issue, despite plead­
ing by the Law Commission and various research bodies for an indepth clause by clause examination of the proposed changes, scared
as it is of informed public opinion on such a sensitive issue that has
irreversible, harmful bearings on the future course of India's devel­
opment. Nor has it incorporated in the recently passed patent amend­
ment bill the safeguards that even TRIPs agreement embodies, or
followed the US policy of disregarding international legislation that
is inconsistent with national law or self-interest.

Bibliography
Brautigam, Deborah , 1995, "The State as Agent: Industrial
Development in Taiwan", 1952-72, in Stein, Howard (ed.), Asian
Industrialisation and Africa-Studies in Policy alternatives to struc­
turaladjustment, St Martins Press, London, Chapter 5, pp 145-181.
Development Committee, 1994,48th Meeting, Report No 33,
World Bank, Washington. DC.

ECLAC (UN Economic Commission for Latin America and the
Caribbean), 1994, Policies to Improve Linkages with the Global
Economy Santiago, Chile.
Fishlow, Albert and Gwin, Catherine, 1994, "Lessons from the
East Asian Experience : overview", in Fishlow, Albert;
Gwin,Catherine; Haggard, Stephen, Rodrik, Dani; and Wade, Rob­
ert, Miracle or Design : Lessons from the East Asian Experience,
Overseas Development Council, Policy Essays No 11, Washington

INDIAN PHARMACEUTICAL INDUSTRY

Indian Pharmaceutical Industry: Effect
of Proposed Product Patent Regime
Amit Sen Gupta
US statesman Thomas Jefferson remarked, “Ingenuity should re­
ceive a liberal encouragement”. Jefferson introduced the first patent bill
to the US Congress in 1790. It became the Patent Act, upon which US
patent and trademark law is built. His comment sums up a popular
notion of intellectual property rights, one that is promulgated to a large
extent by industries. Discoverers and inventors are thought to deserve
special reward or privilege because of the benefit of their discoveries or
inventions to society. Benefiting society is not considered a reward in
itself, and, true to classical economic theory, certain incentives-fire heed­
ed to encourage invention or innovation.
'
TTte strongest proponent of strengthened intellectual property pro­
visions as part of the World Trade Organisation (WTO) is the United
States. Not coincidentally, the companies mosLconcemed about intellec­
tual property are U.S.-: based. Individual companies, as well as industry
groups like the Pharmaceutical Manufacturers Association (PMA) and
the Intellectual Property Committee (EPC), a coalition of 13 major U.S.
companies, including IBM, DuPont, General Motors, Merck and Co.
and Pfizer, had strongly lobbied with the U.S. Govt, on intellectual
property issues.

The industrialized and developing countries’ conflict over intellect
tual property protection of pharmaceuticals mirrors the. broader conflict
over protection for high technology. High technology multinationals claim
“imitation goods”, many emanating from the Third World, cause them
to suffer large losses. The industrial countries do not say, however, that
in order for the multinationals’ to recover those ‘losses’ a massive
transfer of income from the poor countries to' the rich would be re­
quired. Third World countries dispute these claims. They point to the
historical record of the industrialized countries, most of which did not
have strong intellectual property laws'when they were developing. For
Dr.Amit Sen Guota, Secretary, Delhi Science Fonim, New' Delhi.

407

example, the United States in the nineteenth century and Japan through
most of the twentieth engaged in exactly the sort of activities the United
States now labels piracy. More recently, the “four tigers” of East Asia - Taiwan, South Korea, Hong Kong and Singapore — industrialized
with the help of weak intellectual property protections.

The WTO agreement includes provisions which require changes to
be made in the Indian Patents Act of 1970. Such changes would have a
direct bearing on the Drug Industry in the country. In fact the Indian
Drug Industry has especially been targeted by the Pharmaceutical MNCs
for alleged violation of the principles of “free trade”, which supposedly
provides the philosophical underpinning of the WTO agreement. It is
another matter that the principles of free trade in an unequal world are
designed almost entirely to benefit those who are more equal than oth­
ers, namely countries in N.America, Europe and Japan. Moreover a
strong Patent regime, as outlined in the WTO agreement is harmful to
the interests of not only the Third World but also a large number of
people in the developed world.

Intellectual property rights (IPRs) come in five varieties: patents,
plant breeders’ rights, copyrights, trademarks and trade secrets. This
paper seeks to focus on the area of patents, and more specifically on the
possible impact of a change in the 1970 Indian Patent Act, in line with
the WTO agreement, on the Pharmaceutical Sector in India. The major
substantive change being sought by the U.S., European Union and Ja­
pan in the Pharmaceutical Sector is a switch to a Product Patent Re­
gime from the present Process Patent Regime. The shift from a process
■patent regime to the recognition of an exclusive right on production and
commercialization, is likely to lead to changes in the market structure
and in the conditions for access by consumers to pharmaceutical prod­
ucts. The implications may be examined with regard to drug prices,
impact on health care and self reliance in the Indian industry:
Impart on Self Reliance
The Indian Drug Industry has built up a base for production of
almost all bulk drugs from basic stage using innovative process technol­
ogies. A major role has been played by various CSIR laboratories. This
has been possible because of Indian Patent Act of 1970 which allows
Process Patents and not Product Patents in the area of vital areas in­
cluding drug production^ One of the proposals in the WTO agreement

408

SOCIAL ACTION VODK OCT.-DEC. 199S

requires India to change its Patent Act to include Product Patenting for
a period of 20 years. If the Indian Patent Act is changed in line with the
WTO agreement,.in one sweep this base will become meaningless. To­
day the Industry is not, by and large in a position to invest in develop­
ment of new product technologies. Investment required to develop a new
product with definite therapeutic advantage is far in excess of the total
turnover of most Indian companies. Compare the present R&D expendi­
ture of about 100 crores annually to the estimated cost of development
of a new drug, which is about $ 300 million or roughly Rs. 950 crores.
In fact, anticipating change in the Patent Act many MNCs have closed
down their R&D facilities in India. These include the facilities run by
Ciba Geigy, Bools, Hoechst and Rhone Poulenc. Many have also start­
ed the process of winding up their bulk drug manufacturing facilities in
the country, anticipating change in the Patents Act. For such a change,
where importation would be seen as working of a “patent”, would mean
that the interests of MNCs are better served if they directly import
drugs and earn “super” profits through the time tested method of “trans­
fer pricing”. A change in the Patents Act will greatly help MNCs, who
control new product technologies, to take over the Indian market and
“rig” drug prices and drug availability at will.
There is a danger of regressing to the pre 1970 situation when the
Indian drug market was controlled by MNCs and drug prices in the
country were one of the highest (in real terms) in the world. The Ameri­
can Senate Committee (Kefauvcr Committee) had in fact cause to com­
ment on this situation in the 1950s’. The situation then was to an extent
saved by the development of a strong Public Sector (HAL & IDPL)
especially in antibiotic production. With progressive emasculation.of the
Public; Sector even that “safety net” does not exist. Today the Global
Drug Industry is poised for a new “revolution”, using biotechnologically
engineered drugs. At this stage if we change to a product patent regime,
we shall eventually hand over the Indian Drug market to MNCs who
control this new emerging technology. A major section of Indian Indus­
try in the pharmaceuticals sector had opposed a change in the Indian
Patents Act of 1970. But today some have changed track and many
seem ready to follow suit. They see an opportunity in tying up with
MNCs as junior partners to target the huge generics market in the
United States. While this may provide some immediate benefits to a
few Indian companies, in the long run their very survival is at stake as

INDIAN PHARMACEUTICAL INDUSTRY

409

the “uncaged” MNCs prepare to take over the Indian Market once
again.

Implications of a product patent regime are not limited only to the
area of technological self reliance. Technological dependence on MNCs
is the proverbial “thin edge” which will be used by MNCs to establish
their suzerainty over the Indian Drug market (a position they had lost
after the mid seventies). They will then again start charging exorbitant
prices for drugs in the Indian market. If we refer to Table I, we can sec
that between 1985 and 1996 the categories of drugs which show the
maximum rise in sales are categories which include overwhelming ma­
jority of drugs still under Product Patent or whose Product patents have
expired recently. In other words if we had a product patent regime
today, the drugs showing fastest growth would have been priced way
beyond the capacity of the average consumer.
It has been argued in certain circles that by agreeing to change the
Indian Patent Act, essential drugs will not be affected. This again is not
borne out by facts. It needs to be remembered that there is no absolute
entity called essential drugs. New drugs are constantly being introduced
and old drugs become obsolete. It is totally unacceptable to argue that
the poor people of India shall have to remain satisfied with old near
obsolete drugs even when better alternatives are available in the World

Market.

Impact on Health Care

Let us examine here three real scenarios which affect the poorest in
this country - all possible fallouts of changes in the Indian patents Act.
1)

There is today a resurgence of Tuberculosis in the world related to
AIDS. These new cases arc almost always resistant to convention­
al ant-T.B. drugs and require treatment with new generations of
ant-T.B. drugs - all of which are under patent protection. India
accounts for the largest number of T.B. cases and even today halt
a million die of T.B. in the country. Can we safely ignore the
disaster if this virulent form of T.B. sweeps across the country and
our patients are deprived of these life saving anti-T.B. Drugs be­
cause we have sold our souls - and much more - to the WTO?

2)

Falciparum Malaria, the most virulent form of the disease, is al­
ready rampant in the country. Many strains are already resistant to

Tabic 1 : CHANGING PATTERN OF RETAIL DRUG SALES •• 1985 TO 1996 (Figures in '000)

1996
Therapeutic Group

Value

1992

1985

1989

percent

Value

percent

Value

percent

Value

3.81
1.72
3.40
1.05
1.36
1.47
4.48
1.93
1.72
6.28
5.70
1.70
2.13
5.55
2.16
1.89
1.01
1.01
1.93
6 15
3.29
1.60

1744458
1254401
493109
1147929
340099
389529
433982
1790065
652952
684380
2515369
1857988
638270
775677
2217417
794162
766729
365949
392072
758531
2353495
1493832
554532

4.53
3.26
1.28
2.98
0.88
1.01
1.13
4.65
1.70
1.78
6.54
4.83
1.66
2.02
5.76
2.06
1.99
0.95
1.02
1.97
6.12
3.88
1.44

477457
213649
470153
186716
201848
175848
898627
384703
293214
1263622
1086320
278028
424128
1176726
445001
370927
225622
211761
519279
1486687
757107
332000

2.27
1.02
2.24
0.89
0.96
0.84
4.27
1.83
1.39
6.01
5.17
1.32
2.02
5.60
2.12
1.76
1.07
1.01

83463
99045
212344
65655
91296
104781
375779
161929
149402
551748
525252
161563
210292
570355
255329
236159
132601
139393
268550
945837 '
507538
255455

2.70
3.03

3.32
3.56

3.58
1.96

436898
467818
158792
448946
203501
248497
246946
398557
508440
359902

100

11775823

percent

( 1985 to 1996

QUINOLINES
CEPHALOSPORINS
ANTI DIABETIC
CARDIAC THERAPY
ANTI EPILEPTICS
ANTIEMETIC
HYPOTENSIVES
ANTACID etc.
MACROLIDES
SYSTEMIC ANTIHISTAMINE
AMPI/AMOXY/CLOX
COUGH & COLD PREP.
PSYCHOLEPTICS
ANTI ASTHMATIC
ANTI INFLAM/RHEUM
TOP. CORTICOSTEROID
SEX HORMONES
HEPATIC etc.
MINERAL SUPPLEMENTS
GENERAL NUTRIENTS
VITAMINS
ANTI T.B.
SYS. CORTICOSTEROID

ELECTROLYTES (ORAL & IV)
analgesics
anti SPASMOD/CHOLINERGIC

/ANTI DIARR/ DISINFECT
DIGESTIVES INC. ENZYMES
TE1RACYCL1NES
TRIMETHOPRIM COM.
TONICS
TOTAL

1830572
1959325
637097
1798505
798395
942429
858835
1083589
964931
569014

2.71
2.90
0.94
2.66
1.18
1.39

1038274
1166858
449930
1144633
426096

1.60
0.84

737617
961144
460426

1.92
2.50
1.20

699183
749532
278316
676147
306164
313923
357894
508635
751962
412360

67592595

100

38471053

100

21030743

Source: ORG Retail Audit for relevant periods

2.98
1.43

7.07
3.60
1.58

3.22
1.46
1.49
1 70

0.71
0.84
1.80
0.56
0.78
0.89
3.19
1.38
1.27
4.69
4.46
1.37
1.79
4.84
2.17
2.01
1.13
1.18
2.28
8.03
4.31
2.17

2987.16
1072.04
980.93
975.89
910.11
846.55
706.57
703.80
679.10
669.85
634.04
612.64
586.02
557.30
470.98
441.38
414.65
389.63
386.10
339.82
337.64
322.68

3.06

318.99
318.82
301.21
300.61
29233
279.25
247.73
171.88
89.78
58.10

100

473.99

3.97
1.35
3.81
1.73
2.10
3.38

O
g
r
>
3
|
O
£
q
7
2
P

INDIAN PHARMACEUTICAL INDUSTRY

antianaemic
.anti parasitic

3187521
2576634
1160849
2295296
706373
922188
991801
3030905
1301584
1163986
4247658
3855555
1151355
1442635
3748957
1457S66
1278522
682436
682512
1305410
4160010
2221193
1079769

412

INDIAN jtHARMACWflCAL INDUSTRY
SOCIAL ACTION VOL 4S OCT.-DI-C. !«'■«

conventional drugs like chloroquine (including a large number of
cases detected in the capital city of Delhi every year). New drugs
are being developed, but again they will be under patent protec­
tion.

3)

Enteric Fever (Typhoid) resistant to the conventional drug Chloramphenicol - is widespread in the country today. Some stud­
ies indicate that in some regions 40-50% cases are resistant. In
such cases the drug of choice is Ciprofloxacin - a new drug which
is still under patent production but is being manufactured in India
using new process technology. The price of the drug, which started
at Rs.24 per tablet has already come down to Rs.8. This could not
have happened under a Product Patent regime.

These examples are indicative and not exhaustive. But they illus­
trate that a strict Product Patent regime is not designed to serve the
interests of a vast majority of the people. This is true even for a bulk of
people living in the developed North. In the U.S. a major concern today
is the spiralling rise in drug costs that has pushed health care beyond the
means of a large number of poor people. In Canada state run hospitals
are facing closure due to the huge rise in drug prices as a result of
changes made in Canada’s Patent Act. Before any changes are made in
the Patents Act of 1970 we would do well to ponder on such, and other,
global experiences that are unfolding today.
Impact on Drug Prices
A major element of the campaign against changing India's Patent
Laws, in order to comply with requirements of the WTO agreement, has
focused on the alleged fact that Drug Prices are lower in India than
other countries. Hence, it has been argued that a change in India's
Patent system would lead to massive increase in the prices of Drugs.
While a lot of rhetoric has been used by both sides in this debate,
the claims and counter-claims have not always been based on hard
facts. In order to put this debate in its proper perspective, an analysis of
comparative prices of Drugs in different countries is presented here.
The countries chosen include four developing countries from South Asia
- India, Bangladesh, Pakistan and Sri Lanka, and two countries from the
developed World - Canada and U.K. The countries of South Asia were
chosen as they, broadly, are at similar stages of development and their

413

economies function under familiar constraints. The two countries with
developed market economies are similar to the extent that both retain
strong state support to health care and have mechanisms to regulate cost
of health care including those of drugs. India with its liberal Process
Patenting system as regards to pharmaceuticals (now under suspended
animation) is the only country in this study not to have a Product Patent
regime as yet (if one discounts the 1995 amendment which could not by
passed by Parliament).
Drugs chosen for the analysis fall under two groups. The first
group comprises of six drugs - Amoxycillin, Co-Trimoxazole, Diazepam,
Erythromycin, Frusemide and Propanolol - which have been in the mar­
ket for a long time and are not under patent protection (process or
product) in the countries analysed. While an analysis based on these six
drugs cannot be termed as exhaustive, they are fairly representative of
the drugs in the Indian market. Of the 5 top selling products in the
Indian market, formulations made of these drugs account for 3, and of
the top 20 these account for 7 viz. Althrocin, Septran, Roscillin,
Novamox, Mox, Ampoxin and Voveran. Althrocin - a formulation of
Erythromycin - is the top selling brand with an annual turnover of
Rs.4.24 crores. The second group is comprised of three newer drugs Ranitidine, Diclofenac and Nifedipin - which are still under Product
patent outside India or have come off Patents only recently. These drugs
too are fairly representative with formulations based on two of them Zinctac containing Ranitidine and Voveran containing Diclofenac- being
listed at the 6th and 20th places respectively among top selling products
in the ORG Retail Survey.
The retail prices of these drugs have been compared .in the six
countries. Where different brands have varying prices, the lowest price
has been taken for purposes of comparison. In order to show the relative
position in different countries, average cost of each basket of drugs
(comprising of 6 drugs in the basket of older drugs and 3 drugs in the
case of newer drugs) has been computed. This computation was done by
taking the price of each drug as 1 unit in the case of India. Based on
this the relative cost of each of the drugs in the countries studied have
then been calculated, and a mean value for each basket calculated from
this. To show the real impact of drug prices the relative cost and mean
cost, adjusted against the GDP per capita has also been shown.

of the financial impact of buying drugs in each country.
gives a rough measure

This is indeed a strange situation as logically India should have an
edge over almost any country in the world in this respect. Unlike Paki­
stan, Bangladesh and Sri Lanka India has the indigenous capability to
manufacture most drugs. Further economies of scale should favour Indi­
an manufacturers in comparison to these South Asian countries, given
the much larger size of the Indian market. Compared to U.K. and
Canada, Indian manufacturers enjoy the advantage of much lower
infrastructural and labour costs. A conclusion one can draw is that the
Industry in India is either unwilling or incapable of passing on the
results of these gratuitous circumstances to the consumer. In fact, to the
contrary, companies in India (both Indian and MNC) have receive a
further bonus in 1995 in the form of the new Drug Price Control Order,
where price control mechanisms have been further relaxed by drastically
reducing the span of control and by increasing the profitability allowed

Table 2: Comparative Costs of O lder Drugs
(Not Patent Protected)

This interesting outcome exposes chinks in the arguments put for­
ward by the two contending Industry Associations in the pharmaceutical
sector in India - the Indian Drug Manufacturers Association (represent­
ing Indian Companies) and the OPP1 (representing Multinational Com­
panies). IDMA has consistently argued that drug prices arc the lowest
in India and a change in Patent Laws would reverse this position. The
above analysis clearly shows that drug prices are lower in India only in
the case of Patent protected drugs. We find from our study that in the
case of other drugs, prices are higher in India than even developed
industrialised countries. Given the fact that drugs in the Indian market,
which are under Product Patents globally, account for only 10-12% of
total pharmaceutical sales, this means that by and large Indian drugs are
costlier.

415

INDIAN PHARMACEUTICAL INDUSTRY

Calculated by m ultiplying average cost with the ratio of GDP per capita in India, with the corresponding figure for each country.

SOCIAL ACTION VOL. 48 OCT.-DEC. 1998

The analysis is shown in Tables II and 111. We see from Table II
that the average cost of older drugs is the highest in India. The cost is 3
times that in Sri Lanka and even higher than in U.K. and Canada.
Adjusted against GDP per capita, cost of these drugs works out to be 5
limes that in Sri Lanka and 12 to 16 times that in U.K. and Canada.
The position is the complete reverse in the case of newer (Patent Pro­
tected) drugs. Table III shows that in the case of these drugs, prices are
lowest in India. These drugs arc 3 to 13 times more expensive in the
other countries studied. Even when adjusted against GDP per capita the
cost of these drugs work out to be the cheapest in India.

;

414

4 18

SOCIAL ACTION VOL 48 OCT.-DEC. 1998

Scheme. The scheme’s objectives arc to secure the provision of sale and
effective medicines to the NHS at reasonable prices. The scheme was
renewed in 1993 for five years and is currently under review. The
House of Commons Health Committee has now recommended that the
criterion of comparative cost effectiveness (as is in vogue in Australia)
should be adopted by the NHS before it agrees to pay for new drugs.3
Present Trends in Pharmaceutical Industry
In the last two decades, while the Indian Drug Industry has grown
considerably, a several disturbing trends are discernible. As these trends
would have a bearing on changes within the Industry in case the Indian
Patent Law of 1970 is changed to allow Product Patents in Pharmaceu­
tical, a discussion on some of these trends would serve to highlight some
relevant concerns.

Emphasis on Expensive Drugs
Most manufacturers arc vying for the up-market section of the
Indian consumer who can pay heavily to ‘buy’ health care. Production
of expensive drugs outstrip demand while less expensive drugs are in
short supply (see Table 4) Thus the indifference shown by companies
towards production of low-cost essential drugs. In doing so the Industry
is also in danger of falling into a self-destructive loop where 1000
manufacturers fight for the market for drugs among 5% of the popula­
tion who can pay. This acts as a major constraint to further develop­
ment of the Industry. With a Product Patent regime, such a trend can
only be accentuated, leading to larger sections of the people being “costed
out” of the market for drugs.

“Free” Market Ethos of the Reform Process
A study of the production pattern of monitored bulk drugs shows
that larger companies arc not interested in producing bulk drugs, but
rather prefer to act as mere traders and middlemen by concentrating on
the formulations market In such a situation there can be no justification
in liberalising production controls, and in fact more stringent production
controls arc called for.
The logic of the market forces is even less applicable to the Phar­
maceutical Industry than other sectors. Unlike consumer goods, drugs
are not purchased by the consumer on the basis of his choice or prefer­
ence. They are purchased/ consumed on the advise of the medical pro-

INDIAN PHARMACEUTICAL INDUSTRY

420

SOCIAL ACTION VOL. 48 OCT.-DEC. 1998

Cession. The Drug companies have built a market for their drugs through
their extensive marketing network. The consumers have little or no
choice in such a Tigged’ market and are forced to buy anything and
everything that Doctors are ‘induced’ to prescribe by the ‘friendly
neighbourhood’ medical representative. This is surely not the best cli­
mate for market forces to stabilise prices. In a regime where product
patents are allowed, market forces will be even more ineffective in
containing prices of drugs.
With rapid developments in Science and Technology there has
been an explosion in the number of drugs which are available in the
market. Unfortunately only a small minority of drugs entering the mar­
ket offer therapeutic advantage over existing drugs. For example of the
348 new drugs from the 25 largest US drug companies between 1981
and 1988, the US FDA said that at the time of introduction : 3% (12
drugs) made an “important potential contribution to existing therapies”;
13% made a “modest potential contribution; and 84% made “little or no
potential contribution”. A French study of 508 new chemical entities
marketed in the world between 1975 and 1984 found 70% offered no
therapeutic improvement over existing products. I5) This, in effect, con­
tradicts conventional claims that better Patent protection leads to intro­
duction of superior therapeutic regimes, and as a consequence, better
health care.

Increase in Imports
After having built a self reliant Industry much of the gains are
today sought to be frittered away. In recent years import dependence in
the Industry has grown (see Table 5).
Table5 : PRODUCTION, IMPORTS & EXPORTS OF PHARMACEUTICALS
(1997-98 - est.)
(FIGURES IN RS. CRORES)
Production of Bulk Drugs
Production of Formulations
Exports
Annual Rate of Growth of Exports (since 1990-91)
Imports
Annual Rate of Growth of Imports (since 1990-91)

Source : Centre for Monitoring of Indian Economy (C-MIE)

2.623
12.068
3,080

INDIAN PHARMACEUTICAL INDUSTRY

421

The excess of exports over imports is an illusion and likely to
disappear soon given the much higher rate of growth of Imports in the
1990s. If the above trend continues India may soon become like any
‘Banana’ Republic, depending largely on imported bulk drugs. The trend
of increasing imports can only worsen when Product patents are al­
lowed, especially as the IPR agreement under WTO contains a clause
that equates importation as with working of a Patent. That is, the patent
Jioldcr has no obligation to actually manufacture locally, and has the
full freedom to import from his country of origin. The present Indian
laws prohibits such activity, and can offer other manufacturers the
option to produce locally if the original patent holder refuses to do so.
MNCs Concentrate in Irrational and Inessential Areas
The Govt, would do well to go back to the Hathi Committee report
of .1975 detailing the sins of omission and commission of the Foreign
Sector in the Drug Industry, when it is set to roll out the red carpet for
MNCs. Nothing has changed since then, in fact the situation has wors­
ened. The Foreign Sector are the worst offenders when in comes to
production of irrational and hazardous drugs and non production of
essential drugs. In fact the Small Scale Sector produces more Bulk
Drugs than the Foreign Sector. The measures in the 1978 Drug Policy
restricting this Sector, is the single most important factor responsible
for the growth of the Indian Drug Industry in general and the Indian
Sector in particular. The foreign sector has never in the past brought in
new technology and will not do so in the future. Easy access to MNCs
through a Product patent regime will only result in emasculation of the
Indian Drug Industry. Table 6 shows the comparative contribution of
different sectors in different therapeutic groups. It clearly shows the
reluctance of MNCs to produce drugs in areas of importance for the
health needs of the country.
TABLE 6 : SHARE OF MNCs IN DIFFERENT THERAPEUTIC GROUPS
(figures in Rs.crores)
THERAPEUTIC GROUP

TOTAL MKT.
OF TOP
200BRANDS

SHARE
OF TOP
200 BRANDS

345.8
212.3

191.0
102.1

SHARE
% SHARE
OF MNCs TO nrMNCs
SHAREOFTOP
200 BRANDS

29.3%

VITAMINS
STEROIDs

184.5
94.6

96.60
92.66

422
NUTRIENTS & MINERALS
163.6
COUGH & COLD
3773
& ANTI ALLERGIC
ANTI-INFLAM ,/ANALG.,
413.4
& ANTI SPASMODIC
RUBS & BALMS
48.0
ANTACID etc.
259.9
ANTI ANAEMIC
145.4
DIABETES, CVS.,
422.6
EPILEPSY, etc.
ANTI ASTHMATIC
1233
ANTIBACTERIALS
1254.2
ANTI PARASITIC/
236.9
ANTI DIARRHOEAL
ANTI T.B.

423

INDIAN PHARMACEUTICAL INDUSTRY

SOCIAL ACTION VOL 48 OCT.-DEC. 1998

41.1
143.1
61.6
134.9

129.2

88.06
80.40

150.0

66.18

26.6
843
29.0
563

64.06
59.04
47.03
41.77

27.6
761.8
67.6

40.22
29.53
25.71

1043

Source : ORG Retail Survey of top 200 Brands, December 1994.

MNCs Reduce Productive Activities
A recent trend in the Industry would need mention here. Since
1990-91 there has been a discernible trend of a dwindling market share
in the case of Multinational companies (see Table 7). Along side this
trend there have been a spate of mergers and tie-ups in the Industry in
the last few years. Many of these mergers have been a consequence of
mergers that have been taking place globally among giant Transnational
Pharmaceutical Companies. Bristol-Myers, Sqibb, Hoechst Marion
Roussel, Novartis (merger of Ciba and Sandoz) and Pharmacia and
Upjohn are all recent products of the trend in mergers. While the above
has had its repercussions in the Industry, Indian companies like Piramal
(which acquired Nicholas and some other Cos.) have also got into the
act in the domestic Industry. Prominent tie ups between Indian firms
and foreign Cos. include those between Ranbaxy and Eli Lilly, Cadila
and American Herbal Products, Nicholas Piramal and Reckitt & Colman,
Cheminor Drugs and Schien, Sarabhai and Magainin Pharma, etc.
Global Trends Towards Increased Monopolies
This global trend towards merger of Drug TNCs has been sparked
off due to two kinds of compulsions. Globally, Drug Companies are
being forced to reduce the cost of medicines. Pressure is being mounted
by Health Insurance Cos., Health Management Organisations (HMOs)
and Governments (in countries like U.K. and Canada where the Stale
provides Health Insurance cover) all over Europe and North America.

Table 7 : SALES TURNOVER AND MARKET SHARE OF TOP 20 COS.

Ranbaxy
Glaxo
Lupin
Cipla
Hoechst
Dabur
Pfizer
SOL Pharma.
Sarabhai
Torrent
Dr.Reddy’s Lab.
Alembic
Knoll
HAL
Kopran
IPCA
Smithkline Beecham
Burroughs Wellcome
Cadila
Parke Davis

SALES
1990-91

SHARE
1994-95

285.14
288.93
12632
98.05
196.74
45.33
111.64
20.65
118.50

765.85
482.77
334.49
295.83
281.74
26036
211.99
210.23
209.92
199.63
194.76
192.72
189.02
198.00 (esl)
180.01
178.49
178.32
175.18
175.00 (esl)
148.39

52.96
123.25
77.80
103.03
60.11
97.02
93.10
74.67
94.36

MARKET SHARE %
1994-95
1990-91
4.8
4.8 .
2.1
1.6
3.3
0.8

0.5
2.0
N.A
0.9
2.1
1.3
1.7
N.A
1.0
1.6
1.6
1.2
1.6

7.0
3.0
2.7
2.6
2.4
1.9
. 19
1.9
1.8
1.8
1.8

1.7 (est)
1.6
1.6

1.3

Source ; Centre for Monitoring ofIndian Economy (CMIE)

These pressures have become stronger in recent years with the realisation
that spiralling Drug costs are making Health insurance cover (whether
state funded or privately managed) unsustainable. In all these countries
there is a major move to insist on generic prescription in most cases,
thus opening up a huge generics market. The ability of leading Drug
TNCs to operate in this market is obviously compromised, as they do
not have the advantage of using their Brand Images to comer large
chunks of this emerging market. They are thus forced to compete on
more or less equal terms which a large number of lesser known Cos,
and also sell drugs at relatively cheaper rates. In the U.S., for example,
from 1995 through 1997, generic drug prices showed a double-digit rate
of decrease. Large Drug TNCs are thus in the process of working out
new strategies — which include greater cartelisation in the form of
mergers and tie-ups — to maintain their suzerainty over the global Phar­
maceuticals market. Companies like Rhone-Poulenc and Bayer are al­
ready getting into the generics market.

424

SOCIAL ACTION VOL. 48 OCT.-DEC. 1998

A second compulsion which is changing the face of the Industry
relates to a factor which has been both a major strength and a major
source of weakness for Drug TNCs. Dirge Cos. have generated huge
profits through the Patenting of top selling Brands. A classic example of
this is Glaxo, the global leader in the consequence, Glaxo is desperate to
place a new patented product that can match the kind of profits Zantac
was able to generate. In other words R&D and Patenting efforts are to
be driven, not so much by actual therapeutic needs, but by the need of
Drug Cos. to maintain their super profits at present levels. Simulta­
neously, new Drug development has become more expensive because of
more stringent regulatory laws. It is now estimated that the cost of
putting a new molecule on the market is approximately $820 million
(approx. Rs.3000 crores). This is a major reason for the trend towards
global mergers, as individual Cos. wishing to retain the huge growth
rales of the 1970s and 80s, are trying to pool resources for R&D. It
must be remembered that such mergers do not necessarily mean greater
emphasis on Scientific research in the Industry. Burroughs Wellcome’s
merger with Glaxo, about three years back, is a case in point. After
Glaxo’s takeover of Wellcome in 1995, some 12% of Glaxo’s 62,000
workers lost their jobs (including a significant no. engaged in their R&D
wing), and Beckenham, Wellcome’s giant research complex near Lon­
don, was closed.

As a consequence of the above shifts in the industry we are possi­
bly looking to a new situation, where 10-12 large Transnational con­
glomerates will survive as “research based” Cos. that is Cos. that will
be in the business of drug development and patenting. This will leave
the much Ittrger non-patented or generics market to a large number of
Cos. The decline of market share for TNCs in the Indian market has
been commented upon earlier. It is possibly a reflection of the reluc­
tance of large TNCs to be satisfied with the moderate returns that the
Indian market provides, in the absence of a strong Patent Regime. In
fact many TNCs have been engaged in the divesting of their productive
assets in the country - for example the sale of Hoechst’s Research unit
in Mulund to Nicholas Piramal and Pfizer’s proposal to sell its huge
Anklcshwar plant. TNCs in India appear to have placed their bets on a
twin-strategy. Wait for the Indian Govt, to capitulate to pressures and
bring in a strong Product Patent regime, at which stage they would enter
the Indian market with renewed vigour to reap super profits from their

INDIAN PHARMACEUTICAL INDUSTRY

425

patented products. In the mean time they wish to limit their stakes in
terms of maintaining productive assets, and are preferring to maintain a
toe-hold in the market through tie-ups with Indian Cos. The apparent
decline in market share may just be a temporary aberration that would
be wiped away if India brings in a strong Product Patent regime. It may
be mentioned here that it is being anticipated that Biotechnologically
engineered drugs are poised to bring in tt new revolution in medicine.
Upward of 300 such drugs are in various stages of development and the
patents for most of these would be held by large TNCs. The response to
this new situation by Indian Cos. have again been twofold. Some have
used the opportunity to increase their Market share (Ranbaxy, Dr.Reddy’s
Labs, Cipla, Cadila, Sol, Dabur, etc.). Others have increased their clout
manifold (like Nicholas Piramal) by multiple acquisitions. The moot
point however is, whether the present boom for large Indian Cos. can be
sustained in the face of proposed changes in Indian Patent laws.

Product Patent Regime in Promoting Innovation and Disclosure of
Information
The standard argument in favour of strong patent protection in
pharmaceuticals has held that such protection ensures early disclosure
of innovations and thus promotes faster dissemination of knowledge,
and that it is just compensation for investments made by Drug Cos. on
new product development. Patents permit their holders to forbid the use,
sale or manufacture of a product or process for a limited time (generally
seventeen to twenty years) in the countries in which the patents are
granted. In theory, patents are more advantageous for both the patent
holder (presumably an inventor) and society, since intellectual property
protection is considered society’s payment for the full disclosure of
information about the patented object. “Full disclosure” usually means
providing enough detail for a “person skilled in the same or the most
clearly related area of technology to construct and operate” the patented
object. We shall, in this section, examine the validity of both these
claims.

Just how far Intellectual Property Rights should extend, has be­
come a matter of professional and public discussion. Can information
provided by patients acting in the public interest legitimately be consid­
ered the intellectual property of a pharmaceutical company? Should
licensing authorities and pharmaceutical companies be permitted to li­

426

SOCIAL ACTION VOL 4S OCT.-DEC. I99S

cense and market a drug, respectively, without making available all the
evidence about the beneficial and adverse effects of the drug. Pharma­
ceutical companies claim that clinical-trial reports are commercially
valuable intellectual property. In practice, to support the marketing of
their new products, most manufacturers make some of their intellectual
property generally available by publishing some of the reports upon
which their successful licence applications were based. Unfortunately,
these reports are not generally representative of all the evidence. A
report in 1980 showed that studies submitted in support of applications
for new licences for drugs in which side-effects had been shown were
less likely than others to be published6. There have been innumerable
recent instances of suppression of vital information by Drug Companies
about their products, even in an environment of strong patent protection.
A few’ of these would merit mention here.

The Journal of the American Medical Association reports that a
drug company suppressed research which showed that generic thyroid
drugs were as effective as its own branded product for almost seven
years. A randomised trial had concluded that two brand name and two
generic forms of thyroxine sodium (levothyroxine) were bioequivalent
and interchangeable without loss of therapeutic efficacy in most patients
for the treatment of hypothyroidism. The two brand name products were
Synthroid - the most commonly used brand in the United States, and
Levoxine (now renamed Levoxyl) — a newer, cheaper product similar in
price to generic forms. The authors of the study estimate that using
generic or less expensive brand name products in the United States
could save $356m a year.

These findings were published in 1997, despite being ready for
publication in 1990. In 1987 Betty Dong and colleagues from the de­
partment of clinical pharmacy at the University of California Medical
Center in San Francisco were asked by Flint Laboratories, the manufac­
turer of Synthroid, to carry out research comparing their drug with three
others. Both sides apparently expected the study to show that Synthroid
was superior. By the end of 1990, when the study was complete and it
became clear that all four preparations were biocquivalent, the results
were sent off to Bools Pharmaceuticals, which had taken over Flint
Laboratories.

INDIAN PHARMACEUTICAL INDUSTRY

427

Dr. Rennie says that over the next four years Boots “waged an
energetic campaign to discredit the study and prevent its publication.
The study was eventually submitted to JAMA in April 1994, and a
publication date was set for 25 January 1995. On 13 January 1995 Dr.
Dong suddenly withdrew her manuscript from publication, citing im­
pending legal action by Boots. Apparently, Dr. Dong had signed a
restrictive covenant at the beginning of the study stating that all infor­
mation gathered in the study was confidential and could not be pub­
lished or released without written consent from Flint Laboratories.

In March 1995 the pharmaceutical branch of Boots was taken over
by Knoll Pharmaceuticals. The FDA wrote to the company saying that
its assertion that Synthroid was pharmokinetically superior to other
preparations was misleading and that the information should not be
disseminated. Under pressure from the FDA Knoll agreed on 25 No­
vember 1996 to allow the research to be published, but it still insisted
that the conclusions were not supported by the data7Drug companies submitting licensing applications to the Food and
Drug Administration (FDA) in the United States will now have to reveal
whether researchers involved in a drug trial have any financial interest
in the company. The new regulations aim to eliminate possible data bias
arising from financial considerations. Effective from February 1999, the
new rules will require companies to disclose whether clinical investiga­
tors have received stock and patent options, payments in the form of
research grants, gifts of equipment, consultant fees, and honorariums
from lectures.

Drug companies routinely recruit doctors and scientists to study
their products and to conduct clinical trials. Clinical investigators may
receive substantial compensation for participating in these studies, and
these may then be used to support an application to the FDA. A recent
article* found that doctors who had a financial relationship with manu­
facturers of calcium channel blockers were more likely to consider them
safe and promote them over competing antihypertensive treatments than
those who lacked such relationships’The problems that can result from inappropriate concern about
intellectual property arc illustrated in the case of human albumin solu­
tion, a blood product that has been used in the treatment of hypovolaemia
and burns since 1941. The licensed indications for albumin are the

428

SOCIAL ACTION VOL. 48 OCT.-DEC 1998

emergency treatment of shock, the acute management of burns, and
clinical situations associated with hypoproteinaemia. In the UK alone an
estimated 1,00,000 patients are treated with human albumin solution
each year, at a cost to the UK National Health Service of close to 12
million pounds.

To investigate whether treatment with human albumin is benefi­
cial, a systematic review of randomised controlled trials comparing al­
bumin with crystalloid (an alternative to albumin) was undertaken by
members of the Cochrane Injuries Group. The results gave considerable
cause for concern, and were therefore communicated to UK Department
of Health on April 6, 1998. In each of the categories corresponding to
the licensed indications, the risk of death among patients treated with
albumin was higher than that among patients in the comparison groups.
Overall, the risk of death in patients receiving albumin was 14% and the
risk of death in patients not receiving albumin was 8%.
On April 29, 1998, the researchers received the published papers
that had been used by one of the three manufacturers, CENTEON, in
support of its application to renew its licence for albumin in 1992. The
application included only ten of the 18 trials that were available in
1992. The application contained no description of the search strategy
used to identify trials for the renewal application, no critical appraisal
of the quality of the included trials, and no quantitative synthesis of the
results. In other words, information available which raised doubts on
the efficacy of human albumin, had been deliberately suppressed for six
years.’101
A dispute between a medical researcher and her drug company
sponsor has led Toronto’s Hospital for Sick Children to commission an
external review of how it monitors clinical trials sponsored by drug
companies. Scores of the hospital’s scientists and researchers signed a
petition calling for an independent inquiry into the dispute between Dr.
Nancy Olivieri and the Toronto based pharmaceutical company Apotcx.
In 1995 Dr. Olivieri agreed with Apolex to test the drug deferiprone in
clinical trials on young patients with thalassaemia - a potentially fatal
disorder affecting the clotting of blood.. When Dr. Olivieri’s research
led her to believe that the drug could lead to liver fibrosis, she decided
to inform the patients and their families, other researchers, and regulato­
ry agencies. Her findings were published in the New England Journal of

INDIAN PHARMACEUTICAL INDUSTRY

429

Medicine. She reported that five of 14 deferiprone treated patients had
progression of hepatic fibrosis. She suggested that deferiprone may be
toxic to the liver, may accelerate the progression of hepatic fibrosis in
patients with thalassaemia, and hence should be used with caution.
When Dr. Olivieri decided to go public Apotex reminded her of a confi­
dentiality agreement she had signed with the Company, and have threat­
ened legal action.’1 *>

Closer examination^ thus, reveals that intellectual property rights
have no necessary relation to invention, innovation or ingenuity. IPRs
exist to gain advantage over economic competitors, create monopolies
and recoup the costs of R&D. Monopolistic control has propelled west­
ern economic development and the progression of industrial society has
evolved with the evolution of the patent system. Patents, hence, are
linked less with invention, innovation and ingenuity per se, than with
industrial applications and regulation of the markeL The theory that
incentive is responsible for innovation is typically found in economic
systems based on competition, where people are thought to gain and
lose at each other’s expense, and reward is associated with advantage. It
is a moot question whether this sort «. prompted “ingenuity” should be
rewarded too often and too liberally, especially with the growing con­
cern with the possibility that too much protection may create
overinvestment in the production of knowledge.

Further, it needs to be understood that even in the U.S. and Japan,
an enormous part of research is State funded. The lines, therefore,
between what constitutes “basic research” by a company and what it
draws from public funded research, are blurred. Let us look at one key
sector, where Patenting activity is at its peak - Biotechnology. In 1990
alone, the US government spent more than $3.4 billion to support the
R&D of biotechnological applications. Japan’s Ministry of International
Trade and Industry (MITI) announced in 1981 that biotechnology, as
well as microelectronics and new industrial materials, were a key tech­
nologies. The MITI laid out $58 million for biotechnology in 1990,
including several public-private research projects.
When the US introduced IPRs in the Uruguay Round as a new
issue, it accused the Third World of ‘piracy’. The estimates provided
for royalties lost in agricultural chemicals are US$202 million and
US$2,545 million for pharmaceuticals. However, as the Rural Advance­

430

SOCIAL ACTION VOL 48 OCT-DEC. 199.3

ment Foundation International (RAFI), in Canada has shown, if the
contribution of Third World peasants, and tribals is taken into account,
the roles are dramatically reversed: the US owes-US$302 million in
royalties for agriculture and $5,097 million for pharmaceuticals to Third
World countries, according to these latter estimates. In other words, in
these two biological industry sectors alone, the US owes $2.7 billion to
the Third World.112’

Conclusion
Finally, an over-arching tendency in the Industry - applicable to
both Huge Indian Cos. and TNCs - needs to be taken note of. Over the
years many large Cos. have cut down Bulk Drug production, and arc
increasingly acting as mere traders. In many therapeutic groups, major
production is accounted for by the Small Scale sector. In many cases
the latter is depending heavily on imported bulk drugs, i.e. they function
as suppliers of imported bulk drugs to large Cos. The trend is discern­
ible, as commented upon earlier, in the sharp rise in the rate of growth
of imports. This tendency has been fuelled by liberalisation in the Indus­
try - making imports easier and also the scrapping of ratio parameters
which earlier made it mandatory that a certain percent of a Co’s turn­
over should be made up of by bulk drug production. The Indian industry
is thus faced with the twin danger of a resurgent Foreign Sector poised
to strike, armed with a strong Patent regime, and an Indian Sector that
is increasingly dependant on imported Bulk Drugs. A possible safe­
guard against such threats - the Public Sector — has all but been wound
up. The implications for self reliance and Health Security are obvious.
Contrary to the reforms ideology the market does not regulate prices of
drugs, as demand primarily depends on prescription habits of doctos,
disease profiles, drug resistance etc. Hence the market cannot ever be a
proper mediator of prices of drugs. The oligopolistic nature of the In­
dustry, where few companies have monopoly within various therapeutic
groups, makes the operation of the market even more infructuous. The
present policy of abandoning price and production controls has already
led to unjustified rise in prices. The concessions to the Foreign Sector
mark a dangerous shift in our policy framework. These concessions and
a possible change in the Indian Patents Act will return the Drug Indus­
try to the situation prevailing in the fifties - a situation where TNCs
can earn super profits due to their control over technology and brand

INDIAN PHARMACEUTICAL INDUSTRY

431

NOTES & REFERENCES
1.

2.

Majumdar, J.S. 1986. Background Paper in Amit Sen Gupta, (ed), The Drug
Industry and the Indian People, DSF and FMRAI, New Delhi.
For a more detailed discussion on differences in prices of new and older drugs
in India refer to, Sen Gupta, Amit, “Do Drugs Cost Less in India", Economic

3.
4.

and Political Weekly, January 27,1996.
British Medical Journal, 1997.315:200-201.
Government of India, Annual Report, 1994-95', Ministry of Chemicals and

5.

Fertilisers.
WHO, Clinical Pharmacological evaluation in Drug Control, Copenhagen,

6.
7.
8.
9.
10.
11.
12.

WHO, 1993.
Lancet, 1998.352: 726-29.
Journal ofAmerican Medical Association, 1997;277:1205-18.
New England Journal ofMedicine, 1998,338:101-6.
British Medical Journal, 1998;316:493.
Lancet, 1998; 352: 726-29
British Medical Journal, 1998;317:618.
Shiva, Vandana, Third World Resurgence, No. 86, October 1997.

APRIL 1992

Dunkel Proposals
A Death Knell for the Indian Drugs

And
Pharmaceutical

Industry

Price : Rs. 2.00

P.K. Ganguly

Published by P. K. Ganguly for Centre of Indian Trade
Unions, 6, Talkatora Road, New Delhi-110001 and printed at
Progressive Printers, A-21, Jhilmil Ind. Area, G.T. Road,
Shahdara. Delhi-110032

A CITU PUBLICATION
6> Talkatora Road, New Delhi-110001

APRIL 1992

Dunkel Proposals
A Death Knell for the Indian Drugs

And

Pharmaceutical

Industry

Price : Rs. 2.00

P.K. Ganguly

Published by P. K. Ganguly for Centre of Indian Trade
Unions, 6, Talkatora Road, New Delhi-110001 and printed at
Progressive Printers, A-21, Jhilniil Ind. Area, G.T. Road,
Shahdara. Delhi-110032

A CITU PUBLICATION
6, Talkatora Road, New Delhi-110001

Dunkel Proposals

A Death Knell for the Indian Drugs
.and Pharmaceutical Industry
' ’ USA, the gendarme'of world reaction, in its drive fora
ne\<. world order, has been utilising the international financial
and trading organisations to transnationalise the world eco­
nomy under its . hegemony. With this objective it utilised the
IMF/World Bank, the financial organisations of the international monopolists, to compel India to frame its economic and
industrial policies as per their dictates. With the same objective
it is utilising the multi-lateral forum, the GATT, in which it is
the most dominant partner, trying to blackmail India to surren­
der to the proposals made by Arthur Dunkel, its Director
GeneraL Simultaneously, at. bi-lateral level, it has kept its own
Trade Laws—the Super and Special 301 hanging like Damocle’s
Sword over India. All are with the objective of dominance to
the extent of changing the domestic laws of the country and
tilt its policies to give absolute power and positions for the
multinationals to conduct the economic governance of the
jCountry in-their favour.
•
Three Pronged Attack

a- ■ ■

-i • The Dunkel proposals are a combination of three pronged
■'attack ’ through the so-called Trade Related Investment

Measures (TRIMS), Trade Related Intellectual Property Rights
(TRIPS) and General Agreement on Trade in Services (GATS).
The proposals postulate most dangerous provisions to under­
mine the economic sovereignty of the country, like no restric­
tions on foreign equity participation; no restrictions on areas
of investment; no licensing; no export obligation to fund
imports; free import of raw materials, components and inter­
mediates; no obligation to use locally available products and
raw materials; foreign investors to be treated at par with
domestic companies in all respects; and above all, repeal of all
laws and policies by India which put restrictions on above.
Although the three strategies, TRIMS, TRIPS and GATS
are interlinked and orchestrated to enable the multinationals
to have control over the Indian economy, the TRIPS singularly
constitute one of the worst forms of neo-colonial exploitation
of the country by the multinationals. They demand that India
has to amend its Intellectual Property Laws like the Indian
Patents Act, Trade and Merchandise Mark Act, Foreign Excha­
nge Regulation Act, Atomic Energy Act. etc and join the-Paris
Convention on Patents. India’s Agriculture and. Pharmaceu­
tical industry will be directly .hit, if the, TRIPS., proposals (.are
accepted by the Government. The purpose, of this articles, to
focus on the Drugs and Pharmaceutical industry of the country,
which is related to'the life and health of the people,

Pharmaceutical Industry in India
'
It is to be noted at the dutset that the' drugs and pharma­
ceutical industry in India is already under the strangle hold of
the multinationals. -. India was bne of the pioneers'in the quest
for' scientific ' knowledge and' developed^vafious’indigendus
medicines. Dr. P. C. Ray, T. K.'Gajjar and'S.’S. Spktfey,'''etc
were among the leading luminaries in this' prqcess'of indigenisation. They made efforts to develop Serums, Vaccines', Penicillin,
Streptomycin, Anti-Malaria; Anti-Leprotic drugs,'etc.'1 Above
all, they made efforts to develop the public sector 'to' achieve
self-reliance in the production, and research and development
of life saving and essential drugs according to the disease
pattern of the country.
l>-jg;iut. -.-z.-.l !
With this objective, aba. later stage the Hindustan Anti­
biotics Ltd (HAL) was established in 1954. with . technological

assistance from WHO and UNICEF. Later in 1961 the Indian
Drugs and Pharmaceuticals Ltd (IDPL) was established with
Soviet assistance. With its vast infrastructure and main plants
at Rishikesh .and Hyderabad, the IDPL was equipped to
produce life saving and essential bulk drugs from the basic
stage. A surgical instruments plant of IDPL was also establi­
shed at Madras laterx Later on three units, viz Bengal Immu­
nity, Bengal Chemicals and Pharmaceuticals Ltd and Smith
Stanistrent & Co. Ltd, which became sick in the private sector,
were taken over and nationalised by the Government. Efforts
to make the country self-reliant in production of drugs through
the public sector triggered off a new situation.
Multinationals’ Hold in Drug Industry

However, the policy of wooing the multinationals by the
Government of India gradually nipped the developing indige­
nous medicines and the process of indigenisation in the bud and
exposed the people to the international capitalist racketeering
in drugs and pharmaceuticals. The motive of production by the
multinationals being only profit, the needs of the people, the
pattern of diseases in India, research and development and the
problem of banned and irrational drugs were all thrown into
oblivion. .Today the multinationals control about 78 percent
of the drug production in India, 16 percent of the production
are in the hands of the Indian private sector and only 6 percent
are produced in the Public Sector. It is to be noted that most
of the life saving and essential bulk drugs were produced in the
public sector and small scale units. The multinationals refused
to produce essential and life saving bulk drugs because of. low
profit return. Instead they sell over 60,000 formulations in
the country. According to World Health Organisation (WHO),
80 percent of these drugs are non essential and irrational.
Besides, a number of drugs available in India are banned, in
the parent countries of the multinationals, as they have been
found to produce dangerous toxic side effects. But under
pressure from the multinational drug cartels’ organisation, the
Organisation of Pharmaceutical Producers of India (OPPI), the
Government has not been able to stop the entry of such drugs
in the country.
,I 1
Pointing to these realities, the Hathi Committee in 1975

2
3

recorded that the activities of the multinational drug firms in
India were anti-national and recommended for their nationali­
sation. But the Hathi Committee recommendations have been
thrown into the waste paper basket by Government. Along
with this the government also threw into oblivion the Alma
Ata Declaration for Health for All by 2000 AD, to which it
is a party.
Major and Dangerous Shift in Government’s Policy
On the contrary, the Rajiv Government made a major and
dangerous shift in the economic policy in 1985. The policy
called for virtual disbandment of the public sector and selfreliance and made the entry of the multinationals ’ easier by
initiating the process of delicensing, decontrol and deregulation.
The drug policy formulated in 1987 in tune with the economic
policy was a bonanza for the multinational drug cartels. The
policy brazenly announced that there will be no more public
sector units in the drugs and pharmaceutical units, as India had
already acquired self-reliance. IDPL and other public sector
units were thrown into competition with the giant multinational
drug firms.' With import liberalisation even intermediaries were
allowed to be imported making different units of IDPL idle' and
forcing under-utilication of the plant capicities at different
levels. The conditions of the smaller units like Bengal Immu­
nity and Bengal Chemicals became worse. Growing sickness
became the feature of the public' sector units. And now the
Narasimha Rao Government has given further bonus to these
multinationals by further resorting to delicensing’, decontrol
and deregulation and initiating the process of dismantling the
public sector. But still these international vultures are not
satisfied. And hence the Dunkel proposals on the issue of
Intellectual Property Rights, pressurising India to be a member
of tha Paris Convention on Patents.

Paris Convention
As has been noted earlier, the demands under TRIPS const?:
tute one of the worst froms of the neo-colonial exploitation. The
imperialists headed by the USA want to take back India and
and other third world countries to the colonial period and ‘rule’

4

over them by pressurising them to become members of the Paris
Convention. The Paris Convention on Patents was held during
the colonial period in 1883. The convention was attended by
15 countries. A draft prepared by the USA for the protection
of industrial property was adopted which turned the Intellectual
Property Right to Industrial Property Right. The draft stated
that the countries to which the convention applies constitute a
a union for the protection of Industrial Property. Nullifying
the very definition of Patent right for Intellectual Property, the
draft stated that it did not concern the interest of the investors,
not even that of the producers, but was aimed to protect the
Industrial Rights of the member countries. The first Article of
the Convention stated that Industrial 'Property shall be under­
stood in the broadest sense and shall apply not only to industry
and commerce proper, but likewise to agriculture and attractive
industries and to all manufactured or natural products. It
means that if some one invents a herb, which gives materials
for production of life saving drugs, and if it is patented, none
will be allowed to cultivate that herb. The objective behind
protecting the Industrial Property Right was to establish Pro­
duct Patent Right out of Process Patent Right and not to allow
any other country, to produce the same product even through a
different process. '
‘
. One of the malpractices indulged in by the drug multinatio­
nals to exploit the third world countries was only to patent a
particular product in a third world country without producing
it there and go on importing the product from the parent
country and sell it in the third world country at exhorbitant
prices—5 to 6 times more than that in the parent country. In
this way while garnering huge profits, they kept the country
away from acquiring self-reliance and at the same time caused
huge drainage of foreign exchange licensing system in medicines
after the enactment of the Indian Patents Act, 1970 to safeguard
public interest. The Paris Convention forbids compulsory
licensing by. any country and stated that compulsory license
would not be applied on the ground of failure of work or insu­
fficient work on patents in that country.
. The other provisions of the Paris Convention include decon­
trol observance of the principle of equal national treatment to
foreign investors. It means that no special treatment can be

5

given to any domestic sector for their growth. That is, the
proces of self-reliance and indigenisation and even the develops
ment of the small scale sector have to be grounded. And finally
to fortify the provisions, the convention stated that for succesful application of the Paris Convention domestic laws of the
countries have to be amended if needed. To further fortify the
provisions the convention stated that no Article of the conven­
tion can be amended unless agreed to by 80 percent of the
member countries.
Thus it can be seen that the Dunkel proposals, particularly
on the Intellectual Property Rights were drafted from the pages
of the Paris Convention formulated during the colonial rule
more than one hundred years ago, when imperialism was on the
ascend. Taking advantage of the present tilt of the correlation
of class forces in favour of imperialism, the USA is coming fast
on the third world countries to create its new world order, i.c.
back to the old imperialist order with the neo-colonial drive.
India is its special target as it is its largest trade partner in the
third world with a surplus of exports of drugs aad pharmaceuti­
cals to USA.
In the light of above it is necessary to examine the develop­
ment of the drugs and pharmaceutical industry, especially after
the enactment of the Indian Patents Act in 1970, which has
come into sharp contradiction with the Dunkel Proposals on
Intellectual Property Rights.
'
•i, :<
.■
•
'
'■. ■
Patent Laws in India

The first Patent Act was enacted in India during the British
regime in 1856, which was taken from the English Patent Act of
18521 In 1911 the Indian Patents and Designs Act was enacted;
establishing a system of Patents in the country. The British
regime amended this act several times according to their needs.
"• After independence the Government appointed the Teckchand Committee (1948) and then the Ayyangar Committee
(1957) to look into the question of Patents. Both Committees
made identical recommendations that patents should not be
granted to enable patentees to enjoy monopoly to import the
patented product to exploit the poor nation, instead Patents
should protect development of Indian industries from aggression
of foreign capital. They also recommended that Patents should

6

be granted td encourage invent'ioris and' (Hat they should be
worked in India on a Commercial Scale. They further recom­
mended that for the survival of its own industries, India should
not bei a member of the Paris Convention. It is also pertinent
to note here that during this period a debate was also going on
to formulate an industrial policy of the country as well. Al­
though the Industrial Policy Resolution was finally adopted in
1956 pronouncing a leading role for the public sector to deve­
lop a self-reliant economy, the debate on Patents went on much
longer due to a strong lobby in favour of the multinationals,
who tried to subvert any law projecting self-reliance. The
Pharmaceutical and Allied Manufacturers and Distributors
Associations Ltd (PAMDAL), the main spokesman for the drug
multinationals in'India and later the MNC's own organisation,
vizo the organisation . of Pharmaceutical Producers of India
(OPPI) were at the forefront of such nefarious designs. How­
ever, their efforts could be overcome and the. Indian Patents
Act was passed in 1970...
(
; ,,

1

Indian Patents Act, 1970

The Indian Patents Act' which was ultimately formulated
on .the basis, ofi th© above recommendation/, although' not a
panacea jn itself, did have the following features, which helped
the grpwth pf;the.drugs rand pharmaceutical:! industry in the
country. uoijuuwiorq e-ri1
a'H in-^nia t»;i; ihivr. 4 j. : .- ;i
a)
National interest was?'given'priority1 "over the'interest
of the Patentee.

b)
Product patenting was not allowed in chemicals and
drugs & pharmaceutical products ;,alongwith. several other
matters,. .Drugs or medicines included all medicines for internal
or external use of;.human beings or animals; all substances
intended to be'used for or jn the-diagnosis, treatment, mitiga-.
ti^n or( prevention of diseases in human beings or. animals; all
substances, intended to be used for or in, the maintenance .of
public health, or preventiou;pr control of any> epedemic disease
Hmong'.human ...beings 'oq animals;. insecticides, germicides,
fun'gicideS| weedicides and all.other.-substances., intended to be
used .for the protection .or preservation of plants;,all chemical
substances which are’ordinarily used as intermedinates in the

7

preparation of or manufacture of any 'medicine or substances
above referred to.
c)
Only Process patenting was allowed permitting manufac­
ture of the products through any different process. The term
of such process patent was also kept lower in pharmaceuticals
as compared to other invention. It was five years from the date
of grant or 7 years from the date of application, whichever was
shorter. This gave a good scope of research and development in
drugs and pharmaceuticals and develop alternate technologies
to suit Indian conditions.

d)
Compulsory. License: For Process Patenting in medicines
also the Act provided for “Compulsory License” • after the
expiry of three years from the date of granting the Patent. This
means that the Government empowered itself to revoke the
Patent if it was found that the Patented substance has not met
the requirement of the public or was not available at reasonable
prices. With such licensing the Government forced the Patentee
to work the Patent in the lountry.
e)

Patentee was not allowed to import at his own price..-

f)
Burden of proof of violation of Patents is on the Patentee.
This means if a Patent holder brings a complaint of violation
of his Patent Right, then he has to prove it, and not the accused.
It is in tune with the general law that the prosecution has to
prove the guilt, and not the defendant.

Demands of the Dunkel Draft

,i,

- ■, The Dunkel proposals demand reversal of all the salient’
features of the Indian Patents Act. They demand equal treat­
ment to foreign companies. That means India must forsake its
national interests and help growth of the mulinationals in the
country subverting its own industries, the public sector and
self-reliance. It is a demand to abolish FERA, IDR Act etc.
They demand product patenting and process patenting both,'
and for a period of 20 years, instead of the present maximum
of 7 years for process patenting only. This virtually means per­
manent dependence on imports of all medicines as stated above

8

at exhorbitant prices. They demand that the Government must
shed its authority to revoke a Patent on the ground of its non' working or high price. Further, working of a Patent should be
deemed to have been made on import of the.product. This
means complete de-licensing and decontrol and-the national
Government should function only in name under the command
of the giant multinationals without any power or authority of
itself. And finally the most audaciously ridiculous—the burden
of proof of violation of Patents must lie on the accused.. So
there cannot be any rule of law, but only rule of jungles—the
survival of the fittest—the multinationals. This virtually means
that cases of violations will be a regular feature and the accused
— an lndian industry will be put on the dock in a foreign coun­
try and pay the penalty.
Development of the Pharmaceutical Industry .
after the Indian Patents Act

...

i Despite the giant multinationals operating in the pharmaceuti­
cal industry, the national sector did record a diversified growth
and development after the enactment of the Indian Patents
Act in 1970. This growth can be seen in in-house Research and
Development (R&D) and creation of a self-reliant"technological
base; in indigenous production of life saving and essential bulk
drugs and formulations at much cheaper prices; in achieving
near self-sufficiency in the production of bulk drugs and almost
total self-sufficiency in production of formulations;' and above
al|, growth in exports...............
' '
■.
' '• As product patenting is not allowed, Indian scientists and
national laboratories and enterpreneurs could develop process
technologies to produce a number of life saving and essential
drugs through indigenous technologies within 4-6 years of their
introduction in international market by the. multinationals.
These include anti-bacterials, anti-TB, anti-bypertensive, antiasthamic^ anti-rheumatic, anti-ulcer, anti-th'elmentic drugs; etc.'
Apart from this, the national sector including the small and
■ mediuni sectors and the public sector have started producing
a'bhtit 100 bulk drugs through indigenous' technologies. The
national sector has also started manufacturing'many new
drugs1 through indigenous technology, whose patents are, yet to

9

expire in the world. According to UNIDO, “India is technologi­
cally developed enough to be totally self-reliant with rich
capability for the discovery of new chemical entities.” The
acceleration in production of essential and life saving bulk*
drugs by the Indian Sector can be seen from the fact’ that in
1975 the Indian sector produced 62 per cent bulk drugs, while
the foreign sector produced 38 per cent. In 1987 bulk drugs
production by the Indian sector was 82 percent, while that by
the foreign sector came down to 18 percent only. Similarly in
the production of formulations, the Indian sector produced 50
percent in 1975 with the same contribution by the foreign
sector. In 1987 the Indian sector produced 60 percent of
formulations, while the foreign sector produced 40 percent.

Similary in exports the performance of the Indian Pharma­
ceutical Industry has been phenomenal. It has risen from
Rs. 165 crores in 1983-84 to Rs. 640 crores in 1989-90. Because
of quality and competitive prices the export performance is on
the rise. India is a gainer by about 700 million dollars with
USA' by way of more exports than imports of drugs.
■

But before the Indian Patents Act, the drug prices in India
were among the highest in the world. The multinationals
imported the life saving and essential drugs and sold them in
India at 5 to 6 times more than that in their parent countries.
And a large number of these drugs were banned in their parent
countries. The US Government in 1978 had even amended its
Foods & Drugs Act to allow export of even such banned and
hazardous drugs to the third world countries at high prices. Even
the Kefauver Committee of the US Senate had stated in 1959
that, “The prices of certain drugs and broad-spectrum anti­
biotics in India like Areomycin and Achromycin (by CyanamidUSA) are among the highest in the world. As a matter of fact, in
drugs India generally ranks among the highest priced nations
in the world—a case of an inverse relationship between percapita
income and the level of drug prices.”
, It is to be noted that notwithstanding the mischievous
propaganda launched by the OPPI, over 70 percent of the Indian
population does not have the access to the modern, medicines
despite their “lowest” prices.I ...

Consequences of Accepting the Dunkgl Draft
’’’“ It is now easy to visualise the consequences if the Dunkel

Prices of Drugs in India
There has been a hue and cry by OPPI and even some
Indian sector, supported by the bourgeois press that the prices,
of drugs'in India are the lowest in the world. They propagate
that prices of drugs in India have not been raised for years
although prices of all commodities are increasing. The OPPI
even called for a strike in the industry in last August to, pressurise the Government to increase the prices of. drugs. They
even tried'to force to workers and employees to go /on strike,
which'of course they refused. But the realities must be known
by the people. It is only after the enactment of, the Indian
Patents Act and the price control on some life saving and
essential drugs imposed by the 1978 drug policy formulated'by
tie then Janata Government in pursuance of the' recommenda­

tions of the Hathi Committee, that prices of these drugs could
be brought down to some extent. It is because of development
of indigenous technologies that the Indian drug prices could,
be made competitive in the world market.

10

proposals are atcepted by the Government; India ■ will come
finder the ned-colonial net of'the monopolistic intellectual
property regime of the USA and-other imperialist' countries
as'visualised by the Paris Convention of the colonial period.
India will have to change all its Patent and other Intellectual
Property Laws. If Process Patent is changed to Product
Patent, no new products can be introduced by the Indian sector
as at present. The country’s research activities in process
research for new drugs, chemicals, pesticides; etc > will have
to:be stopped as all these will become patentables. for 20
years. Self-reliance and the process of indigensation' will have
to be buried, as the country will become; entirely: dependent
on imports, not only for patented raw materials', but also
for patented ■ finished formulations of drugs and medicines
for.-human: beings and animals as (defined in the Indian
Patents Act. The inevitable, result;'.will.:, be.: closure of
dur national laboratories and 1 research, .institutions.,: And

11

prices of all such ■ drugs and medicines will be unimaginably
exhorbitant, as there can be no price control. Thus India
will be back to the pre-patent Act days when the prices of
drugs were among the highest in the world. Already as stated
before,.over 70 per cent of the population do not have the pur­
chasing power to buy the medicines. Moreover, as there can
be no control by the Government whatsoever, instead of life
saving drugs, banned, spurious, irrational, and hazardous for­
mulations will flood the Indian market. Coupled with this, as
these medicines will have no relation with the disease pattern
in the country, health care programme of the country will be a
mockery. This will get a further set back, as the budgets of the
various Governmental institutions responsible for implementa­
tion of health care programmes will have severe pressure due to
the high prices of the medicines. The socalled programme of
of Health for All by 2000 AD will have to be buried. Above
all, export ‘activities would receive a serious jolt, and with' the
inevitable rise-in imports, India’s balance of payment position
will be further, worsened. Prescriptions of Dunkel and prescrip­
tions of IMF will together oush India yet closer to the debt trap,.
Finally, the question of “bliin”, to which the Government has
remaind so callous.. With little opportunities that will remain
for the highly qualified scieiftifij: and technical manpower of the
country for indigenous technological research, India’s loss to
the developed country through brain drain will be colossal. This
will be the net result of the neo-colonial technological exploi­
tation through TRIPS. ... . .
The Forthcoming Drug Policy .

.

....

,
,

....

, ,

.. 5

- •■.The policy of liberalisation obviously had have its impact
on. the drug'policy. Although the 1978 drug policy, did some
justice to the Hathi. Committee, the multinational drug cartels
started ‘ sabotaging it by increasing prices,, under producing
life saving bulk drugs and over producing. irrational, formula,
tions .with impunity. The. 1987 drug policy by the Rajiv
Government in tune with the then new economic policy not only
unceremoniously buried.the Hathi Committee, but started
grating, (denigratingi the-public sector as well. .IDPL and

12

other public sector drug units were thrown into : competition
■with the giant multinationals and started getting sick. Now the
■Narasimha I- ao Government under IMF conditionalities have
brazenly started dismantling the public sector and inviting the
multinationals. With the economic sovereignty itself being at
stake, the self-reliant moorings of the Intellectual Property
Rights of the country have become weak. The Government is
dangerously-vacillating at the GATT level. It remained supine
before USA’s Special 301. The strong lobby of OPPI and the
Indian monopoly sectors under ASSOCHAM and FICCI are
pressurising the Government to go the Dunkel way ‘and join
the Paris Convention. Only the sole voice of objection has
come from Indian Drug Manufacturers’ Association (IDMA),
the Organisation of the medium national sector. But the
Government has already started tilting under pressure of the
' OPPI. Prices of almost all the life saving and essential drugs
have recorded steep hike during the last one year of the IMF
dictated new economic policy.
Diabolical Offensive
In the above background the Government is exercising
on a new drug policy. A Committee of Secretaries under the
Ministry of Chemicals has been entrusted a draft to policy. As
reported in the press, this draft policy has been turned with the
new economic policy. It has recommended sweeping delicen­
sing, decontrol and deregulation and suggested increase of
prices of drugs much beyond the “compensation” already
allowed against.devaluation, grounding all control on prices
of life saving and essential drugs. The Dunkel proposals on
TRIPS have successfully intervened on several issues. Reser­
vation of certain drugs for production in public sector unitsare being removed. Four public sector units including the'
biggest, IDPL have been put in the bit list. “Discriminations”
between the Indian Sector and foreign sector is going to be
removed to satisfy the demand for equal treatment. FERA and
MRTP have already been virtually dismantled. Compulsory
quota of basic bulk drug production is being removed. Now
the last straw remains about the change of the Patent Laws.
The danger signals are there. It is to be noted that if the‘ new'
13

economic and industrial policy is a surrender of India’s
economic sovereignty, surrender to the Dunkel proposals and
TRIPS will sound the death knell for the Indian Drugs and
Pharmaceutical Industry.

What is required at this juncture is a broad front for stru­
ggles. Not only those of the drugs and pharmaceutical in-.
dustry, but all sections of the workers and the democratic and
patriotic forces must unite to effectively resist this most dia­
bolical offensive on the country.

□ □□

-0)

(3> wXf-cK

IMPACT OF DUNKEL-GATT PROPOSAL ON DRUGS. CHEMICALS AND
PHAMACEUTICAL INDUSTRY IN INDIA
Maresh Banerjee

The GATT (General Agreement on Trade and Tariff)
proposal was originally conceptualized and formulated as a
multilateral trade policy to encourage and ensure freedom of
international trade. With a view to arive at a consensus, the
member states including India met several times through the
first round (Geneva 1947) to the seventh round (Tokyo 197379) and the proposals were examined and discussed thread­
bare. Finally in the eight round (Uruguay 1986) the then
Director General Arthur Dunkel formulated and finalised the
proposals by laying down a 32-page document in which all the
suggestions and amendments put forward by the developing
and under developed member states were rejected. This
document is now referred to as Dunkel Draft. Subsequently
after several meetings of the governing body at Montreal
(1988), Geneva (1989), Brussels (1990) and after meetings
held in 1991, it came out with a 436 page final document
highlighting (a) Trade related investment measures (TRIMS),
(b) Trade related intellectual property rights (TRIPS) and (c)
General agreement on trade in services (GATS).
In summary, the measures proposed in the Dunkel Draft are:
m
No restriction of foreign equity participation,
No restriction on areas of investment,
No licensing,
(iv) No export obligation to fund import,
Free import of raw materials, components and interme(v)

w

Foreign investors to be treated at per with dom estic compa­
nies in all respects.
All these types of measures and agreements appear to
be intended for global domination by the multinationals in
almost every spheres of socio-economic life including the
area of drugs and pharmeuticals.
Before adoption of the Indian patent act (1970), the drug
price in India were amongst the highest in the world. This was
reported by the American Senate Committee headed by the
Senator Kefauver in 1963. Since the introduction of Indian patent
act (1970), the growth of domestic section has been significant
in respect of price, availability, early introduction, self-reliance in
manufacture, and also in export potentialofdrugs.Thisisevident
in the dat a as presented in Tables I, II, III, IV and V.
The Indian patent act 1970 clearly provides the patent rights
of a drug to remain in force from 5 years to 7 years. There is scope
for manufacturing the patented product through alternate pro­
cess. The Dunkel-GATT proposal advocates both product and
process patent to be incorporated so that no one can manufacture
the patented product through alternate process. It also recom­
mends that the patent period should continue for 20 years with
scope to extend it for a period of about 20 years more by the end
of which the product would become obsolete. Because of the
Indian patent act 1970, the problem of drug lag has been
almost nonexistent in India (Table IV).
India is now capable of manufacturing most of the bulk drugs
(over 80%) required for producing most of the essential drugs and
the significant share of Indian patents in therapeutic groups, as on
31st March, 1993, are depicted in Table V.
The open door policy for unrestricted FERA equity, unchecked
foreign imports with investments by the giant multinationals of the
developed industrial countries will undoubtedly cripple our indig­
enous industry, self-sufficiency technological progress and re­
search in the field of drugs and pharmaceuticals. The DunkelGATT proposal, it is rightly apprehended, shall adversely affect
the economic and political soverignity of India, shall compel us to
do away with the Indian patent act 1970, shall retard the growth
and development and achievement in the field of drugs and
formulations. The rise in the price of drugs will be inevitable. With
the high rate of morbidity and with the huge population still lying
below the poverty line, very lev/ would be able to have access
(vi)

Table I: Drug production growth in India.
Year
Worth of drugs produced.
Rs. 500 Crores.
1973-74
1992-93
Rs. 5,400 Crores.

Table II: Drug exports from India.
Worth of drugs.
Year
Rs. 140 Crores
1985-86
1992-93
Rs. 1281 Crores.
Table III.

Drug Prices in UK, USA, Pakistan and India. In
Indian Rupees(1992-93).

UK

Drugs

Ranitidine
(300mg) x 10.
Diclofence
(50mg) x 10.
Norfloxacin
(400mg) x 10.
Ciprofloxacin
(500mg) x 4
Atenolol
(50mg) x 10
Astemizole
(lOmg) x 10
Vincristine
1mg vial

USA Pakistan

481.31

744.65

260.40

India

29.03

95.84

239.47

55.80

5.67

252.77

626.15

125.50

39.36

315.96

305.21

234.63

51.00

103.21

228.36

86.63

7.50

100.50

436.36

120.90

6.00

542.92

1068.37

323.16

28.90

Table IV : Relative delay in introduction of new drugs in
India.
Drugs
Salbutamol
Mebendazole
Rifampicin
Naproxen
Brombexine
Ranitidine
Captropril
Norfloxacin

Introduced by Time Gap
national section
1977
4 years
4 years
1978
1980
6 years
4 years
1982
1982
6 years
1985
4 years
1986
4 years
1988
4 years

Introduced in
world market
1973
1974
1974
1978
1976
1981
1981
1984

Table V : Share(%) different therapeutic groups of Indian
patents as on 31st March 1993.
1. Antibiotics
2. Antibacterials
3. Systemic
antifungals
4. Anti -leprotic
5. Cardio-vasculars
6. NSAIDs
7. Tranquilizers
8. Anticonvulsants

40.23
98.80

25.66
69.96
40.18
22.16
74.42
65.93

Anti-peptics ulcer
drugs
____
65.92
10.
Oral-anti diabetics 55.30
11.
Anti-asthmatics 47.53
Anti-histamines
12.
21.34
13.
Cytostatics &
anti leukemics
32.41
14.
Contraceptive
hormones
88.79
15.
Anli-diarrhoeals 90.00

9.

to modern health care. Drug needs to meet the goal of 'Health
for All by 2000 AD’ will go by default.
The call given by the Government of India to introduce
free market economy to compete with the giant multinationals
who are armed with the global economy, production base and
market their command, is like calling upon goats to compete
with tigers. Everyone knows what would be the fate. The
people are being pushed under an indirect colonical rule.
All section of the people of India, committed to the welfare of
people, should join hands to launch mass movement to forestal
this suicidal anti-people move by the Government of India.

DRUG ACTION FORUM - KARNATAKA
C/0 Community Health Cell, No.367, Jakkasandra I Main, I Block, Koramangala, Bangalore - 560 034,

An appeal to the Honourable President of India
INDIAN PATENT ACT, 1970
We, the signatories to this appeal,

having reflected seriously on the impact of the amendments to the Patent Act, 1970,
concerned about the impact of the changes on the availability and affordability of
drugs, especially on the socio-economically poor citizens of our country,
Appeal to The President of India, as the Head of the Republic, as follows:

The Indian Patent Act, 1970 had been drafted carefully, keeping in view our Values and
Ethos and following National and International standards. Repeal or amendment of the
provisions of the Act, along the lines now proposed, will adversely affect our people.
This is particularly so with regard to production and use of sorely needed medicinal
drugs. The cost of drugs will escalate (it has already increased) and will become nonavailable people, particularly the poor, if the patent laws are altered.

We, therefore, request you, The Honourable President of India, to ensure that profit
motives of a few affluent countries or large multinational corporations do not pressurise
us to change the law, which was passed after widespread consultation and much thought,
and which has been functioning well in the interests of our people.

The Indian Patent Act, 1970, may be retained undisturbed.
We remain.

Name

Designation

Signature

Name

Designation

Signature

Refuse Approval to Patents Ordinance
Te following memorandum was presented to the President of India by thp National Working Croup on
Patent Laws on January 6, 1999.

1

here is no immediate urgency in regard to. the
Ordinance on the Patent Laws at this juncture since,
even as per WTO rulings, we need to amend our law
before April 19,1999, and there is ample lime for this
to be made part of the agenda for Parliament during
tlie Budget session for which a Bill is pending.
We would draw your kind attention to the report
of the People's Commission on WTO (consisting of
eminent personalities, Justice V.K. Krishna Iyer,
Professor Yash Pal, Professor Prabhat Patnaik and
Professor S.K. Sinha) in which they have discussed
this issue at length. The present discussion appears
to be to scuttle all discussion and steamroller the
EMR route, which is only one of the two alternatives
available even under Sections 70.8 and 70.9 of the
TRIPs Treaty.
As the issue is under discussion between the
NWGPL and different political parties, the Ordinance
would unwarranted ly jump the gun. We would like
to add that under the extant provisions of Articles
70.8 and 70.9 of the TRIPs Agreement, under the Bill
before Parliament Exclusive Marketing Rights (EMRs)
for a minimum period of five years must be granted—
once applications are made for the same—for all
products for which a party may hold a patent in a
member country, and for which an application may
be in tlie 'mail box' opened after January 1, 1995 in
India. Incidentally, no qualifications or safeguards
would be consistent with the WTO, as the government
appears to suggest. It is understood that some 3000
such applications are pending in the mail box, and
even if these applications are totally rejectable, we
would—under the present Bill (which would become
tlie Ordinance)—be forced to grant EMRs for five
years, for the 'mail box' is not even supposed to be
opened until December 31, 2004.
Thus, the Patents Bill—and the Ordinance proposed
—is wholly against India's interests, and there must
be other alternatives available which need to be
examined thoroughly, perhaps through a Select
Committee of Parliament. While that is a matter for
Parliament to decide, we urge you, Mr President, to
refuse to accord approval to any Ordinance on the
subject, since the next Parliament session is due in
February, well before we are required to meet the
deadline for amending our Patent Laws th conform
MAINSTREAM ■ January 30, 1999

to the WTO ruling.
We urge, Mr President, that for reasons advanced
above, you may kindly refuse- to approve any
Ordinance that the government may submit to you,
and advise the government to process tlie Bill through
Parliament.

For and on behalf of the
National Working Group on Patent Laws
B.K. Keayla

Arun Ghosh

Convenor

Co-Chairman

Just Released
Alternative Economic Survey
(1991-1998)
Seven Years of Structural Adjustment
The Alternative Economic Survey,' prepared every
year by a group of concerned economists, acade­
micians and social activists, is an attempt to counter
the window-dressing and a certain amount of
disinformation attempted by the official Economic
Survey, and to present a realistic, people-centred
picture of the state of the Indian economy. The
present volume, the sixth in the series, attempts to
present an account of the fate that befell India and
the Indian masses during the last seven years of
structural adjustment.
Contributiors in this volume include:
Dolly Arora, Kamal Nayan Kabra, R.M. Murthy, Kishor
C. Samal, Sadhana Arya, Sanjay Kapoor, Kamala Prasad,
Kripa Shankar, Jay Bhattadiarjce, Raj Kishore, K.S.
Chalapati Rao, Suresh Shukla, P.K. Chaubey, Ashish
Kothari, D.N. Rao, J.P. Singh, Keshab Das, Man Mohan
Krishna, K. Ashok Rao, Surjit Singh, Alok Das, Ashok
Mathur, E.K. Rao, T.M. Thomas, S.K. Coyal, Balraj
Mehta, Janardhan Rao, V. Upadhyaya, Tilak D. Gupta,
Chaturanan Mishra, E. Revathi, N.V. Varghese, Damodar
Jena, R.K. Mishra, Suntan Sahai, Hnri Om Varma

Send your orders to:
Rainbow Publishers Limited (Lokayan)
13, Alipur Road, Delhi-110054
Azadi Bachao Andolan
Gandhi Bhavan, Chatham Lines, Allahabad-211002
demy 4 vo • pp. x + 230
Hardbound • ISBN 81-86962-18-2 • Rs 395/S25
Paperback • ISBN 81-86962-19-0 • Rs 100/S10

55

(Hi Ci ISSUES

Patent capitulation
Eager to meet a WTO deadline, the BJP-led Government opts for a legislative course that will be deeply
divisive, without taking into account the larger implications of the step or the context of domestic opinion.
SUKUMAR MURALIDHARAN
ONTH j ;-:'.-anco:o'US interne. debate
and an ac- erse rumg bv the Dispute
Settlement
DSb . the watszcoc or
global trace, p.-iteoed me Union Cabinet's
recent decision: :■ amend the Indian Patents
Act, to bring:: tn ane with the noma man­
dated bv the World Trade Organisation
(WTOk Cohering me deep schisms
wit'^fce c.-.n--.va Janata Partv over the
issue, the Centre: decision must unco-otedly count as a brave one.
Yet. it is ec-taiiv lacking in conviction.
when viewed against the tenuous parcamenrary arithmetic o: me BJ?-ied coalmen and
the fare of an earner effort at amending the
Patents Ac: - sd_l fresh in political memory.
In effect, the BJP-led Government has
promised tc resurrect rhe Patent; Act
(Amendment Siu mat was oassedbv me Lok
Sabha in March
and then allowed to
japse (Fnnti^u. May If’ 1995). The PA'.
Narasimha Pete Government considered
withdrawal rhe prudent course rather than
have the bill run the gauntlet of hostile rbrees
in the Rajya Sabha. With tew exceptions, all
the parties ofthe Opposition had made it dear
that they would vote against the amendment.
Among the most vociferous in its opposition
was the BJP.
Since then India was taken before the
DSBaathe Vt i Ctor its failure to conform
ron^Fiatorv norms of parenr protection.

M

At issue were two clauses or rhe WTO agree­
ment - 70.8 and ”0.9 - which were quite
transparently the industrialised countries'
efforts to dilute the gains won by develop­
ing nations over the length of time that
would precede transition to rhe new regime
of patent protection.
In their formulation, these two clauses
are an object lesson in how concessions
granted in seeming good rairh in one pan of
a treaty can be completely neutralised in
another. Developing countries were, as a
rule, afforded a transition period offivevears
for fuITcompiiance with the WTO agreement on inteuecruai property protection.
In addition, countries that followed a
system of process patents rather than product‘patents in certain areas of technology as India did in drugs anc pharrnaceuricils
for instance - were given another five years

100

to extend rhe new regime to these specific
The plea gained little credence. The
areas. India, which as a developing country DSB observed in agreement with the
was entitled to the exemption of five years,
European Union and the United States that
is hence obliged to adopt the WTO rules on
there was a degree of “legal insecurity” sur­
patents by the year 2000 and to introduce") rounding these applications. Although not
product patents for drugs antLpharmaceu-1 invalidated or rejected at the rime of the
ticals by the year 2005.
—I hearing, their tenuous legal basis could con­
^YetTthe possible benefits of this transi­ ceivably lead to such an outcome in future.
tion period were diluted by the compulsions And as for clause 70.9 of the WTO agree­
of article 70.8, which insisted that all mem­ ment. India was, by its own admission, in
ber states should, from the date of entry into
default on the requirement that EMRs be
force of the WTO agreement, institute “a accorded to applicants who had filed prod­
means by which applications” for such parents
uct parent claims in the mailbox.
In combination, these two findings
could be filed. This clause, popularly known
as the “mailbox” stipulation, required the
implied that India earned no reprieve. The
Indian parent authorities to begin receiving
DSB ruling, later upheld by the Appellate
Board, obliged India to put in place the nec­
applications for product patents in drugs and
pharmaceuticals from January 1, 1995essary legaTframework for ensuring conforAlthough the patent would be granted nurv with WTO norms on patents by April
1999----------------------------------- ------------only after 2005, the applicants would enjoy
the special privilege of “exclusive marketing ------ The confidence ofinternational investors
being a precious commodity in days of glob­
rights"(EMRs) in the intervening period.
subject only to the condition that their al uncertainty, the Government set about the
application for a patent must have been
task of ensuring conformity with a degree of
granted in one other member country of the earnestness. A signal was sent out, though it
WTO. Known as the “pipeline protection” was perhaps of symbolic rather than substan­
in legal jargon, EMRs serve as a precursor tive importance, when the BJP-led
to formal patent protection, and are ditter- Government quietly signed on to the Paris”
Convention early in August this year.
enroTtly-in-dcgree'a'rid not in kind.
In a milieu of disparate legal systems Sentiments obviously had been sub­
where turmeric and basmati rice for instance dued since the peak of agitational fervour
have been granted patents in certain coun­ against the Paris Convention was hit just
tries - the havoc that could be caused by over a decade ago. Before the agenda of
such a provision is readily apparent. The intellectual property protection was inte­
Patents (Amendment) Bill of 1995 sought grated into trade policy and brought under
to establish the mailbox system and institute rhe jurisdiction of the WTO, the Paris
EMRs, bur failed at the stage of parliamen­ Convention had been the chosen vehicle for
infrusion into sovereign spaces by-gom7
tary scrutiny precisely because it failed to
mercial interests from the advanced
assuage these concerns.
nations. But the Government’s decision on
Rather than tackle these apprehensions
frontally, India chose a rather disingenuous accession drew few adverse comments in
tack in hearings before the DSB. It was August.
Today, there is a distinct attitudinal
argued on behalf of the country that the svstem of receiving mailbox applications was change among sections involved with the
iffplacerthough without formal legal back­ patents issue. There is a strong line of advo­
ing. Between January 1, 1995, and lantiarv cacy which believes that EMRs engender .a'
31, 1998, no fewer than 2,212 mailbox
monopoly and are antithetical to rhe public
patent applications had been received, none interest. B.K. Keayla, convener of theNatlonal Working Group on Patent Laws,
of which had been rejectedWr‘invalidated,
is a fervent advocate of the view that the bal­
India’s representative argued. The failure to
get the Patents (Amendment) Bill passed in ance of advantage for India lies in dispens­
Parliament was, by this criterion, immater­ ing with the transition period and moving
ial. The system of receiving applications for directly to a regime of product patents.
product patents still remained in place.
In support of this argument, Keayla

FRONTLINE. DECEMBER IS. 1998

Principles at a low premium
made its support contingent on one con­
dition- that the IRA Bill would specifi­
cally rule out the entry ofoverseas investors
into
the insurance sector.
HE insurance sector provides the
Chidambaram had then argued that
backdrop for another spectacular
this was beyond the province of the IRA
change of heart by the Bharatiya Janata
Party. Nine months into its tenure, the
Bill. The question of eligibility to partici­
coalition Government led by it has shed
pate or otherwise would be taken up in
all residual anxieties about national sover­ amendments to the Insurance Act, 1938,
eignty and the security ofpublic funds, and which would follow the formal constitu­
announced a sweeping set ofliberalisation tion of a regulatory body, he said.
measures for the instance sector. The Following the BJP’s refusal to entertain
more than probable legislative mishaps • this plea, the U.F.’s version of the IRA Bill
aside, the public sector monopoly in insur­ was hastily withdrawn from Parliament.
In just over a year, the BJP has evi­
ance will soon be a thing of the past.
Foreign entities will be entitled to partic­ dently gone from strident advocacy of a
ipate in insurance to the extent of 26 per swadeshi perspective in insurance to an
attitude bordering on the permissive. In
tent equity holding in an Indian venture.
With participation by non-resident fact, the package of measures its
Government proposes seems to adhere
Indians and foreign institutional investors,
the overseas equity stake in Indian insur­ closely to the recommendations of the
R.N. Malhotra Committee on Reforms in
ance companies could go up to 40 per cent.
the Insurance Sector, which submitted its
Curiously, these decisions have been
taken in conjunction with a legislative report in early 1994. The thinking today
is reportedly to insist on a minimum share
measure which is fairly limited and mod­
est in its purpose - to provide statutory capital of Rs. 100 crores for new insurance
backing to the Insurance Regulatory companies. A promoter could have a share
no higher than 40 per cent and no lower
Authority (IRA), which now functions on
than 26 pet cent. And while the Malhotra
the strength of a presidential ordinance.
In mid-1997, the United Front Committee did not differentiate between
Government had sought in vain to intro­ overseas and domestic enterprises, the
duce a legislation with precisely the same Union Cabinet today has chosen to define
purpose, though without undertaking any the threshold of participation by foreign
firm commitments about eligibility to par­ entities.
Several viral aspects of the new insur­
ticipate in the liberalised ambience of
ance industry norms remain to be worked
insurance.
Finance
Minister
P.
Chidambaram managed to recruit the sup­ out. Particularly crucial would be the
investment
guidelines that are enforced to
port of the Congress(I) to this cause
regulate the deployment of funds by the
though the Left constituents of the U.F.
insurance companies. Security beingofthe
remained opposed to the move. He then
approached the BJP in a bold bid to recruit utmost priority in the insurance sector, the
trans-partisan support. The BJP, while public sector enterprises are today obliged
to put most of their funds into gilt-edged
giving him a number of positive signals,

government securities which offer rela­
tively modest returns. The Malhotra
Committee had been rather critical of this
rule and proposed that insurance compa­
nies and pension funds look with greater
favour on maximising returns through
judiciously placed investmen ts in the stock
market.
An examination of the deployment of
household savings shows that the impor­
tance oflife insurance policies and pension
funds has remained relatively unchanged
over the years. Since the early 1980s, when
the share markets went through successive
cycles of boom and bust, the proportion
of household savings invested in insurance
and pension funds remained inflexible. In
contrast, the proportion that goes into the
share market has fluctuated very widely
over the years. Between security of invest­
ments and returns, the household sector
in India seems already to be exercising a
judicious measure ofchoice. It is not quite
clear that they need a new set of insurance
norms that will alter this pattern of dispo­
sition of their savings.
The privatisation of insurance raises
exactly this possibility. Even ifthe threshold of share capital for entry into rhe sector is retained at the relatively high-level
of'Rsi .100-crores (as against-rhe'-Rs.
50.000 in the case of public sector-com—
panies), it is not clear that all potential
liabilities and assets will be perfectly
matched. If, on top of this, companies are
enabled to plough insurance funds into a
volatile stock market which is yet to rid
itself of the latent possibilities of abuse,
there would seem to be a rather high and perhaps unacceptable - element of
attendant risk. The mitigating circum­
stance perhaps is that there is little sign
that the BJP-led Government will be able
to overcome survival anxieties in the near
future and depart from its hitherto undis­
tinguished legislative record. 13

litigation, governmental-fatigue and-a_tri.umph~5y^ default of global monopolies
which have nodearth of legal resources.
For a while, it was reported that the
Group of Ministers constituted to examine
this question was divided over the best
option available to India. Two of the four
Ministers seemed to believe that there was
some merit in going directly to a system of
product patents which would be symmetric
in its application for domestic and overseas
entities. The other two were unconvinced
that the residual benefits offered by the
WTO in the form of the transition period
could be so easily dispensed with.
In finally deciding this question, the
Government went by the calculation that
the bulk of the mailbox applications

received will not be granted patents in
another WTO member country and would
nor be eligible for EMRs. Failing an exam­
ination of the content of the applications
received, there would seem Hide to choose
between this and the alternative viewpoint.
Evidently, the point at issue is simply
that the Indian Government entered into
international obligations without rnnsid.
ering the context of domestic opinion. On
finding that it could not sustain the atten­
dant commitments, it made an elaborate
pretence that domestic concerns were
immaterial, since rhe formal requirements
of the WTO treaty would be met by
default. Under the pressure of a WTO
deadline, it has opted now for a legislative
course that will be deeply divisive. 0

SUKUMAR MURALIDHARAN

T

points to the large numberofapplicarions that
have been received for the grant of product
patents - an annual average of over 700 since
the mailbox was opened on January 1, 1995.
In authentic terms, no more than 50
inventions are made in a year which could
qualify for patent protection, claims Keayla.
“Pipeline protection”, in other words, could
be a permit for a rampage of monopoly
interests. India would be obliged to grant an
applicant an EMR subject only to the con­
dition that the applicant held a parent in
another member-country of the WTO.
With patent systems in many countries
becoming increasingly permissive- as exem­
plified in the grant of patents on turmeric
and basmati rice - “pipeline protection”
would be little other than a route to endless

Forum of Parliamentarians on
Intellectual Property
A-388, Sarita Vihar, New Delhi-110 044
Phones : 694-7403, 681-3311
Founder Members
Justice V.R. Krishna Iyer
Former Judge
Supreme Court

Fax : 91 (11) 694-7403

Special meeting of the Forum of Parliamentarians on
Intellectual Property held on July 24, 1996 in Conference
Room 'B', Parliament House Annexe, New Delhi.

Dr. Murli Manohar Joshi
Member of Parliament
Former President
Bharatiya Janata Party

STATEMENT

A special meeting of the Forum of Parliamentarians on Intellectual Property
was held on 24th July, 1996.
The meeting was convened in the background
Dr. Ashok Mitra
of the press report about the American demarche to the Government of India
Member of Parliament
Communist Party (Marxist) on the so called failure of the Government of India to amend the patent
laws and strong reaction in Parliament of the senior Members of Parliament
Shri S. Jaipal Reddy
belonging to different parties on July 19, 1996 to the issues arising out
Member of Parliament
Several parliamentarians and a number of eminent
Leader of the Janata Dal of the reported demarche.
experts participated in the Forum meeting.
Sfriri George Fernandes
Member of Parliament
President. Samata Party
Shri Indrajit Gupta
Member of Parliament
General Secretary
Communist Party of India
Co-ordinator

Shri B.K. Keayla
Former Commissioner of
Payments
Government of India

The following participants spoke at the meeting:
Members of Parliament
Dr. Murli Manohar Joshi, Shri Chandra Shekhar, Shri Jaipal Reddy, Shri
George Fernandes, Dr. Ashok Mitra, Shri Prithviraj Chavan, Shri M.A. Baby,
Shri Rup Chand Pal, Shri Dipankar Mukherjee and Shri Nilotpal Basu.

Eminent Experts
Dr. Nitya Nand, Shri S.P. Shukla, Dr. Arun Ghosh, Shri J.C. Jetli, Shri
B.K. Keayla, Dr. Vandana Shiva, Dr. Rajeev Dhavan and Shri Dinesh Abrol.

The meeting recalled the Declaration on TRIPs Patents Regime issued at
the Conference of Parliamentarians on Intellectual Property held on 24th
January, 1996 and an appeal by the National Working Group on Patent Laws
titled "Priority Agenda for the Parliamentarians" on 21st May, 1996.
The meeting noted with satisfaction that the composition of the 11th Lok
Sabha has undergone a transformation resulting in an overwhelming majority
for MPs belonging to the political parties who have been strongly opposing
the unequal treaty of New GATT/WTO, particularly the Agreement on TRIPs.
It was felt that this development would impart new strength to the struggle
against the unequal Agreement on TRIPs.
The meeting re-affirmed the country's sovereign and inalienable right to
have an intellectual property regime which would promote public interest
and ensure self-reliant development in social, economic and technological
spheres. The meeting reiterated its strong opposition to the unequal and
unacceptable Agreement on TRIPs incorporated in the New GATT/WTO and its
resolve not to allow amendments to the Indian Patents Act, 1970 so as to
make it conform to the regime visualised in the TRIPs Agreement.
In this context, the meeting noted that according to U.S. Administration
itself as many as 48 countries have yet to amend their patent laws and
most of the developed and developing countries have not complied with their
so called obligations under the TRIPs Agreement.
In addition, there are
45 other least developed countries who have clear 10 years to apply the
provisions of the TRIPs Agreement.
Thus there are 93 countries who have
yet to amend their patent laws.
In the circumstances, there was no
justification whatsoever for any industrialised country to mount pressure
on India in this regard.

Patents - The International Farce
{Translated from the Editorialpublished in the Kannada magazine, Taranga}

The British, and, before them the Mughals, apart from snatching
away India's freedom, seemed to have snatched away the patriotism
and pride of the countrymen. Even now, our country is being looted
in umpteen ways. Are we not resilient enough to resist such
assaults?
Today, America, Japan, Europe and other countries are looting the
natural resources of the country. They are hindering/restricting our
growth, research and scientific development. Though fully aware
that all this unfair, we have allowed it to get out of hand. Why this
cowardice?

Basmati rice, neem, gooseberry, bitter gourd, turmeric, grapes,
mustard, ginger, black cummin, brahmi, sitaphal, jackfruit,
pomegranate, black pepper, isabgol .... the list goes on and on.
Nearly 30 items have been patented. We have lost our rights over
these things. In other words, these cannot be used by Indians
anymore. If we need to use them, we have to write to America or
japan for permission.
This is international piracy. Can there be a bigger insult than going
with a begging bowl to other countries for the ingredients/items we
use in our culinary/ Ayurvedic preparations?

There have been many protests by farmers, scientists and lay persons
regarding this issue. Objections have been raised.
Now and then, we hear news about the Government of India
intending to lodge a protest and initiate a movement against this
unfair practice. Pharmaceutical companies have also made the
requisite noises. Inspite of all this, the daylight robbery has not
stopped. In the guise of civilization, trade and economic betterment,
should this go on?

India is a unique, vast land. The weather of the land is diverse. We
have regions of extreme cold, rain and deserts. No other country in
the world has such a diverse wealth of natural resources. But, are we
not capable enough to preserve and use our natural resources in a
proper manner? Probably, we may even destroy and sell the birth
place of one of the great souls of this land, if there are monetary
gains!

Having recognized the potential of Ayurvedic medicines for profit­
making., the greedy pharmaceutical companies of America are
poised to make billions of dollars from every grain, grass, leaf and
fruit possible. According to estimates, 25% of prescriptions in
America have drugs with herbs as one of the ingredients. This trade
amounts to 20-30 billion dollars per annum. In Canada, England,
Australia and other countries, it touches more than 70 million dollars.
These medicines need nearly 2,50,000 varieties of herbs. Half of them
are available in India. Some are available only in India. And, the
global looters have been quick to realise that India is a soft target.

There have been instances of multiple patenting of the same herb by
pharmaceutical companies in America, where the trade war between
companies is intense. Neem has 65 patents, turmeric has 15, mustard
10, gooseberry 20 .... The list is endless. Where is the end to this
international sacrilege of looting the natural resources of another
country and claiming it as their own?
Patents are framed by multinationals. Is our Government unaware of
this fact? Can't we do anything to stop this unfair trend? Has the
Government ever thought seriously about initiating action in this
regard? Why this unholy silence?

India also has a patent law. It dates back to as early as 1970 - an
outdated law. Is it not possible to modify this law to face today's
challenges? Are the people's representatives - the MPs aware of this
problem? Are they really eager/interested to know more?

The multinational pharmaceutical companies of America and Europe
are scheming to distort this outdated patent law of ours. India has
already lost a few times in this patent imbroglio. One by one, all our
natural resources are being patented outside our country. Such
resources then become the sole property of that country. Later, India
stands to lose all the rights over the patented resources.
The pharmaceutical companies manufacturing Ayurvedic medicines
in India are in real, deep trouble. Slowly, the multinationals are
establishing their stranglehold over this area. And, our companies
are helpless against this assault. In reality, these patents are a
violation of our farmers' rights. They strike at the core of our natural
resources. In essence, native wisdom culled over centuries of
civilization will be rendered useless.

Patents have been brought out in the name of NRI scientists also.
This is just for their convenience - akin to hanging us by our own
rope.

When we say that we are hospitable nation, it doesn't mean that we
can be cheated out of what is rightfully ours. It is wickedness
unlimited. How many Indians have faith in our political system,
where the politicians are forever involved in internal squabbles, that
they have the capability to rescue us from this whirlpool?

- Santosh Kumar Gulwadi

o I i cy

What is Patenting ?
G. Utkarsh
eem,
Turmeric,
Basmati...... ! Screened,
manipulated and patented!
These famous Indian plants are
amongst many that may trigger bio­
technological innovations, only to be
eventually patented, often abroad.
Having over-exploited India’s bulk
resources like timber, spices, silk,
cotton etc. as raw materials for few
centuries, the developed countries
now set to capitalise on our genetic
resources and wisdom. No doubt,
future wars would be fought more
with intellectual ammunition than
physical or nuclear.

N

Intellectual Property Rights
Intellectual Property Rights (iprs) re­
fer to exclusive authority provided by
the government to the first innovator
for manufacturing and marketing the
innovation, prohibiting other parties
unless licensed by the ipr holder, on
payment of fees or royalty.
Patents, the most relevant form
of iprs for pharmaceuticals, are pri­
marily used to protect industrial in­
novations. Depending upon the
country, the patent lapse after 7 to
120 years and thereafter anyone can
commercialise the innovation. Copy­
rights are used to protect artistic ex­
pressions for about 50 years. Trade
secrets, renewable after every 7
years, protect the undisclosed infor­
mation like recipes. Plant breeders’
rights; trademarks, geographical in­
dications, designs, databases, are
some other forms of iprs.

Patenting Innovations
Patents are granted on novel, nonobvious and useful innovations.

Knowledge already in the public
domain (e.g. Ayurvedic formula­
tions) is not considered novel and
hence, not patentable. If the inno­
vation is a mere discovery (e.g. new
species) and does not involve an in­
ventive step, it is not patentable.
Further, just the knowledge of using
a plant or a mixture of herbal ex­
tracts to cure a disease is not pat­
entable in India. Screening, isolation
of active ingredients and demonstra­
ble market potential may however
render the invention patentable. A
patent application must specify suf­
ficient details of the method of in­
vention so that anyone skilled in that
art must be able to repeat the same
without the help of the inventor. The
disclosure statement must also in­
clude adequate reference to exist­
ing public knowledge. Based on
such specifications, the patent au­
thorities and experts scrutinise the
application by referring to existing
literature and patent documents.
The patent claims and summary are
also publicised for a few^months
(e.g. through gazette notification) to
invite oppositions, if any, generally
prior to the approval.

member countries of the gatt are
obliged to provide strong ipr protec­
tion to domestic as well as foreign
innovations in all the fields of tech­
nology. Only natural plants and ani­
mals other than microorganisms and
essentially natural methods for their
reproduction are not patentable.
Patents must now be granted 20
years and on products as well, not
just process.
Till recently, many countries pro­
vided partial or no ipr protection in
health and food sectors. In India.
only 7 years duration process pat­
ents were granted in the pharma­
ceutical sector. Thus, Indian drug
companies vigorously manufactured
many imported drugs by slightly
modifying the patented process and
sold it at much lower prices. This
benefited the public and the Indian
industry much to the dismay of the
foreign manufacturers. However,
after 2005 ad India and other de­
veloping countries are obliged to pro­
vide product patents in all sectors,
posing threats to these reverse en­
gineering technologies, and the do­
mestic industry, also making new
drugs very costly.

Patenting Life

Biopiracy

Scope, application procedure and
period of ipr protection varies across
countries. Further, protection needs
to be separately obtained in each
country. The Trade Related Intel­
lectual Property Rights (trips) sec­
tion in the General Agreement on
Trade and Tariff (gatt), is an effort
by the developed world’s industrial
lobby to homogenise and strengthen
the ipr regimes world over. The 130

Industries in the developed countries
argue that developing a new drug
takes 10 to 12 years and nearly us
$400 million. They advocate strong
and longer ipr protection to this in­
vestment as the drtig manufactur­
ing is easy to copy and manipulate.
However, this argument overlooks
the valuable diversity of crop plants,
medicinal plants and die people’s
knowledge that the developing coun-

AMRUTH, FEBRUARY 1999

15

tries have been freely providing to
the developed world. The developed
world industries have made huge
profits from the resultant new dings,
crops and cosmetics. However,
these products are patented and sold
at exorbitantly high prices even to
those countries that contribute the
biodiversity and knowledge as raw
material. Since iprs protect only
commercial inventions, day to day
domestic use of bioresources are not
prevented. Grandmothers can freely
use Tulsi or Turmeric for domestic
health care. Ayurvedic vaidyas or
pharmacies can continue to sell their
powders and syrups unabated, but
they cannot today claim a share in
the profits generated from a derived
drug, which will most likely be pat­
ented. Such inequitable sharing of
benefits lead to a growing discontent
and eventually gave birth to the in­
ternational Convention on Biological
Diversity (cbd) 1992, the political
weapon of the developing countries.

CBD and Genetic
Resources
by 170 countries, reaf­
firms the sovereign rights of the
nations. Article 15 requires mem­
ber countries to transfer genetic re­
sources on the basis of prior con­
sent and mutually agreed terms.
These conditions, however, do not
apply to genetic resources obtained
prior to the convention i.e., 1992. For
instance, Kew gardens and herbaria
in uk house the most exhaustive
collection of Indian plants. These
specimens can be easily used to
extract genetic material without In­
dia’s consent just as the us devel­
oped its controversial variety from
Basmati rice strains procured in the
last decade. Thus, biodiversity rich
southern countries can set terms of
cbd, signed

benefit sharing only in future trans­
actions, if any. Further, a biodiversity
rich country can dictate terms only
if the genetic resource is endemic
e. exclusive to it. Otherwise, a
i.
neighbouring country can offer the
shared resource on more competi­
tive terms.

efit sharing with the original con­
tributors. mncs are also actively en­
gaged in tapping the folk knowledge
through local agents, cbd provides
the spirit though not the weapons to
fight the misappropriation of such
public domain knowledge.

Say no to Patents?
CBD and Traditional
Knowledge

Taking a clue from the cbd, ipr re­
gimes are being widely opposed
Article 8 j of the cbd requires mem­ through various seemingly conflict­
ber nations to respect and preserve ing strategies. Environmental and
the knowledge of local people and social activists altogether reject
apply it only with their approval, in­ patenting of life citing three reasons
volvement and equitable sharing of - monopolies are socially unjust as
benefits. Article 10c requires mem­ they lead to exorbitant prices; mo­
nopolies often lead to monocultures,
ber nations to protect customary
usage of biological resources. Arti­ which are unsustainable in the long
cle 16(5) mandates nations to en­ run; and monopolies over life are
sure that iprs are supportive of and unethical, as humans have not cre­
do not run counter to the cbd objec­ ated life. However, most govern­
tives. However, most of these pro­ ments including developing coun­
tries in the world do not seem to buy
visions cannot be operationalised
without enacting corresponding na­ this view today and have signed
tional legislation. Unfortunately, the gatt. Costa Rican Biodiversity Act
does not disqualify all iprs on life,
approvals relate only to undisclosed
but prevents iprs on all innovations
information. Much of the traditional
knowledge is already in the public similar to traditional knowledge.
Costa Rica
being a small
market, in­
The monopolies are
vited little re­
socially unjust as they lead to exorbi­ action. Even if
tant prices and monocultures, which
India decides
against
are unsustainable in the long run;
patenting of
and also lead to
lifeforms, inmonopolies over life, which is unethical, no v a t i o n s
based
on ge­
as humans have not created life.
netic
re­
sources and
knowledge
originating
in
India
will
domain - in the form of computer­
ised database with quick search fa­ continue to get patented abroad, with­
cilities, often housed in developed out any consent or benefit sharing.
The Indian government seems
countries (like napralert in Chicago,
us). Industries access this informa­ inclined to allow product patents
tion without any consultation or ben­ very soon. The patent bill to meet
AMRUTH, FEBRUARY 1999

16

our obligations under the World
Trade Organisation (wto) could not
be passed in December 1998 par­
liament session due to the resistance
from the activists. However, the gov­
ernment keen to avoid any penal­
ties and multilateral sanctions from
the wto, immediately issued an or­
dinance to provide for exclusive
marketing rights (emrs), if not prod­
uct patents. Even the budget ses­
sion of the parliament may be ad­
vanced to get the bill approved be­
fore the wto deadline. Internation­
ally, most of our neighbours have
already enacted strong ipr regimes,
including China, which is not a wto
member yet.

Patent Wars?
Government institutions such as the
Council for Scientific and Industrial
Research (csir) joined the patent
war by filing many patents in India
and the us e.g. relating to the use of
Neem. However, csir’s success in
commercialising its invention is lim­
ited. Cost of filing and maintaining
patents abroad are also prohibitively
high and the csir lacks money to
commercialise the technology. Pri­
vate sector is in no better shape,
barely few Indian companies like
Ranbaxy or Dr. Reddy’s Lab have
'some capability for r & d to gener­
ate patentable innovation. No won­
der, of the 500 and odd patent claims
filed in India last year more than two
third were by the foreign agencies,
especially mncs I It seems unlikely
that Indian scientific community can
protect much of the innovations
based on the enormous diversity of
traditional formulations, estimated
at about 10,000 in Ayurveda alone.
Further, the rationale driving the
patenting spurt by the public sector
institutions seems to be that of pro­

viding Indian public with less costly
products before the foreigners can
monopolise those. However, if csir
can successfully commercialise its
inventions abroad, it can even make
profits. Unfortunately, csir has given
no thought to sharing such benefits,
if any, with Ayurvedic or folk medi­
cal practitioners. In fact, most of the
csir missions do not fully involve
Ayurvedic experts, csir patent re­
lating to use of ‘Piperine’ in treat­
ing tuberculosis, based on
Ayurvedic formulation Trikatu, is a
case in point. Such non-participatory approach is against the spirit of
the cbd. No doubt Indian r & d
should gear up for patenting, but it
must also encourage complimen­
tary strategies.

Sui Genris IPRs for
undisclosed information
One of the alternative strategies
advocates modifying the existing
IPR regimes so as to make them
less costly, simpler and sensitive to
the requirements of the folk scien­
tists. For instance, Kenya has be-

Indian r&d
should gear up for
patenting, but it must
also encourage
complementary strategies
gun to grant petty patents (also
termed as utility or soft patents) to
folk medicinal formulations. These
require less precise specification,
need not prove market potential, are
cheaper and easy to apply. Similarly,
special forms of copyrights,
geographical indications, trade­
marks can be evolved to protect
AMRUTH, FEBRUARY 1999

cultural expressions, denominations
and symbols. Trade secrets are
being used in Ecuador to protect
undisclosed community knowledge
being computerised by the local
University.
The most efficient way to pro­
tect the undisclosed information is
to empower people to negotiate in­
formation transfer agreements i.e.
contracts with the entrepreneurs
and/or the government. The re­
wards could be in the form of spot
payments, milestone payments and
direct share in the royalty once the
product gets commercialised. Such
contracts are not uncommon in
Peru, Philippines or Africa. To pro­
vide teeth to such contracts, it is
necessary to modify the ipr
legislations to enforce submission
of relevant contract/ transfer
agreements as a proof of the prior
informed consent.
However, granting such iprs to
an individual may cause injustice due
to the presumption that other per­
sons are ignorant in that art. In re­
ality, only a person in proximity to
media, legal advice and other re­
sources may be able to register an
ipr claim. To minimise this, it is nec­
essary to publicise the claims for
petty patents contracts etc. and
invite the public oppositions. Nev­
ertheless, utility of sui generis i.e.
independent iprs could still be lim­
ited, as the industries would claim
iprs over so called distinct
innovations.

Acknowledging the
public origin of IPRs
The patent spree or the sui generis
ipr protection may after all benefit
only a few innovators, primarily in­
dividuals. To protect people’s rights
in relation to vast store of public

^/-^olicy
knowledge requires broader solu­
tion. These rights could be in the
form of entitlement to information
regarding application of their knowl­
edge. to share benefits of such
knowledge, to demand favourable
terms for transfer of technology in­
cluding those protected by iprs, to
nurture local r & D and protect cus­
tomary usage of biological re­
sources.Towards this end, the ipr
laws must be amended to require
mandatory disclosure of all the avail­
able public knowledge regarding an
innovation. Further, the ipr authori­
ties must conduct exhaustive search
prior to grant of an ipr to examine
the claims of novelty and inventive­
ness. Such disclosures will also al­
low the public to challenge incom­
plete or misleading claims.
This is illustrated by the patent
granted by the us patent office to
use turmeric in powder form for
wound healing. The us laws do not
mandate scrutiny of public domain
knowledge abroad while granting a
patent. Further, no public hearing is
invited prior to the approval. Nev­
ertheless, when csir took proper
steps to prove that such a usage was
traditionally known and undercur­
rent research, the us court revoked
the patent.

Promoting
knowledge

the

registers could be maintained at the
local panchayat offices. Urban
r & d institutions can integrate this

information with the public domain
resources through databases.
Such databases must be linked to
commercial benefits through a pub­
lic biodiversity fund. The fund must
promote public knowledge and con­
servation, by rewarding people and
providing them social incentives.
This fund could support meetings
of folk practitioners and farming
practices for promoting exchange of
knowledge. Venture capital fund
may be provided to grassroot inno­
vators to experiment putting their
ideas into practice.
The public fund can be generated
by sharing the royalty derived from
innovations based on public domain
knowledge and a modest tax on
sales of biodiversity based products,
such as medicines. It can also be
raised by diverting perverse incen­
tives such as wasteful expenditure
on the modern primary health care
system that eventually erode sus­
tainable traditional practices. Such
public fund must be created using
the provisions of cbd. gait and trips
do not prevent such recognition to
traditional knowledge, taxation
measures and environment friendly
incentives.

public

Operationalising people’s rights
would require documentary evi­
dence about the existing knowledge
and practices, besides modified ipr
regimes. The documentation must
begin at the level of villages, record­
ing knowledge, practices and per­
ceptions of individuals. Local schools
and colleges can prepare such reg­
isters with the help of the local
knowledgeable individuals. These

Indian response
Many Indian ngos such as frlht,
mssrf, kssp, sristi, Navadhanya are
actively encouraging documentation
of public knowledge. IISc has al­
ready prepared 50 village level
biodiversity registers in several
states. Even grassroot ngos and
people’s science movements from
Karnataka and Andhra Pradesh
have voluntarily launched such
documentation in many villages.
AMRUTH, FEBRUARY 1999

Acknowledging the public mood.
the Indian government’s November
1998 draft of the proposed Indian
Biological Diversity Act makes sig­
nificant promises. It envisages documentation of bioresources and
knowledge, commitment to protec­
tion of public knowledge through stii
generis system, scrutiny of ipr ap­
plications, obligation to oppose un­
just iprs, equitable benefit sharing
provisions etc. The Act provides a
broad framework and spirit though
leaves much to the rules to be
framed. Most unfortunately, the Act
neither enforces disclosure of tradi­
tional knowledge in the ipr applica­
tions nor links the benefit sharing to
documentation, perhaps leaving it for
the ongoing Patent Act amendments.
The proposed Patent Act
amendments seem to exclude inno­
vations based on Indian medicine
system from patentability. This
would help keeping prices of new
Ayurveda based drugs low. How­
ever, India must then also prepare
for probable retaliatory measures by
the developed countries and also
forgo share of benefits if such prod­
ucts are manufactured, patented
and sold in say in Norway or us.
Recently the World Intellectual
Property Organisation, a un body
marginalised by the wto, has initi­
ated discussions to safeguard the
traditional knowledge. India must
support such political developments
and lobby with other developing
countries to work within the con­
straints to modify national ipr re­
gimes and eventually the trips when
it is reviewed this year.

The author is from the
Centre for Ecological Sciences,
Indian Institute of Science,
Bangalore.
18

could participate effectively in their
its entirety, the course contents were found
a programme in their life. In brief, the
development.
quite relevant as they touched upon all the organising of the programme created an
awareness that would have its spread effect
(10)
In decentralised planning top priority vital issues of decentralised governance and
should be given to education, health, water
development. Older people of the area also
in coming days to foster better working of
and sanitation facilities as these directly effect
said that for the first time they had seen such
panchayats. That was the general consensus.
society’s welfare and the women of the
community.
(11)
Keeping in view the importance of
the panchayats, particularly zilla panchayats,
the central government instructed the state
governments in 1995 to put DRDA under
the control of zilla panchayats. But so far
V Manoj
these instructions have not been acted upon
by the state government. Hence it is
Developments in law have kept pace with those in the field of
recommended that they are operationalised
without any further delay.
biotechnology. However, the various judicial bodies which have been
(12)
Women’s share in government servicecalled upon to address the issue have not ventured to look at the
is low in comparison to that of the males.
issue objectively and examine the moral, ethical and environmental
The women representatives said that they
dimensions. As a result, judicial process has often recognised
could not easily interact with maleemployces
undesirable standards incompatible with the larger social needs.
at the block as well as elsewhere. Hence as
in panchayats at least one-third of the posts
form. The court, in the case, considered
LAW in the area of life patenting has been
in government services should be reserved
developing in the west for the last two
whether a micro-organism constitutes a
for women.
manufacture ofcomposition of matter within
(13)
The panchayats’ self-mobilised decades, keeping pace with the developments
in biotechnology. Biotechnology either the meaning of the statute. The court in a
resources will enable them to assert as
directly or indirectly deals with living subject
5:4 majority judgment interpreted the above
institution of self-governance. Hence, they
matters.' The advancements in this area expression asincludinglivingsubject matters
should make efforts to raise their own
proved that genetic constitutions of living
also. The reasons behind the judgment are
resources through tax and non-tax measures.
beings can be altered.2 This resulted in the
not very clear. The court went against the
In this context imposing of all taxes listed
legislative intent behind the provision dealing
emergence of genetic engineering as a
in the panchayat act is a worthwhile
scientific revolution which promises even
with patentable subject matter. As Brennen
preposition to be acted upon.
the creation of new forms of life. The subject
J, said in his dissenting judgment,4 the court
The recommendations which have
matters of biotechnological inventions are
has misread the applicable legislation. The
emerged from the organisation ofthese camps
micro-organisms, hybrid plants, genetically
minority view reflects the concern of the
may also be equally applicable to those other
engineered animals, human genes and cell judges in going against the legislative
areas which are having the same social,
lines. The high commercial potential of direction because the legislative language
economic, educational, and cultural
genetic researches made this branch of science
has chosen carefully to limit patent protection
background as the Gangoh KP.
a focal point of trade and investment.
to inanimate objects. On the other hand, it
The reservation of one-third seats both of
is evident from the majority view that the
members and chairpersons of the PRIs for Consequently, claims for patents on these
living inventions have started coming up
decision is throughly influenced by a number
women under the 73rd constitutional
of socio-eonomic factors. But, the court
amendment was a right step towards their along with a demand for better patent
protection for biotechnological inventions.
observed that the grant or denial of patents
participation in decision-making in the
This led to a situation where law and legal
on micro-organisms do not affect in any way
decentralised governance. But in most cases
systems were compelled to address the issue
the pace of the genetic researches. The court
their roles have been actually performed
did not venture to make a value judgment
of granting patents on living beings,
eitherby their husbands orany male member
on the relative merits and demerits ofgenetic
particularly in the context of globalisation
of the family as has been revealed through
engineering.5 But the decision created a
of trade and investment.
these camps organised in Gangoh KP. The
tempest in the intellectual circles resulting
The various judicial bodies which were
women are not aware about their powers and
in heated debates about the various
called upon to address the issue, did not
authority. The traditional mindset of the
ramifications of providing patents on life
venture to look at it objectively in the light
males towards the females, which one poet
forms. The debate still goes on.
of the moral, ethical and environmental
described as “Man for the war and women
Subsequent to Chakraborty case6 the court
dimensions involved in it. The resultant
for the hearth", is responsible for this injustice
in Ex Parte Allen’ extended patent protection
to women. The only remedy for this malady judicial process therefore failed to reflect
upon the competing rationale involved in it.
to multicellular organisms. A few days after
is to make the women aware by imparting
This gave rise to the legal recognition of the decision in this case the PTO
to them training about local governance and
undesirablestandards incompatible with the
commissioner in the US issued a statement
the environment in which they are living.
larger social needs thereby lacking universal
which reads as follows:
Hence, training-cum-awareness building
acceptability.
programmes followed by workshops should
The patent and trademark office now
be organised in a sustained manner for
considers non-naturally occurring non­
Patents on Life
women’s empowerment. The experience in
human multicellular organisms, including
The US supreme court in Chakraborty
these four camps indicates that traininganimals to bepatentablesubjectmalterwithin
case’ liberally interpreted the patentability
cum-awareness building programme initiated
the scope of 35 USC."
in the Gangoh KP was appreciated by the
norms contained in 35 USC Section 101, and
This statement is now reflected as the
held
that
a
man-made
micro-organism
is
women as well as men. Although the
policy in the manual of patent examining
programme schedule was not adhered to in
patentable. This was the first patent on a life
procedure.’ Based on this policy the US

Patents on Life, India and
the TRIPs Mandate

152

Economic and Political Weekly

January 24, 1998

Patent Office granted the first patent on an
animal the Harvard Oncomouse.'"The patent
was for a transgenic non-human mammal.
The mouse disclosed in this patent was
bearing activated oncogenes in its genome
and as a result had an increased susceptibility
to cancer.11
Even though this patent is generally
referred to as the Harvard Oncomouse patent,
the claims allowed under the patent were of
considerable breadth not limited to the mice.12
After the Harvard Oncomouse patent, no
patents were issued till 1992 and i n December
1992 further patents were granted on
transgenic mice. Patenting of living beings
in US is no more confined to micro­
organisms. In 1995 the scientists at the
University of Utah succeeded in finding
BRCA, the breast cancer gene. They got it
patented in US and the small biotech company
which they started to commercially exploit
the invention turned to be a market giant.1’
Subsequently, W French Anderson of the
National Institute of Health (NIH) of US
obtained a broad patent on human gene
kherapy in 1995. Mammals, human genes
"nd cell lines, nothing is left out now from

the purview of patents in US.

Developments in Europe
The European Patent Office (EPO),
following closely the US patent office
practices, has granted numerous patents on
all sorts of biological materials.14 Though
not explicitly mentioned, it is generally
accepted that EPC allows patent protection
for micro-organisms.l5TheTechnical Board
of Appeal of the European Patent Office in
a number of cases upheld EPO’s decisions
in granting patents on plants and seeds.'6
The question of patenting an animal came
up for consideration before the EPO
examinajiondivisionandtheEPOTechnical
Board of Appeal in the Harvard Oncomouse,
patents claims.” The decision of the
examination division not to accept the claims
on animals as such was set aside by the Board
.of Appeal. The Board held that “the exception
rto patentability under Article 53(b) of the
European Patent Convention applies to
certain categories of animals but not to
animals as such”.'" The decision of the board
really reflects the political considerations
involved in this issue. The Board finds the
probable enviromental risks and the
sufferings of the animals on one side and
the usefulness of the invention on the other
side as the two competing rationale. But the
Board did not venture to make a value
judgment on the issue. Instead it left the
matter for the examination division to act
upon.
In the Green Peace Case"* the Board of
Appeal took an altogether different stand.
In this case the Board held that claims on
genetically engineered plants are not

Economic and Political Weekly

acceptable. Following this decision, now it
will not be possible to obtain a European
patent on genetically engineered plants or
seeds because these will include plant
varieties which come under the purview of
the exclusion provision under Article 53(b)
of the European Patent Convention. The
Board was called upon in this case to explain
the expressions ordre public and ‘morality’
occurring in article 53(a) of the European
Patent Convention. The Board held:
It is generally accepted that the concept of
ordre public covers the protection of public
security and the physical integrity of
individuals as partof the society. Thisconccpt
encompasses also the protection of the en­
vironment. Accordingly under article 53(a)
of EPC, inventions, the exploitation of
which is likely to breach public peace or
social order or to seriously prejudice the
environment are to be excluded from
patentability as being contrary to ordre
public.™
Explaining the concept of morality the
Board held that it is related to the belief that
some behaviour is right and acceptable
whereasotherbehaviouris wrong, this belief
being founded on the totality of the accepted
norms which are deeply rooted in a particular
culture.21 Therefore the Board opined that
an invention which docs not conform to the
conventionally accepted standards ofconduct
is to be excluded from patentability as being
contrary to morality.
This seems to be a proper exposition of
the balancing of interests envisaged under
article 53 ofthe European PatenlCon vention.
But the new biotech directive cuts at the root
of this and brings a new set of patentability
norms.
The European Parliament passed the
directive on biotechnological inventions on
July 16, 1997. The proposal of a council
directive on the legal protection of biotech­
nological inventions was first put forward
in 1988. After six years of negotiations
between the EU institutions the directive
was introduced before the European parlia­
mentin 1993. On March 1,1995theEuropean
parliament rejected the directive. Recently
the proposal was reintroduced before the
European parliament and of all the 510
parliamentarians, 378 voted forthedirective,
with 113 voting against and 19 abstentions.
Even though the European parliament has
passed the directive, to have the force of law,
it has to be ratified by the European council
of ministers.
The EC biotech directive broadens the
European patent regime and brings within
its scopea wide range of biological materials.
Article 2 of the directive defines the expres­
sion biological material in the following
lines:
biological material means any material
containing genetic information and capable

January 24, 1998

of self-producing or capable of being
reproduced in a biological system.
According to article 4(2) of the directive,
plants and animals as well as elements of
plants and animals are patentable subject
matters. The new patentability norms
provided in the directive exclude human
beings as a whole and human embryos from
patentability. The decisions of the European
parliament to give the green signal to the
directive attracted criticisms from various
comers. Environmentalists and NGOs call
it a clear demonstration of democratic
unaccountability. 22

India and TRIPs Mandate

The above-mentioned march of law has
deeply influenced the patentability norms
set under theTRIPs Agreement. The TRIPs,
under article 27, mandates for patenting of
micro-organisms. 2’ India being a member of
the World Trade Organisation is required to
provide product patents on micro-organisms
before January 1,2004.24 The Indian Patent
Act, in its true spirit seems to have excluded
all living beings from patentability. Section
3 of the act categorically states that an
invention which is contrary to well
established principles of natural laws or the
intended use of which would be contrary to
law or morality or injurious to public health
are not inventions for the purposeof granting
patents. The question here is: do these
provisions exempt from patentability inven­
tions relating to living beings? If they do,
the mandate of the Patents Act goes against
the TRIPs requirement and there arises a
conflict between the two.
In the TRIPs Agreement also an attempt
is made to strike a balance between the
conflicting values on patenting of living
beings. This is evident from the incorporation
of the morality, ordre public provisions in
article 27(2) of the Agreement. TRIPs in
article 27(2) provides that the member
countries can exclude from patentability such
inventions, the prevention of the commercial
exploitation of which is contrary to protect,
ordre public, morality, human life, animal
life, plant life, health and environment. The
operation of this clause is limited by a pro­
viso which says that an exclusion cannot be
made merely because the exploitation is
prohibited by law. But article 27(3), though
allows the exclusion of plants and animals
from patentability, brings micro-organisms
within its purview. This in fact goes against
the jurisprudential basis of article 27(2)
resulting in an erosion of the balance aimed
to strike by incorporating certain basic norms
for excluding even living beings from patent­
ability based on morality principles of
sovereign states. But from the review
provision in article 27(3) it appears that the
framers of the TRIPs were aware of these
conflicts. Article 27(3) provides for a review

153

of the patentability criteria, to be made, four
years after the date of entry into the WTO
Agreement, i e, January 1, 1999. As far as
India is concerned the attempt should be to
bring specifically inventions on life within
the coverage of the general exclusion under
article 27(2).
As regards plant varieties are concerned
the TRIPs mandate is to provide protection
by patents or by suigeneris system or by a
combination of the both. Since patents on
plants attract scathing criticism in the above
lines, the alternative is the suigeneris system.
An effecti ve suigeneris system also demands
for the private property rights over plants
through a statutory mechanism. Therefore
all the arguments based on the abovementioned provisions equally apply to such
a legal mechanism.
The provisions in section 3 of the Patents
Act are to be analysed in the light of article
27(2) of TRIPs. Since these provisions
encompass the notion of morality in the
Indian territorial context, the TRIPs objec­
tion for making certain inventions illegal
by statutory measures does not have any
bearing upon it. In fact article 27(2) of
TRIPs justifies the mandate in section 3 of
the Patents Act. Any attempt to interpret
the above-mentioned provisions is to be
made in the light of a jurisprudential enquiry

154

as to the notion of morality in the Indian
context.
TRIPs inarticle27(2)expressly recognises
the need to protect human, animal and plant
lives, as well as health and environment.
This reflects the concern regarding the long­
term social risks associated with the
commercial exploitation of biotechnological
inventions. Since trade motives foster the
commercialisation of biotechnology, the
environment risk arguments have a larger
economic dimension. But granting private
property rights stands central to all these
different arguments. Therefore the morality
i ssue has a direct beari ng on the envi ronmentbased arguments against the deployment of
biotcchnologicai inventions.
This agai n prompts ajoint reading of article
27(2) of TRIPs and section 3 of the Indian
Patents Act. The reasoning here is identical
to the one which we have raised in the
morality context. Section 3 of Patents Act
has to be read in consonance with article
27(2) of TRIPs thereby reasserting the
strength of ‘the morality, public order,
environmental protection’ arguments against
life patenting. Any attempt to override or
nullify these provisions violate the basic
norms, which they stem from. Therefore
article 27(3) is to be restructured so as to
receiveuniversalacccptability.This becomes

easy because article 27(3) gives room for
renegotiating the patentability norms in
TRIPs. Attempts are to be made persistently
to renegotiate thcTRlPs patentability norms
by highlighting its fallacies insteadof framing
proposals on micro-organism patenting and
to bring amendments to the Patents Act.

Notes
The expression biotechnology despite its
long standing tradition is not properly
defined. But several attempts have been
made to comprehensively define the
term biotechnology. An OECD study defines
biotechnology as the application of scienti­
fic and engineering principles to the
processing of materials by biological agents
to provide goods and services. See Bull,
Holt and Lilly, Biotechnology. International
Trends and ProspectiveslOECD, Paris, 1982),
P 21.
2
See Micheline L Gravelie, ‘Biotechnology An Overview’, 10 Canadian Intellectual
Property Review /. p 1.
3
Diamond vs Chakraborty (1980) SC, 447, US
303.
4
With whom White, Marshall and Powell, JJ,
joined in the dissenting judgment
5
The Court observed: "What is more important
is that we all without competence do entertain
these arguments, either to brush them aside
as fantasies generated by fear of the unknown
or to act on them". Supra, n 3, para 8.

1

Economic and Political Weekly

January 24, 1998

NEW DELHI

Falling in Line, Smartly
BM

The government has been very vocal about its supposed achievement
in recording a build-up of exchange reserves. The WTO has taken
this seriously and has now suggested that the quantitative restrictions
on imports be lifted. And the government has promptly accepted the
directive.
THE World Trade Organisation (WTO) has
proposed that India should shorten the fiveyear transition period for the removal of
quantitative restrictions on its imports. The
government has treated this proposal as a
directive and has fallen in line promptly. In
addition to the transitional facility under
what is called an international treaty for
promoting amultilateral tradingsystem under
the aegis of WTO and also because of its
weak balance of payments position, India
has been exempt so far from the obligation
to lift quantitative restrictions on imports.
It was agreed in the WTO consultative
mechanism in the last three years that “it
would be neither prudent nor feasible to
consider general lifting of quantitative
restrictions”. In January this year, however,
the WTO reviewed India’s BOP and ruled
that it had improved and wanantedthe lifting
of quantitative restriction.
The Indian delegation to WTO
consultations in Geneva was placed in an
awkward position. The government in India
has been advertising the build-upof exchange
reserves as a signal achievement of its
economic liberalisation and globalisation
policy. This was meant essentially for home
consumption to gamer political gains for the
performance of the economic reform policies
in the last five years. But this advertising
gimmick has been taken advantage of by the
developed countries to activate the WTO to
press home their demand for the removal of
all restrictions on their exports to India.
India’s ardent economic reformers, on their
part, have found in the latest move for
removingquantitativerestrictions on imports
a favourable opportunity to assert and push
forward their liberalisation-globalisation
objectives. It is not fortuitous either that their
demand for scrapping FERA and for the full
convertibility of the rupee has lately become
strident.
The union commerce ministry, when it
announced the import-export policy for five
years, beginning 1997-98, had gone slow on
. the removal of quantitative restrictions on
imports. Conditions •were said to be yet
inappropriate for an unrestricted import spree.
The exchange value of the rupee had, after
all, eroded sharply in the previous two years
which made imports very costly in rupee
terms; the volume of exports had to go up
substantially to earn dollars and export

1304

promotion measures had really not clicked.
The trade and current account deficits too
have been widening. Thecommercc ministry
is now being forced to go back on its cautious
stance on the liberalisation of imports. But
the union finance ministry even before WTO
demanded removal ofquantitative restrictions
on import to bring down tariff barriers to
levels below what was required under the
WTO timetable. The push for import
liberalisation, with all its implications, is
thus gaining momentum. Its impact is bound
to be severe for the Indian capital goods
manufacturers who are facing demand
recession. But its impact will be even more
visible and sharp in respect of the goods of
current consumption - to subserve not only
the elitist demand in the upmarket.
Agricultural commodities, processed and
non-processed, among them foodgrains, too
will have free access to the Indian market
and compete against the domestic products.
The government is already inclined to rely
on imports to overcome temporary shortages
and stabilise prices of essential wage goods.
But the removal of quantitative restrictions
and lowering of tariff barriers on their import,
including of foodgrains, are bound to have
adverse implications for the domestic
producers, the farmers and craftsmen.
Significantly, even as imports are proposed
to be further liberalised, disinvestment of
government equity in large public sector
industrial undertakings (PSUs) too is being
rapidly streamlined. The earlier lethargy and
confusion in this regard is being removed.
The disinvestment programme cannot, after
all, be limited merely to the shedding of
government equity in driblets for raising
revenue to narrow its budgetary deficit. It
has to be part of the wider structural
adjustment process for the privatisation and
gloablisation of the Indian economy. The
Disinvestment Commission has come forth
with the recommendation for ‘strategic sale’
of PSUs and has identified, in its second
report, five major PSUs-Bharat Aluminium,
Bongaigaon Refinery and Petrochemicals,
Hindustan Teleprinters, Indian Telephone
Industries and Madras Refineries to start
with for their ‘strategic’ sale. It has
recommended that the sale of PSUs should
be thrown open to private business interests
not only Indian but foreign as well. It has
simply ignored and overturned the

proposition that thegovcrnmentshould retain
its management control over PSUs in the
core sector and disinvestment by the
government in their case should not exceed
49 per cent of their equity. As matters stand,
it is not on the cards that Indian business
interests will have either financial resources
ortcchnological andmanagementcapability
to take them over and run large PSUs
efficiently. Public investment for industrial
development, after the initial spurt between
mid-1950s and mid-1960s started
decelerating afterwards and by the 1970s
this had led to the obsolescence of many of
the established PSUs. Renovation and
technological upgrading has to be a
continuing process for maintaining arid
improvingtheirefficiency.Buttheiroriginal
rated capacity actually tended to suffer
considerable erosion. Much before the
sale of the government equity in PSUs
was started under thespell ofthe privatisation
-globalisation philosophy, many of these
undertakings were also attempted to be
linked to foreign TNCs in the name of
introducting new technologies. This
encouraged import of equipment
associated with the introduction of their
' technologies and management practices
in PSUs even though they were out of step
with the economic and social environment
in India.Thesedevelopments havenowpaved
the way for the ‘strategic sale’ of PSUs to
TNCs.
The western developed countries and their
international financial institution had tried
to discourage public investments for building
modem industries when India embarked on
planned development after gaining political
independence. When, however, they failed
to block these investments, they tried to
regulate and distort the technological and
engineering parametersof PSUs and subvert
their management principles. It has been
hard going for public sector undertakings to
grow but they made laudable progress in
many directions. Under the pressure ofvested
interests, domestic'and foreign, and sabotage
by their agents in influential positions,
administrative and political, the ground had
been prepared steadily and over time, to
strangulate commercial and industrial
enterprise in the public sector. Combined
with Withdrawal of budgetary support,
government equity in PSUs has been diluted
in the so-called economic reform era to raise
revenue for current consumption of the
government. The so-called ‘joint sector’
concept too has been sought to be promoted
in such strategic areas as oil, steel and power.
This has not yielded the spectacular results
for the simple reasons that foreign interests
have demanded control in these areas on
exorbitant terms. The economic reformers
now seem to have decided that ‘strategic
sale’ of PSUs to multinational corporations
is the best option for them.
The change in the political line-up behind
the UF government headed by Inder Kumar

Economic and Political Weekly

June 7, 1997

Gujral, has evidently become still more
favourable fortheeconomic reformers lobby.
The reformers seem now determined not to
brook any dithering or hesitation on the
honouring of the international obligations
of the government or the logic of the
privatisation-globalisation process. Finance
minister P Chidambaram sees the inflow of
foreign funds by way of direct and portfolio
investments, deposits and credits as the only
panacea for the ailing and stunted Indian
economy. The adverse implications for the
balance of payments position do not bother
him. This is the same mindset that has driven
him to cut domestic taxes for the rich without
making in his budget ‘conventional’ estimates
of the revenue losses for the government on
this account. But the balance of payments
problem is not something which can be
cavalierly wished away. India’s exchange
reserves arc only seemingly large. They arc
not composed of dollars earned. They are
almost entirely based on the accumulation
of borrowed funds which have been frozen
by the Reserve Bank of India and have not
been used as in the past for investment or
social welfare, albeit inefficiently. The major
portion ofreserves is composed of the volatile
portfolio investment and unreliable NRI
deposits.The reckless commercial borrowing
to push up the economic growth rate in the
second half of the 1980s resulted in the
external payments problem in 1991. The
imprudent reduction of tariff barriers and
lifting ofquantitative restrictions on imports
in the second half of the 1990s may in the
prevailing conditions when reserves can
easily melt and exports are not picking up,
push India into a far more grave balance of
payments position into a couple of years.
Combined with the planned decline and,
eventually total stoppage of public investment
in industry as well as agriculture, prospects
foreconomic growth, let alonesocial justice,
will be blighted.
The economic reformers have indeed
■^persuaded themselves, frankly and without

•

any reservation, that only the rich and the
upper segment of the middle class can be
depended upon to be their articulate political
and social support base. According to their
highly exaggerated estimates, this support
base can grow in due course to be more than
30 per cent of the Indian population. They
are, therefore,devoting themselves to satisfy
their requirements and demands and give
precedence to their claims in economic
policy-making. They also believe that foreign
capital inflows combined with political
support of foreign powers and the network
of international institutions set up by them
will help to achieve their economic, social
and politicalobjectives in India. Theiranxiety
is to ensure that the so-called ‘international
obligations' should be promptly and
enthusiastically honoured by India. This is
becoming more and more manifest. It is
forthright in renouncing unilaterally theright
to take advantage of the transitional facilities

Economic and Political Weekly

embodied in the WTO system for the
enforcement of the multilateral treaty
obligations. The bargaining position of

India in the WTO and all international
institutions is, therefore, weakening to a
dangerous extent. ■

Cogentrix Power: Uneconomical
V Ranganathan

The power generated by the Mangalore Thermal Project is about twice
as costly as competitive power available in global markets. Moreover,
a proper analysis of alternatives, including that of hydro power and
pit-head thermal power from other locations has not been done.
THE growth rate of demand for electricity
for the developing countries is much higher
than that of developed countries. According
to the World Bank ‘to meet the current
demand for electricity, and to provide service
to the two billion people currently doing
without, developing countries will have to
invest an estimated 100 billion dollars per
year over the next decade. In fact, it is
estimated that by 2010 the developing
countries will have surpassed the OECD
countries in total installed generating
capacity, if they can raisethe needed capital’
[World Bank/IFC 1994],
Nearly two-thirds of the incremental
demand for electricity for the whole world
will be coming from developing countries
- of which China and India will account for
the major share - while the developed
countries will be facing a tapering off of
demand. Theinternational power equipment
industry is facing a glut and they have only
the developing countries as their potential
customers. But then the power sector in the
developing countries is neither having the
finances to buy the equipment now, nor are
their utilities financially sound to qualify for
loans. Hence the structural reform, mainly
to facilitate equipment sales of developed
countries to developing countries through
promotion of IPPs and tariff reform (price
increase) to make the buying utilities able
to pay for the equipment purchase.
To be sure, power sector reforms are
sweeping throughout the world, not only in
funds starved developing countries, but also
in developed countries including the UK, the
US, Australia and Japan. But then there is
abigdifference.Thereformsinthe developed
countries are aimed at making the electricity
sector more efficient by bringing down the
pricestotheconsumcr by replacing monopoly
with competition wherever possible. But in
India and most other developing countries,
the reforms are driven by resource mobi­
lisation objective and the need to reduce
fiscal deficit. Electricity supply expansion
is sought to be achieved from private sector
financing instead of government financing.
This, in turn, has made the reform process
externally driven, principally by the World
Bank, which has put ‘reforms' as a
conditionality for its loans. However, while
insisting on the reforms, the World Bank’s
prescription has been ad hoc and piecemeal

June 7, 1997 ,

with a blurring of the distinction between
the ends and the means. The end objective
of reform is introduction of competition tobring down the prices and improve quality.
Privatisation is a means, wherever it will
lead to competition. Achieving private
ownership without achieving competition,
will only displace public sector inefficiency
with private sector monopoly profits and
there is no guarantee for improvement. The
World Bank has been chanting the mantra
of privatisation whereas it should be chanting
the mantra of competition. This is also
illustrated in Mexican energy sector reforms.
There with the advent of Mexican crisis, the
World Bank and IMF imposed condition­
alities to ‘open up’, viz, allow the Mexican
public sector oil companies - which were
a ‘pride’ of the nation - to be bought by the
US multinationals [Rodriguez-Padilla 1996).
By now it is established that competition
is possible in the electricity generation
industry. This should result in a price
convergence, except for some minor
differences due to location. The glut in the
■ electricity equipment market, which can open
up possibilities of sales below full cost of
equipment, is also to be borne in mind. In
the US, coal based electricity prices are in
the range of 4 to 4.5 US cents (about Rs 1.57
per kwh @ Rs 35= 1 dollar exchange rate)
and are falling. In UK the average pool
output price in 1988-89 was 2.08 pence per
kwh (Rs 1.20 per kwh @ Rs 58 per 1 GBP)
[Green and Newbery 1992],
A one paise increase in tariff, for a 1,000
MW plant at 80 per cent plant load factor
means an increased payment of Rs 7 crore
per year, which for 30 years at 12 per cent
interest rate, works out to a present value
of Rs 56 crore.

Comparison of Alternatives
in 1993, Janson and Lako conducted a
study of analysis of alternatives for the
thermal power plant at Mangalore [Janson
and Lako 1995]. They considered four
alternatives, viz, power plant at Mangalore
with imported coal from South Africa, power
plant at Mangalore with domestic coal from
Talchcr, pit-head plant atTalcher with H VDC
line from Talcher to Cuddapah, and finally
LNG based combined cycle power plant.
Both financial and economic analysis were
done, the latter taking the border prices sans

1305

World Trude Orpanlsatlon and National Sovarolunty

World Trade Organisation and
National Sovereignty
~|~he Final Act embodying the results of the
Uruguay Round of negotiations has foisted
an unequal treaty on the developing countries in
all its economic and social aspects. The treaty is
virtually a charter of obligations for the developing
countries. It is a global conspiracy of the
developed nations, not only to blunt the economic
growth in the developing countries but also to set
in motion an era of ■degrowth’, both in the
industrial and in the agricultural sectors
Developing countries are likely to face serious
obstacles, in the form of technical barriers, in their
pursuit of the achievement of all round economic
growth. The claim, that all countries are supposed
to benefit from the new framework, sounds hollow.
Paradoxically, in the area of transfer and
dissemination of technologies, the Uruguay
Round does not bring in freedom from
monopolies. In the area of market access, the
commitment to reduction of tariff barriers and
abolition of non-tariff barriers would make the
markets of the developing countries more
vulnerable to unequal competition Similarly,
binding commitments for imports, particularly in
the area of agricultural products would create
imbalance in the future production and growth in
the agricultural sector. The new global patent
system, as proposed by the TRIPs Agreement,
would strengthen monopolies. Particularly in the
area of health care, it will increase the sufferings
of the poor and aged, manifold. The Service
sector would also be exposed to the shifting of
control over resources, in the financial sector, in
to the hands of powerful foreign institutions. Thus
the Final Act will transform the whole business
environment, by strengthening the control of
global monopolies — the implications of which
for the developing countries, in particular, would
be far reaching.
Without going into minute details, we will
attempt to identify major obligations and their
implications for the developing countries in all the
three sectors of the economy — industry,
agriculture and the service sector.

I

Obligations in the Industrial Sector
Tariff Reduction
“The GATT 1947 rules allowed a lot of
1 flexibilities to the developing countries, for
regulating their imports, because of the balance
of payment problems. The developing countries
had flexible options in determining the operation
of tariff barriers in the shape of customs duties,
and could also employ restrictive import
measures. Thus the industrial sector enjoyed a
sort of protection in the domestic markets. The
Final Act incorporates Uruguay Round Protocol
to the GATT, 1994. Under this protocol, the
member countries were required to submit various
schedules for most favoured nation tariffs, tariff
quotas, preferential tariffs, non-tariff concessions,
commitments limiting subsidisation in agriculture
products, etc. The tariff reductions agreed upon
by each member are supposed to be implemented
in five equal rate reductions, except as may be
otherwise specified in a member's schedule. The
first stage reduction was made effective on the
date of entry into force of the agreement
establishing the WTO, i.e. 1.1.95. Each
successive reduction was to be effective on
January 1 of each of the following years. The final
rates were to become effective no later than four
years from 1.1.95. Complying with the
requirement of protocol, India submitted their
schedules in February 1994. The exact analysis
of the proposed reductions in the tariffs are not
available. However, broadly speaking, the
government agreed to reduce the base rate of
duty from 105% to 40%. The government has
been more than enthusiastic — it brought down
the peak rate of duty to 40% in the short span of
1996-97. It has proposed a further reduction of
the peak rate to 30% in the budget for 1997-98.
This steep reduction in tariff rates has already
had a grave impact on the small scale and
medium scale sector companies. In fact it has
resulted in dumping of chemicals and many other
products from China into our country.

World Trade Organisation and National Sovereignty

□ A significant portion of the foreign exchange
reserves is highly volatile.

Removal of Non-Tarfff Barriers
he Final Act also incorporates "understanding
oh the balance of payments provisions of the
GATT 1994". It provides that the member
countries would confirm their commitment and
publicly announce, as soon as possible, time
schedules for the removal of restrictive measures
taken for balance of payment purposes — l.e.
those allowed under article XVIII: B of the GATT.
It is understood that out of the 4,798 HS-Lines
notified by the Government of India, 4,433 HSLines were under Quantitative Restrictions (QRs).
Consultations between India and the Committee
on Balance of Payments Restrictions were held
in 1994 &1995. During the 1995 consultations,
the committee noted that "in the context of
deteriorating balance of payments situation, it
would be neither prudent nor feasible to consider
the general lifting of quantitative restrictions on
imports at this stage".
A meeting of the committee was again held
on January, 20-21,1997 in Geneva. In this meeting,
India's BOP cover came up for review by the WTO
committee. The International Monetary Fund Is
reported to have stated to the committee that in
view of an improvement in India's BOP position
and foreign exchange reserves, use of Article XVIII
: B and imposition of import restrictions were no
longerjustified. On the basis of the brief cleared by
the Union Cabinet for the Indian delegation to
Geneva talks, only the programme of import
liberalisation with regard to manufactured goods
were covered for phasing out quantitative
restrictions over a period of five years. Import
restrictions maintained by India at present cover
34% of manufactured products—mostly consumer
durables and non-durables — but as much as 70%
of all farm products. The WTO committee has given
time for submission of a programme for phased
removal of QRs on imports till the beginning of
June 1997. If QRs are removed, Indian Industry —
particularly in the medium and small scale sector
— would face unequal competition from imports in
the case of manufactured goods, thereby
threatening its very survival. Moreover, the
unrestrained flow of imports would result in a steep
increase in the import bill. The Indian government
should, even at this stage, seek postponement on
the decision on removal of restrictions, because of
the balance of payments problem, based on the
following considerations.

T

[47]

□ The size of the reserves is hardly sufficient
to sustain 3-4 months of imports.

□ The craze for imported consumer goods
among a section of the elite, with adequate
purchasing power, could result in a surge of
imports.
□ Export earnings are not growing at a
satisfactory rate.

□ Protectionist policies adopted by the
developed countries, particularly in the
areas of textiles and agriculture, are
standing In the way of significant growth In
exports.

Obligations in the TRIPs Agreement
he TRIPs Agreement for global patent system
imposes a range of obligations. The
developing countries have been in the process
of evolving their national patent systems, which
are In tune with their stage of development. Such
systems are designed to balance the rights and
obligations of patent-holders. Contrary to this, the
TRIPs patent system seeks to impose a global
patent model which is virtually a charter of rights
for the patent-holder. Member countries are
supposed to change their patent laws in
accordance with the provisions of the TRIPs
Agreement.
The changes are supposed to be made in two
phases. In the first phase, developing countries
like India, who have no product patent system
for pharmaceuticals and agro-chemicals, are
supposed to amend their laws to accept product
patent applications for pharmaceuticals and agro­
chemicals from 1.1.95. Although the patent rights
on these applications can be granted only after
2005 — i.e. at the end of the 10 year transition
period that the agreement on TRIPs allows to
developing countries like India — product patent
applicants are required to be given exclusive
marketing rights (EMR) after marketing approval
has been obtained, for a period of five years This
implies that even before a patent is granted, a
patent-like monopoly over the market of the
product can be enjoyed by the patentee.
These two obligations virtually negate the 10year transitional period in the said two fields of

T

World Trade Organisation and National Sovereignty

technology. These obligations will have a serious
impact, not only on the pharmaceutical industry
but also for the general public. The industry will
not be able to introduce new products. Moreover,
new products — which would be monopolised
through the medium of exclusive marketing rights
— would be available at prices beyond the reach
of an overwhelming majority of people.
In addition to the obligations during the
transitional period, the obligations to change the
patent system would result in extending patent
rights to all industrial and agricultural products.
The patent rights would also extend to imports;
i.e. importation of the patented product by the
patentee would be treated at par with domestic
production. Moreover, the patent holder would
have exclusive rights to import.
In addition, provisions relating to
safeguarding of public interest, as provided in the
Patents Act, 1970, would have to be radically
amended. The proposed new laws, in line with
the TRIPs Agreement, would have no provisions
for Licensing of Right or Compulsory Licensing
for commercial purposes. Both these provisions
are part of the existing Indian Patents Act, 1970,
and they allow the government the option of
curbing or withholding the monopoly rights of a
patent holder in national interest and in order to
safeguard the health needs of the people. Deletion
of these provisions in any new Act would lead to
significant rise in prices of protected products,
and would also prevent the entry of the domestic
industry into new products.
There is another significant obligation,
which is at variance with existing laws. In cases
of alleged infringement of patent rights, if a case
is filed in court, the defendant will have to prove
that he has not infringed the process patent of
the patent holder (reversal of burden of proof).
This provision puts Indian companies at an
obvious disadvantage, given the high legal costs
and the ability of foreign patent holders (MNCs)
to pledge funds for frequent litigations.
In a report prepared by UNCTAD in July
1996, on the implications of TRIPs on developing
countries, it is stated that the implementation and
enforcement of rules, disciplines and procedures
called for in TRIPs would require large
investments for setting up or improvement of
administrative mechanisms. This has special
relevance for India. The scope of the Patents Act,
1970 is limited in nature. There are no legislations

for plant varieties, geographical indicators,
integrated circuits, etc. The staff of the offices
administering the industrial properties are small
and inadequately equipped. Provisions in the
TRIPs Agreement, such as “reversal of burden
of proof will require large modifications of the
existing legal framework. In India today, patent
examiners still perform manual searchers of prior
applications, because of limited access to
computers and international data bases. There
is already a growing backlog of unprocessed
applications. A steep rise in applications is likely
in the near future. In order to cope with this
pressure, the Patents and Trade Marks Office will
have to be substantially strengthened and
modernised.

Obligation In the Agriculture Sector
As in the industrial sector, GATT 1947 rules
/Apermitted flexibility for the developing
countries for regulating their imports, because of
BOP problems. Agriculture was mostly kept out
of the purview of the GATT because of the
exceptions sought by the developed countries
(primarily the U.S.) in the 1950s. This allowed
these countries to strengthen their agriculture
production by numerous non-tariff measures and
liberal grants of subsidies. By the end of the 1980s,
when their agriculture had made substantial
progress, developed countries like the U.S. and
countries of the European Union felt the need to
find markets for the export of their surplus in the
agriculture sector. Even the Uruguay Round of
GATT negotiations, which was officially proposed
to be concluded by December 1990, were delayed
for three years due to conflicts between the U.S.
and the European Union regarding national
policies relating to agriculture. U.S. producers and
exporters faced competition in the world markets
due to high subsidies granted to producers in the
European Union.
The midterm review of the Uruguay Round
of GATT negotiations agreed upon a long term
objective for reforms of trade in agriculture so as
to "establish a fair market oriented agricultural
trading system and that a reform process should
be initiated through the negotiations of
commitments on support and protection and
through the establishment of strengthened and
more operationally effective GATT rules and
disciplines’. It was further agreed that "long term

World Trade Organisation and National Sovereignty

□ Market Access

in the form of tariff restrictions. Such a situation
can wreck the balance of growth of agricultural
products in India, which is just on the threshold
of self reliance in the area. The extent to which
such disruption does take place would only be
known during the implementation period, as we
start exposing the agricultural sector to the
vagaries of globalisation.

□ Domestic Support

Domestic Support

□ Export Competition

he term “Aggregate Measurements of
Support" (AMS) in the Agreement on
Agriculture denotes the annual level of support,
expressed in monetary terms, provided for an
agricultural product in favour of the producers of
the basic agricultural product; or non-product­
specificsupport provided in favour of agriculture
producers in general (other than the support
provided under programmes that qualify
exemption from reduction under Annexure 2 of
the Agreement on Agriculture). The Agreement
on Agriculture provides two separate levels of
ceilings on AMS — 5% in the case of developed
countries on product-specific and non product­
specific domestic support. For developing
countries de minimis percentage of ceiling has
been prescribed at 10 percent. There are no
reduction commitments needed in the case of
those countries which are below these ceilings.
All those countries whose agricultural support is
above these ceilings had to indicate their
reduction commitments in the appropriate
schedule by mid-February 1994. Members have
flexibility to bring down domestic support by 20%
in a period of 6 years. Further, these levels of
support can also be brought down on the basis of
budgetary support for the relevant products. This
kind of flexibility will thus be available to adjust
the subsidy within the products which fall in the
category of support above the ceilings.
Certain programmes, like measures to
encourage agricultural and rural development,
investment subsidies generally available to
agriculture in developing countries, and
agriculture input subsidies to low income or poor
resources producers are exempt from domestic
support reduction commitments. Similarly, there
are a number of other Government Service
Programmes listed in Annexure 2 of the
Agreement on Agriculture which are also exempt
from inclusion in the Aggregate Measures of
Support. However, for programmes under which

objective is to provide for substantial progressive
reduction in agricultural support and protection
sustained over an agreed period of time". Thus
specific binding commitments have been
provided in the Agreement on Agriculture in each
of the following areas:

□ To reach an agreement on sanitary and phyto­
stationery issues.
□ To secure at least a sui generis system or a
patent system for protection of new plant
varieties.

Market Access

griculture market access concessions —
relating to bindings, reduction of tariffs, and
to other market access commitments — were
submitted to the GATT secretariat by all member
countries by the middle of February 1994.
Member countries are not allowed to maintain
quantitative import restrictions, variable import
levies, minimum import prices, discretionary
import licensing, non-tariff measures maintained
through state trading enterprises, voluntary export
restraints and similar border measures other than
customs duties. These restrictions are supposed
to be converted into tariffs, excepting as otherwise
provided in Article 5 and Annexure 5 of the
Agreement on Agriculture. The implementation
period for the Agreement on Agriculture is 6 years,
commencing in the year 1995 (except for the
purposes of Article 13 of the Agreement relating
to new constraints, the implementation period is
9 years commencing in 1995).
Hitherto, under Article XVIII : B, India has
been able to continue with measures to restrict
imports, for balance of payment purposes. But in
the committee of BOP restrictions meeting held
on January 20-21 1997 India has agreed to the
removal of its legal right on these restrictive import
measures. Given this record, it is not clear how
long we would be able to delay the phasing out of
restrictions on imports in agriculture. The
implementation of the Agreement on Agriculture
would make us extremely vulnerable. The only
safeguards that would be available (once right to
restrictive import measures are foregone) will be

A

T

World Trade Organisation and National Sovereignty

stocks of foodstuffs for food security purposes
are retained by the Government and released at
administered prices, the difference between the
acquisition price and the external reference price
(if the former is higher) has also to be included in
the AMS.

Export Competition

embers are required to reduce the value of
direct export subsidies to a level that is 36%
below the 1986-90 base period level, over the 6year implementation period. The quantity of
subsidised export is to be reduced by 21% over
the same period. In the case of developing
countries, the reductions required are two-thirds
of those required from developed countries over
a 10-year period. No reductions apply to the least
developed countries. Products that are not subject
to reduction commitments is prescribed under the
Agreement However, during the implementation
period developing countries may take recourse
to subsidies to reduce the cost of marketing
exports of agricultural products, or of internal
transport and freight charges on export shipments.
The Agreement on Agriculture also calls for
further negotiations to be initiated before the end
of the fifth year of implementation.

M

Agreement on Sanitary and
Phyto-Sanitary Issues
he Agreement on application of sanitary and
phyto-sanitary measures concerns the
application of food safety and animal and plant
health regulations. It recognises Government's
right to take sanitary and phyto-sanitary measures
but stipulates that they must be based on scientific
basis and be applied only to the extent necessary
to protect human, animal or plant life or health
and should not arbitrarily or unjustifiably
discriminate between members where identical
and similar conditions prevail. The members are
supposed to be encouraged to base their
measures on international standards, guidelines
and recommendations wherever they exist.
However, members may maintain or introduce
measures which result in higher standards if there
is scientific justification. It is feared that in the
guise of sanitary and phyto-sanitary measures,
various arbitrary standards would be stipulated
to block imports by the developed countries (from
developing countries) even when there are

T

binding commitments to open up their markets
to the extent stipulated in the Agreement.
Sul generis System for
Protection of Plant Varieties

ember countries are supposed to evolve an
effective sui generis or patent system for
protection of plant varieties. At present India does
not have a system for protection of plant varieties.
The key issue in this respect is, how the rights of
Indian farmers can protected vis-a-vis the rights
which might be given to the plant-breeders. The
time frame for legislating this measure is 5 years.
The extending of intellectual property protection
to agriculture would seriously impede research
programmes undertaken by public or private
institutions, as well as agricultural universities.
Dominant TNCs would be allowed to seek
exclusive rights over the planting material. The
obligation to legislate does not lay down the scope
and extent to which the protection may be
provided.
It would be in India's interest if exempt
categories are clearly laid down. From the point
of view of food security and health needs, at least
plant varieties relating to foodgrains, vegetables
and fruits (and even medicinal plants) should be
excluded from the domain of plant-breeder rights.
It is also necessary for India to examine and
analyse systems (for protection of plant varieties)
which might be adopted by other developing
countries, who are similarly placed. It must be
remembered that the obligation to legislate does
not extend specifically to all plant varieties.
Further, the WTO is also scheduled to review
various national systems for plant-breeder rights
during 1999. It might be prudent to wait till then,
instead of arriving at a hasty decision to extend
intellectual property rights to plant varieties
immediately.

M

In conclusion it might be stated that the
commitments and obligations undertaken by the
then government in the WTO are clearly inimical
for all-round growth of various sectors of the
economy. Moreover, when these obligations are
assessed against Constitutional guarantees
pledged to our people, most of them would be
seen to be ultra-vires our Constitution.
[ Contributed by li.K.Keaylu |

PATENTS

"World Class" Patents : An Invitation to Disaster?
(IDMA Study)
“World Class" or “Modern" patents are new
terminologies recently adopted by U.S. MNCs and
U.S. Trade Representatives to designate a patent
system, which provides much more stronger patent
protection to rightholders, than even TRIPS
Agreement.

People often use these terms under the belief
that these refer to a modern and progressive patent
system, which will promote research and technological
development. It would be instructive to know the
implications of the expression “World Class” patents.
Till 1992, the developed countries were happy
with the protection available under Paris Convention,
and during GATT negotiations, had been insisting on
all countries joining Paris Convention.

1. SCOPE AND COVERAGE OF PATENTABLE
SUBJECTS:
(a) All fields of technology with no limitations.

(b) Both product and process patents to be covered.

(c)

Even discoveries (as distinguished from
inventions) are also patentable.

(d)

“Discoveries” being patentable, field will be
extended to all natural products and living beings,
including microorganisms occurring in nature.
Plants and agricultural products will also be
covered.

Animals, and part of human beings will also be
patentable.

Having achieved a higher level of protection
under TRIPS, they are now aiming to make further
inroads by making the system fool-proof in favour of
MNC patent holders, by inducing or forcing the
developing countries to accept the “World Class”
patent system under threat of Special 301.

The term “World Class” is used apparently to
create a false impression that it is a more progressive
patent system designed to promote research, and
industrial and technological development.
There is no single document specifying the
requirements of World Class patents. But from the
complaints made by U.S. MNCs and U.S.T.R. against
different countries during last three years, their
expectations of “World Class” patents can be spelt
out as set out below:
IDMA Bulletin XXIX (18) 14th May 1998

The following will also be patentable:

(e)
-

New use of known-substances;

-

new use of known-processes;

-

Combination products by mixing two orthree
known-substances;

-

methods of testing an analysis;
methods of surgical, curative, prophylactic
or other treatment of human beings and
animals;

(f)

Inventions of Bio-technology, genetic engineering
etc. - clones -

Note: - None of these (except micro-organism and
plant varieties) are required to be covered even by
TRIPS agreement. Indian Patents Act, 1970 does
not cover any of these. Except product patents for
all other products except drugs and medicines, pes­
ticides, insecticides, foods etc., for which only proc­
ess patents are allowed.
430

2.THE CRITERIA OF PATENTABILITY ARE LAX

The standards of each of the criteria of
patentability, prescribed by TRIPS, namely, (i) new,
(ii) involving an inventive step; and (iii) capable of
industrial application, are considerably relaxed in
the World Class patents, to allow even common
place items like turmeric powder, new products,
combination drugs, new uses of known-drugs etc. to
be treated as satisfying the patentability requirement
and patents are granted, almost for the asking. Even
methods of treatment and diagnosis are accepted
as satisfying the industrial application test.

Provision could be made for publication and
“re-examination of the patent”, post-grant.

This has the effect of shifting the burden of proof
from the claimant to the objector, as grant of the
patent is normally treated as prima facie proof of its
validity. The objector has to prove the invalidity.
Both as per TRIPS and the Indian Patents Act
1970, departmental scrutiny, prior publication, and
opposition by other interested parties are permissible
before grant.
4.

For considering - “new” novelty and “inventive
step” - i.e. non-obviousness, only the printed and
published matter is to be taken into account. This
means traditional knowledge passed on from
generation to generation by actual use or orally, is to
be ignored and can be patented. The turmeric
powder patent is a case in point.
Under the TRIPS Agreement and the Indian
Patents Act, 1970, it is possible and permissible to
prescribe and maintain higher standards of
patentability criteria.

3.
THE PROCEDURES ARE DESIGNEDTO AVOID
DETAILED SCRUTINY AND PUBLIC OPPOSITION
UNDER THE PRETEXT OF AVOIDING DELAY IN
GRANT OF PATENTS
The pre-grant departmental scrutiny of the patent
specifications and applications is required to be brief
and expeditious. Departmental scrutiny is confined
to available records in the patent office. Definite time
frame is to be provided for disposal of the application.
Publication of the application before grant is also
avoided. In the process, even common place
subjects, like use of turmeric powder gets patented.

In case of chemical patents, broad claims covering
millions of compounds on basis of research and
disclosure of only a few compounds, is to be allowed
on hypothetical consideration, and application of
doctrine of equivalents.
In case of microorganisms, claiming of entire
species may have to be permitted.
Such claims are hypothetical and presumptuous.
They are not supported by actual research or
experimental work. There are no disclosures to
support such claims. As such there is no contribution
to scientific knowledge ortechnological advancement.
The community does not get any benefit in
consideration of such claims.

On the contrary, such claims block and deny to
other research workers a large field for further
research and development.
TRIPS and the Indian Patents Act 1970 do not
require patent protection to be extended to such
hypothetical claims.

5.
Procedure and opportunity of Opposition by
members of public should also be avoided.

IDMA Bulletin XXIX (18) 14th May 1998

BROAD CLAIMS

IMPORTATION AS WORKING OF PATENTS

Importation has to be accepted as working of the
patent. Under U.S. Law, the patentee need not
431

produce, import or actually use the patent in the
country. Yet he gets a right to prevent others from
using, producing or researching.

TRIPS Agreement (through Paris Convention)
accepts importation as working for the purposes of
resisting revocation of patent on ground of non­
working, but compulsory licences can be issued if
working is only by importation.
The Indian Patents Act 1970 insists on
working of the patent in the country.
6.

THE TERM OF PATENT

The term of patent should be 20 years. In case
of commodities, like drugs and medicines, where
approval of regulatory authority is required for
marketing, the 20 year period will be counted from
the day, market approval is given for the commodity
or drug by the F.D.A. Thus the period can be
extended upto a further five years.

TRIPS and the Indian Patents Act 1970 do
not require any such extention to be granted.
7.
USE OF INVENTED PRODUCT FOR TRIALS
FOR REGULATORY APPROVAL OR RESEARCH
WORK PROHIBITED

While the patent is in force, whether during the
'original term or extended period, use of the invention
for experiments, research, or even clinical trials for
generating data for market approval and introduction
of the drug after expiry of the patent is prohibited.
The result is that after expiry of the patent, other
manufacturers cannot introduce the drug, and the
consumer will be denied alternate source for a
further period of about 2 years. Thus, in effect the 20
year term gets extended to about 24 to 27 years.
Neither TRIPS nor the Indian Patents Act,
1970 prescribe any such requirement.

IDMA Bulletin XXIX (18) 14th May 1998

8.

LICENSING PROVISIONS

The Licensing provisions are either totally
excluded (as in U.S.A.) or rendered almost illusory
by rigid procedures or conditionalities.
Thus alternate source of supply is denied during
the entire term of patent.

Neither TRIPS nor the Indian Patents Act, 1970
prescribes any such requirement. TRIPS through
Article 5 of Paris Convention, read with Article 8,
allows licensing.
9.
ENFORCEMENT OF PATENT RIGHTS AND
REMEDIES BY JUDICIAL AND ADMINISTRATIVE
AUTHORITIES TO BE EXPEDITIOUS AND
STRONGER

Enforcement of the patent rights should be
expeditiously allowed by administrative and judicial
authorities. The customs authorities can be asked to
stop imports. The police authorities can be asked to
conduct raids and file criminal actions. The Courts
are required to dispose off the cases expeditiously,
i.e. within months and not years, and remedy should
normally be preventive injunctions plus damages.
No such compulsions under TRIPS or the
Indian Patents Act 1970.

10.

DAMAGES

Damages should include actual loss of profits
and compensation for price reductions resulting
from competition.
Requirements under TRIPS and the Indian
Patents Act 1970 not so strict.

11.

STATE USE OF PATENTS

States use of patents is not to be permitted,
except in case of emergencies and that to limiting in

432

point of time and scope. For state use also, economic
value of usage of patents is to be allowed as
compensation.
Though under U.S. Law-28 U.S.C. 1498, the
Federal Government has reserved all the powers,
they insist on other countries not reserving any
such powers. TRIPS Agreement, properly
applied,' permits such sovereign power
reservation.The Indian Patents Act, 1970 makes
specific provisions.

These are the stringent conditions and
requirements of the “World Class” patents, which
the U.S. MNCs the U.S. Trade Representatives
expect.
The provisions of TRIPS Agreement are by
themselves detrimental to national interests. Yet it
contains some provisions, which soften, to some
extent, the severity of its adverse impact.The “World
Class” Patents would be simply disastrous. It

would be an uncontrolled monopoly of the worst
type, with the State being reduced, not only to a
helpless and mute spectator, but also an
unwilling accomplice, abettor and supporter, of
exploitation, lending its judicially and
administrative machinery to enforce such
patents against the poor, unsuspecting millions
of its countrymen. It would arm the MNC right
holder with weapons, against which there can be no
protection. In fact, the State itself would be a helpless
victim.

Whethersuch patent protection promotes original
research and industrial development in an advanced
country, like U.S.A, is debatable, but for a developing
country, like India, it would be disastrous and totally
prevent any research and would actually result in
closure of many industrial units.

“World Class" Patents in the Indian context'
is an invitation to disaster.

‘Patent laws to be in tune with WTO, but will Safeguard
National Interests' : Dr Murli Manohar Joshi
The government will amend the patent law to
honour commitments to the World Trade
Organisation, but will take steps to safeguard national
interests, officials have said.

we design and chart out certain methods”. India has
until April 1999 under the World Trade Organisation's
schedule to bring in a new law to replace the existing
one.

“We have to adopt a new patent law and it should
be and it would be to honour our international
commitments and also to safeguard our national
interests,” Science and Technology Minister Murali
Manohar Joshi told a news conference.

Joshi said he would brainstorm for two days next
week with experts from the Council for Scientific and
Industrial Research in Bangalore to decide on a
strategy to help Indian industry become competitive
with the help of technological innovations.

“The Industry Ministry is already on the job,”
he said.
Asked if the government was ready to adopt
product patents, Joshi said: "We can do it provided
IDMA Bulletin XXIX (18) 14th May 1998

The meeting on May 11 and 12 will also discuss
emerging opportunities in biotechnology, efforts to
preserve traditional knowledge and scientific
innovations to help common people, he said.
433

Union Human Resource Minister Murli
Manohar Joshi, intervened to clarify that the
WTO agreement was renegotiable and Iridia
would do everything to bargain the treaty in its
favour.

He promised that the new government would
contest the WTO's conditions at the agreement’s
review in 1999. Conditions such as phasing out of
quantitative restrictions in textiles, and other issues,
would be opposed, he assured. India would also try
to present its case at the WTO meet next month,
he said.

Source: Sudesh Verma, Business Standard,
4 May 1998.

TRIPS

India on Special 301 Priority Watch List
The United States has named India in the Special
301 priority watch list for what it termed as noncompliance with its obligations under the Trade
Related Intellectual Property (TRIPS) agreement.

The Clinton administration has placed 13 other
countries and the European Union on the list, US
Trade Representative Charlene Barshefsky on 2
May 1998 said.
“India’s patent and trademark laws continue to
fall well short of providing adequate and effective
protection,” the release said.
“India has enacted modern copyright legislation,
but improvements continue to be necessary in the
enforcement area,” it noted.

Of the nations named in the list, the US Trade
Representative is required to decide which should
be designated “priority foreign countries”, the release
said.

The term means countries that “have the most
onerous and egregious acts, policies and practices
which have the greatest adverse impact (actual or
potential) on the relevant US products, and are not
engaged in good faith negotiations or making
IDMA Bulletin XXIX (18) 14th May 1998

UNCLE SAM WIELDS HIS STICK
*-

Ths Clinton administration has accused India of
non-compliance with its obligations under the trade
related intellectual property agreement

*■

13 other countries and the European Union have
been placed under Special 301

*•

Pakistan has been included in a separate watch
list as Washington looks forward to Islamabad mov­
ing “quickly to improve protection for intellectual
property”

*•

“Earlier, India had been named as a “Priority for­
eign country" under the Special 301 section of US
trade law in 1991-93.

significant progress in negotiations to address these
problems".

Noting that Pakistan in 1997 took necrssary
steps to implement its obligations under the TRIPS
agreement, Ms Barshefsky said it has been included
in a separate watch list as Washington looks forward
to Islamabad moving “quickly to improve protection
for intellectual property”.

An action stronger than putting a country on a
priority watch list is when the USTR heads for the
“priority foreign countries" list. The USTR defines
them as follows: “Those countries that have the most
435

SPECIAL ARTICLES

Indian Patents as Competitive Instruments
Dream and Reality
Amiya Kumar Bagchi
Uttam Kumar Bhattacharya

This paper attempts an evaluation of certain aspects of the working of the Indian patent system as embodied in the Act
of1970. It places the Indian patent system in the context ofthe global patent scenario; it also discusses the relative strengths
and weaknesses of the system in respect of its encouragement of innovation and competitive process. The cases of bio­
technology and pharmaceuticals have been taken up to highlight the position. The necessity of a rationally constructed
innovation system for overcoming the lacklustre performance of the Indian patent system emerges out of the study.
Patents as Competitive Instruments
DESPITE the possible existence of stray
instances of rewarding inventions under pre­
capitalist systems, it may be claimed that
granting patents for new products and
processes is an innovation made by
capitalism. Patents were used as devices to
advance knowledge and bring the new
knowledgeeventually(thatis, after the expiry
of the patent life or through licensing) into
the public domain. But they were also used
as instruments of competitiveness - by the
individual firm against all potential or actual
competitors, and by governments in their
bid to strengthen their own countries against
foreigners.
In England, for example, patents were
used by Lord Burghley, a principal minister
of Queen Elizabeth I as means ofestablishing
industries which were already operating
abroad but for which technologies and
entrepreneurs were not available in England
of the lime [MacLeod 1988: 11-14]. Letters
patent were, of course, used by the Crowns
of England to confer monopolies on court
favourites or their friends and relations in
the production or vending of particular
products [MacLeod 1988: chapters 3-5], But
they were also used by many entrepreneurs
to try and break into the monopolistic
privileges enjoyed by guilds of clothiers,
drapers, brewers and so on. Finally, when
innovation became a regular activity
associated with the industrial revolution.
inventors in many areas tried to protect their
profits by taking out patents. The owners of
the Watt-Boulton steam engine patents
defended their monopoly privileges, and in
general quite successfully, for more than a
quarter of a century. Some economic
historians such as T S Ashton and students
of technology such as F M Scherer have held
•he long patent life of Watt’s engine to be
at least partly responsible for the relatively
slow diffusion of steam power in 18th century
Britain [Scherer 1965/1984; vonTunzelmann
1978: 292-94],

Patents acted both as instruments of grants in Japan and the US or UK. Unlike
in the UK or the US. where applications for
aggression to break open monopolies and
patents are based on claims for first invention,
as instruments of aggressive defence of
and are rigorously examined in regular order
monopoly privileges. Recent work has
further underlined the importance of by the concerned patent offices, applications
for patents in Japan need not be examined
competition in technology and patent wars
at all for seven years [Jacobs 1994: J-8].'
both as influence on the degree and nature
In the event 40 per cent of all applications
of competitiveness of industry and as an
outcome of existing structures of for patents in Japan were withdrawn before
examination could come up. According to
concentration of economic power in an
thestudybyOkimotoandSaxonhouse(1987)
industry. Under wide sets of assumptions,
nearly half of the applications made by
firms which can move first and can devote
Japanese to their own patent office were
larger funds to R and D competition are
rejected; and in the US the ratios ofapprovals
found to have a significant advantage over
to the Japanese patent applications were also
their laggard or weaker rivals in obtaining
patents and building up new positions of low in comparison to that of the US and
vantage [see, forearlierwork on this, Scherer • European countries [Okimoto and
Saxonhouse 1987:391]. However, the sharp
1967/1984; for a survey of more recent
rise in applications for patents since the
work, see’Reinganum 1989; see also
Leininger 1991). The R and D intensity of system was introduced reflected the Japanese
determination to use patents as tools of
firms, ofcourse, varies according to industry,
competitiveness. The strategies of taking
and according to firm size, and can change
out patents even for small and mundane
over time. So does the propensity of firms
innovations and the growing enthusiasm for
engaging in R and D to take out patents [for
applications of patents in the home country
a survey of the empirical work relating to
and abroad even when those were often
the US, see Bound et al 1984], Moreover,
turned down in course of patent examination
in many countries, trade secrets are protected
also reflect the competitive zeal of the
even when patents are not involved. For
Japanese entrepreneurs; they would not
example, in the highly publicised case of the
generally leave unturned any possibilities of
IBM which accused Hitachi and Mitsubishi
patent protection in order to improve their
of violating intellectual property rights and
relative positions.
won a settlement estimated al US $ 300
In Japan, patent applications often give
million, no patent claims were involved
insufficient detail about the invention
[Kinmouth 1987:179], To take another
claimed, bin priority in application can make
example, devices other than patents had
the ground for an exclusive licence
been used for a long time for defending
[Kinmouth 1987; Winebcrg 1988], Fees
proprietary rights in improved breeds in the
charged for patent application and
US chicken-breeding industry [Burgos
1992],
examination in Japan have also been low
compared with those obtaining in the US
Thus the statistics of patents as such are
(details arc in the note 3). It has been hence
only an imperfect indicator of the
alleged that the numbers of patent grants and
inventiveness of an industry or a country or
a fortiori of patent applications tend to
its potential as an aggressive competitor
exaggerate the inventiveness of the Japanese.
[Schmookler 1966; Scherer 1980], There
However, if we also consider those
are further problems in using the numbers
characteristics of the Japanese patent system
of patents as indicators of inventiveness or
along with the basic intention behind them competitiveness at the international level.
namely,
that new processes or products must
This applies in particular to comparisons
be quickly diffused - and the procedures
between patent applications or even patent

that make it more difficult for foreigners to
obtain patents in Japan than in ways available
in western countries (Wineberg 1988; Kotabe
1992], patent statistics can be regarded as
index of the aggressiveness with which the
Japanese defended their domestic economic
space and used that strong home ground as
a base for international aggressiveness in the
relevant fields.
Students of R and D and inventiveness
have, therefore, continued to use time series
of numbers of patent applications and grants
as important indicators of changes in a
country’s inventiveness or its structure of
industry and associated changes in allocation
of resources for innovation. They have also
continued to use international comparisons
of patent statistics for assessing the
international competitiveness of countries
and changes in their competitive strength
overtime [Watanabe 1982; Evenson 1984].
We will also follow these examples in the
sequel, but the caveat? mentioned above
must be bom in mind when judging the
significance of the relevant data.
In India, a patent system was introduced
by the British government in 1856, primarily
in order to defend the proprietary rights of
British patent-holders. The 1856 Act was
replaced by the Industrial Patent and Design
Act of 1911, again primarily on the model
of British legislation. The numbers of patent
applications and grants remained low and
the vast majority of the patents granted were
acquired by foreigners [Kuruvilla 1956].
The contrast between India and Japan,
which started on its path of development of
modem manufacturing industry much later
than India, is as marked in this area as in
most other sectors of industrial management
and development. Japan passed her first
patent law in 1885 and soon the numbers
of patent applications and granted far
exceeded those of India’s. Moreover, Japan
introduced utility models the protection of
which did not embody original inventions
but would be very useful commercially. If
we include the numbers of utility models2
as further indicators of competitive energy
in the field of commercial rivalry then
India’s position would pale further into
insignificance. What is more striking still is
that in Japan foreigners owned only a
minority of patents granted - the proportion
never exceeded a third of the total number
of registration in any decade before the
1960s [Watanabe 1982: Table 3).
In India, the 1911 Act was thoroughly
overhauled and a new Patent Act was passed
in 1970, and came into operation in 1972.
As we shall see, one of the effects of the
new act was to allow Indians to make
headway in patent registrations in India,
especially in the field of drugs and
pharmaceuticals. A death sentence was
pronounced on that Act when India signed
the new GATT treaty and the government

confine our attention to the data on patents
the R and D environment of Indian industiv
and its international setting, and put for||)

of India passed an ordinance on January 3,
1995 (Gazetie of India, Extraordinary,
January 3, 1995) allowing all signatories to
the World Trade Organisation agreement to
avail ofthe Indian Patents Act, 1970, whether
or not they had entered into any separate
bilateral or multilateral agreement with India
tn respect ofpatent systems. The government
has also declared its intention eventually to
align the Indian patent system to suit the
TRIPs provisions of the new GATT treaty.
In effect, the Indian patent system (under the
Patent Act, 1970) lasted only for a period
of about 21 years and the current paper is
to be seen as essentially a post-mortem
investigation of the patient’s health when it
was alive - unless India and other afflicted
countries can successfully demand a new
round of multilateral trade negotiations
leading to a thorough revision of the GATT
treaty so as to make more room for
autonomous, nationally regulated innovation
systems.

a few hypotheses regarding lhccomparaljv.
performance of the Indian innovation Sysp.
within tha^ restricted domain of study
enquiry intothelink of the social environtnen
with the generation and diffusion of
innovations will be left out of the purview
of our enquiry.
Before we proceed, let us point out again
that not all innovations lead to patents, not
all patents embody major innovations and
not all patentssealedoreven licensed actually
lead to changes in processes or products on
the factory or office floor. Some kinds of
innovations arc more amenable to patenting
than others (for example patenting in
chemical field), and some environments are
conducive to the protection of intellectual
property rights through patents and some
may be protected by other devices (for
illustrations of the way proprietary rights in
chicken-breeding were protected in the US
for a long time through device? other than
patents [Burgos 1992], Not all countries
which have become affluent capitalist
societies provided a patent system to protect
intellectual property even at the beginning
of the 20th century. Moreover, as has already
been noted, the laws relating to patent
protection differed greatly from country to
country in terms of their demands for
originality, priority, public disclosure, and
so on. So the number of patents applied for

II
Indian Patents in an
International Perspective
In an earlier paper [Bagchi, Banerjee and
Bhattacharya 1984] we had studied the
working of the Indian Patents Act, 1970
from 1972 to 1980. In this paper we shall
scrutinise the data on patents from 1970 to
1993-94 and provide an interpretative
framework. In the present study, we shall

Table 1: Number or Patent Applications in India by Indians ano Foreigners, 1970 - 1994
Years

Indians

1970
1971
1972
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94

1116(21.7)
1231 (28.3)
1180 (31.9)
1143 (31.4)
976 (28.0)
1148 (33.7)
1129 (37.7)
1342 (93.2)
1097 (38.7)
1124 (38.3)
1055 (35.4)
1159 (39.2)
1093 (36.6)
1135 (36.8)
1055 (33.5)
1001 (30.2)
999 (28.3)
983 (28.2)
930 (26.9)
1077 (29.9)
1039 (28.4)
1180(31.4)
1293 (36.4)
1228 (35.4)
1266(32.7)

Foreigners Resident
In India
162
185
142
136
174
66
34
23
37
13
37
19
19
25
—
5
1
1
—
-

Foreigners

Total

3864
2929
2373
2360
2341
2192
1833
1739
1736
1795
1888
1776
1877
1950
2065
2316
2527
2506
2527
2516
2621
2583
2259
2239 •
2603

5142
4345
3695
3639 .
3491
3406
2996
3104
2870
2932
2980

2989
3085
3145
3319
3526
3489
3457
3598
3661
3764

3467

Noles: 1 Patents Act 1970 was made effective from April 20, 1972.
.
2 Figures in brackets are percentages of the total.
Patent Office : Patents : Annual Report of the Controller General of Patents. Designs •
Trademarks under Section 155 of the Patents Act 1970, (henceforth Patents . Annual
in short) (different issues).

Economic and Political Weekly

June 24, !"•

or. sealed is only a very incomplete and
;mperfect index of innovative activity in any
country, and this applies to the Indian case.
In Tables 1, 2 and 3 we have reproduced
the figures for patent applications, patents
sealed and patents in force in India between
1970 and 1993-94. The figures for 1970,
1971, and 1972 are also given because they
provide some idea of how the relevant
numbers were behavingjust before the Indian
Patents Act, 1970cameinto force (formally,
it came into operation froln April 20,1972).
The numbers of patent applications, etc,
have been divided as between those
originating from or held by Indians and
foreigners (including Indian and foreign firms
and research laboratories).
The following observations can be made
on the basis of the figures in these tables.
First, the numbers of patent applications by
Indians have fluctuated erratically and show
no time trend over the 25-year period. The
numbers of total applications dipped sharply
between 1972-73 and 1980-81 but then rose
smartly in the 1980s and declined again in
the early 1990s. There was virtually no time
trend overall either in the totals of patent
applications by foreigners or in total numbers
of patent applications. Secondly, the patents
sealed in India showed erratic fluctuations
(probably more erratic than in the case of
patent applications) in the cases of those
granted to foreigners as well as Indians. Up
to 1982-83 there is some sign of a decline
in the total numbers of patents sealed,
especially in the numbers granted to
foreigners. The numbers of patents scaled
in favour of foreigners sharply rose up to
1974-75 and then dipped to a low figure of
670 in 1980-81 (compared with 3,207 in
1974-75 and 3,294in 1971 .Table2) but rose
again in the 1980s reaching a peak of 2,585
in 1988-89. This peak was, however, lower
than the figures reached in the early 1970s,
and the numbers of patents sealed in favour
of foreigners had come down again except
in the last year, viz, 1993-94. Since the
numbers of patents sealed in favour of
foreigners always exceeded those in favour
of Indians, the overall numbers of patents
sealed also display a sagging profile over
time.
The clearest trend, however, is visible in
the stock of patents in force. Patents in force
are those for which renewal fees have been
paid in addition to those which have been
freshly granted (within the last two years).
The patents need not actually be worked
even though renewal fees are paid. The total
number of patents in force declined steeply
from 1972-73 to 1980-81. Most of this
decline was contributed by the decline in
patents in force taken out by foreigners. The
latter number was virtually halved between
1972-73 and 1980-81. Patents in force
continued to decline in the 1980s, though
at a smaller rate. By 1992-93. patents i.i

tconomic and Political Weekly

force held by Indians had come down to a
mere 1,034. From our analysis it comes out
that Indians held about the same proportion
of total number of patents in force in
1991 -92 as they did in 1972-73; but the total
number of patents in force in 1993-94 was

only a half of the corresponding number in
1972-73. In any case, patents granted to
Indians never rose above a third of the total
number.
What may be the proximate reason for the
decline in the numbers of patents in force?

Table 2: Number or Patents Sealed or Granted in India to Indians and Foreigners, 1970 - 1994
Years

Indians

Foreigners

Total

1970
1971
1972
73
197274
197375
197476
197577
197678
197779
197880
197981
198082
198183
198284
198385
198486
198587
198688
198789
198890
198991
199092
199193
199294
1993-

596(16.9)
629(16.0)
265 (17.5)
278 (20.7)
358(25.3)
737(18.7)
426(18.4)
928(32.1)
657(26.1)
281(21.9)
516(23.7)
349(34.2)
421 (30.3)
405 (33.0)
340(25.7)
263 (17.9)
451.(23.7)
532(25.0)
588 (27.9)
795(23.5)
519(27.5)
379(25.4)
551 (32.9)
251 (19.7)
442(25.3)

2936
3294
1245
1064
1058
3207
1894
1964
1857
1000(a)
1657
670
936
822
980
1206
1500
1594
1516
2585
1371
1112
1125
1021
1304

3532
3923
1510
1342
1416
3944
2320
2392
2514
1281
2173
1019
1357
1227
1320
1469
1951
2126
2104
3380
1890
1491
1676
1272
1746

Notes: 1 Percentages in brackets indicate percentages to the total number.
2 (a) This information is based on the Annual Report 1978-79. However, according to the
1979-'80 Annual Report the figure was 999.
Source: Same as Table 1.
*
Table 3: Number of Patents in.Force in India: Indians and Foreigners. 1970 - 1994

Years

Indians

1970
1971
1972
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94

2568(9.1)
3063(10.0)
3673(11.4)
3718(11.5)
3948(12.2)
3039(10.9)
2991 (11.3)
2746(12,2)
3065(13.4)
2469(15.0)
2786(16.1)
2757(16.0)
3038(16.9)
3329(17.9)
3523 (18.3)
3008(18.6)
2549(19.0) •
2004(16.6)
2150(17.5)
2584(19.0)
2468(18.4)
2238(21.4)
1206(11.7)
1034(10.3)
1995(21.5)

Held by____________
Foreigners
25753
27663
28650
28718
28270
24758
23453
19780
19795
13966
14474
14448
14892
15291
15726
13162
10844
10059
10115
11015
10941
8210
9093
8997
7281 -

Total Stock of Patents

28321
30726
32323
32436
32218
27797
26444
22526
22860
16435
17260
17205
17930
18620
19249
16170
13393
12063
12265
13599
13409
10448
10299
10031
9276

Note: Figures in brackets indicate percentages to the total number
Source: Same as Table 1.

June 24. 1995

1503

One reason may be the paring of the period
of the general validity of patents from the
earlier 16 years to 14 years under the 1970
Act, and more importantly the slashing
down of the period of validity of patents
in the field of food, drugs and medicines
to seven years under the new Act. Table 4
indicates that a decline in the number of
renewals under the old Act was a major
contributory factor to the decline in the
stock of patents. Another factor was the
working out of the bulge in numbers sealed
in 1974-75.
However, the major reason for the decline
in the stock of patents in force was a decline
in the numbers of patents applied for and
eventually sealed. Four principal factors
seem to underlie this decline. First, the patents
that the foreigners filed for were for
technologies that were relatively old and
hence becoming rapidly obsolete in the
advanced capitalist countries. With
competing processes and products being
imported into India as finished products.
Intermediates or production technologies,
the patentees found it less and less useful
to renew their proprietary rights in the form
of patents, especially since the procedures
for application and sealing were dilatory and
effort-consuming. Secondly, the rate of
obsolescence of products and processes
patented accelerated world-wide, and this
higher rate of attrition of patents in force
reflected this global phenomenon. Thirdly,
Indians may have learned better to invent
around the patents taken out by foreigners

and hence the latter found it less and less
attractive to take out patents. (Of course, it
might be objected that if Indians became
better at circumventing the foreigners’
patents, the latter could have done so on the
basis of patents taken out by foreigners in
their home countries and in third countries
as well. But as against that, it is almost
certain that few Indian firms ororganisations
carried their search process beyond India’s
borders. Even the patent information system
provided by the government of India for use
by firms doing business in India - badly
organised though it was - was hardly utilised
by Indian firms.) Fourthly, the regime of
fqreign collaboration agreements and their
legal interpretation in Indian courts had acted
as a disincentive against local R and D
[Bagchi and Dasgupta 1981] and the
government had encouraged foreign
collaboration agreements on a more and
more lavish scale, especially in the 1980s
[Goyal et ql 1994]. This may have acted as
a further deterrent to both Indians and
foreigners paying fees to take out patents the former because they could get more
secure proprietary rights through
collaboration agreements and the latter
because they found that their presumed
proprietary rights could be effectively
nullified by processes imported through
foreign collaboration agreements.
The continued dominance of foreigners
in the total number of patent applications
filed or patents sealed is in conformity with
the situation in many developed countries

where also foreigners account for a larger
share than local firms, organisations and
individuals [Evenson 1984], However
there are wide variations among these
countries in respect of the relative salience
of patents granted to foreigners. In Japan
for example, thenumbersof patents granted
to foreigners were generally less than half
of those granted to nationals. Moreover,
between 1967 and 1980, the relative
importance of foreigners in the numbers
of patents granted came down further; while
the numbers of patents granted to Japanese
nationals virtually trebled over this period,
those granted to foreigners actually
declined. In the US, by contrast, the
numbers of patents granted to US nationals
came down between 1967 and 1980 but
those granted to foreigners went up. Thus
foreigners, who had accounted for less
than a quarter of all US patents in 1967
came to own about a third of US patents
in 1980. As Table 5 A reveals, these trends
continued unabated for the US and Japan
up to 1992, so that nationals accounted for
only a little more than 50 per cent of total
numbers’ of patents granted by the US in
1992, whereas in Japan nationals accounted
for about three-quarters of the patents
granted in that year. In the UK, the world
leader in technology in the 19th century,
foreigners already accounted for threequarters of 40,995 patents granted in 1970;
by 1992, the number of patents granted had
come down to 37,827 and foreigners
accounted for about 87 per cent of that

Table 4: Number of Patents Renewed in India, 1980 - 1993

Years

3rd

4th

5th

6th

7th

8th

9th

10th

llth

12th

13th

1980-8!

1188

1301

1519

1210

1379

988

982
(6)
740
(3)
937

12
(846)

1983-84

1495

1371

1370

1432

1345

905

734

688

559
(255)
816
(12)
756
(1)
662

1984-85

1197

1194

1220

1139

1243

1027

820

581

583

46
(735)
499
(165)
706
(1)
630
(2)
590

1985-86

1560

1563

1565

1485

1265

952

860

704

523

550

1986-87

1890

1893

1828

1651

1981-82

1179

1179

1297

1269

975

1005

923
(I)
800

1982-83

1828

1880

1936

1989

1581

1041

1017

14th

15 th

16th

(708)

(600)

(565)
398
(187)
603
(5)
560

(679)
8
(696)
35
(522)
374
(122)
467

(515)

(476)

556

454

(555)

(399)
(324)

1480

1187

979

834

686

485

471

(466)
(420)

(100)

(85)

455

(100)

1987-88

1765

1760

1729

1732

1329

1134

987

794

687

573

421

417

1988-89
1989-90
1990-91
1991-92
1992-93

3064
2062
1408
1452
1326

3074
1983
1425
1448
1327

2008
1897
1471
1456
1331

2087
1940
1609
1593
. 1371

1655
1512
1546
1702
1505

1165
1261
1195
1277
1342

1029
955
1105
1099
1103

876
895
855
1004
887

737
744
791
804
830

607
663
675
723
651

524
595
589
612
599

363
455
472
507
476

-

(85)

-

-

—
-

Total

10118
(3830)
9790
(2432)
1410-1
(1732)
11609
( 549)
10621
(499)
12037
(409)
13839
( 100)
13328
(85)
17189
14962
13141
13677
12748

Nines: I No renewal is required for the first two years.
2 According to the Patents Act 1970, patents are valid generally for 14 years. Patents on drugs, medicines and food articles are valid for 7 years
from the date of Patent applications (Section 53 of Patents Act 1970).
3 As per the old Patents and Design Act 1911, patents were valid for 16 years.
4 Figures in the brackets indicate patents renewed under the old Act, 1911.
,
5 Generally patents should be renewed within six months of the period prescribed for the payment of the renewal fees. However. Controller o
Patents can allow lapsed patents to be restored.
Source: As in Table!.

1504

Economic and Political Weekly

June

24, 1995

rrJuced total. We have presented figures
jf patent applications and grants for three
other advanced capitalist countries, viz,
Germany, France and Denmark, and also for
the Republic of Korea. We see in the case
of France and Germany that the numbers of
patents taken out by residents exceed those
taken out by non-residents. But in the case
of the two smaller countries, viz, Denmark
and South Korea, the numbers granted to
non-residents exceed those to residents.
However, we notice that the rates of growth
of patents granted to residents and non­
residents alike in South Korea are far higher
than in the case of all other countries
(including of course, India) (table 5B).
The data compiled by Evenson (1984)
reveal another curious characteristic of patent
registrations. The US, West Germany (that
is, the former Federal Republic ofGermany),
France, UK. and even smaller developed
countries such as Denmark, Belgium and
Netherlands all had a considerably larger
number of patents registered in the name of
their nationals in foreign countries than in
their home countries. In the case of such
countries as Denmark, Belgium, Netherlands
and Italy the numbers of patents held by
nationals abroad was of the order of five to
10 times the numbers held by them in their
homeland. Our analysis of data for the
subsequent periods (viz, 1982, 1984 and
1986) indicated similar trends particularly
in the cases of the US, Germany, UK and
France (Tables 6A and 6B). Part of the
reason for this could be multiple registrations
including registrations in countries which
were signatories to the Paris Convention.
But part could also be attributed to the greater
stringency of proofof inventiveness required
by domestic laws, part could be due to the
patenting of even minor innovations (which
are actually utility models) in countries
(mostly, poor market economies) with very
inadequate means for verification of claims
of originality, and part could be due to the
patenting of products and processes by
branches-or subsidiaries of multinationals
which did not find it worthwhile of feasible
to defend patent rights in their home
countries. These data suggest that to portray
patent holders in developed countries as
passive victims of piracy by developing
countries was far from the truth. To take one
example to illustrate this point, we can cite
Mashelkar, Director, National Chemical
Laboratory (NCL) NCL made certain
innovations in metallocenes, acatalyst which
could be used for making polyolefin
polymers. However, Exxon, the US-based
MNC,« major patent holderon metallocenes
sued any new company entering this field
in order to pre-empt any threat of future
competition. NCL found it difficult to break
this barrierof highly-founded litigiousness
[Mashelkar 1995: 17-18 and see also
Vaitsos 1972],

Economic and Political Weekly

Table 5A: Number of Patent AmjCA-noNs and Grants in Selected Countries. 1970 - 1992

(R)

Patent Applications
(NR)

1970
197!
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

72343
71089
65943
66935
64093
64445
65050
62863
61441
60536
62098
62404
63316
59391
61841
63874
65487
68671
75632
82956
91410
89024
94017

30832
33640
33355
37144
38445
36569
37294
38088
39475
39959
42231
44009
46309
44312
49443
53132
56946
65136
71712
78704
84690
88364
93274

1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

25227
24771
24337
22472
20545
20842
21797
21114
19384
19468
19612
20808
20530
19893
19093
22044
22892
23253
24098
24031
24398
24253
24092

36874
36307
35944
37840
35705
32558
32764
33309
30940
25198
22000
18406
. 1656314798
13735
48138
50529
53256
60077
66203
73493
71280
75149

USA
103175
104729
99298
104079
102538
101014
102344
100931
100916
100494
104329
106413
109625
103703
111284
117006
122433
133807
147344
161660
176100
177388
187291
UK
62101
61078
60281
60312
56250
53400
54561
54423
50324
44666
41612
39214
37093
34691
32828
70182
73421
76509
84175
90234
97891
95533
99241

1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

100513
78425
101328
115221
121509
13511.8
135762
135991
141517
150623
165730
191621
210897
227708
256195
274398
290238
311062
308954
317609
333373
336096
338107

30318
27360
29072
29593
27810
24703
25254
25015
24575
23946
25290
24686
24427
24977
26119
30997
32323
33076
36464
39855
43419
44357
46349

103831
105785
130400
144814
149319
159821
161016
161006
166092
174569
191020
216307
235324
252685
282314
305395
322561
344138
345418
357464
376792
380453
384456

June 24, 1995

Total

(R)

._______ Patents Granted______
Total
(NR)

47073
55988
51515
51501
50643
44603
44162
41383
40979
30605
37152
39225
33896
32872
38364
39554
38124
43518
40497
50185
47393
51184
52254

17354
22328
23293
22638
25632
25391
26074
23886
25123
18248
24675
26545
23993
23990
28837
32107
32736
39437
37427
45354
42973
45330
45189

64427
78316
74808
74139
76275
71994
70236
65269
66102
48853
61827
65770
57889
56862
67201
71661
70860
82952
77924
95539
90366
96514
97443

10343
10376
10116
9357
8971
9120
8855
7722
8464
4182
• 5158
6076
4686
5655
4442
6087
5403
4609
4447
4234
4361
4492
4642

30652
31178
32678
30487
28837
31569
30942
28827
32359
16618
18646
16848
24904
22599
14425
28393
27526
24050
25117
26663
27818
29582
33185

40995
41554
42794
39844
37808
40689
39797
36549
40823
20800
23804
22924
29590
28254
18867
34480
32929
28659
29564
30897
32179
34074
3782

21404
24795
29101
30937
30873
36992
32465
43047
37648
34863
38032
42080
4223
45578
51690
42323
51276
54087
47912
54743
50370
30453
78994

9475
11652
12353
11391
8753
9736
7852
9561
7856
9241
8074
8824
8378
9123
10110
7777
8624
8313
7388
8558
9031
5647
13106

30879
36447
41454
42328
39626
46728
40317
52608
45504
44104
46106
50904
50601
54701
61800
50100
59900
62400
55300
63301
59401
36100
92100

1505

Ill
Effectiveness of Indian Patents as
Competitive Tools: Cases of
Biotechnology and Pharmaceuticals

Table 5B: Number of Afpucations ano Grants of Patents in Selected Countries, 1976 - |

(R)

(NR)

Total

(R>

Patents Granted
(NR)

Germany
10395
61705
30640
10815
60401
30154
11581
58492
28184
10895
55184
24305
9826
48583
19900
6537
46579
16738
8279
47826
17158
10709
47103
15445
11402
45209
13225
13215
83103
43478
15347
86108
45233
16194
88481
47501
15704
95998
53126
16904
102427
59162
16569
110349
66459
16756
109187
65783
17833
115209
69298
France
8420
39890
28419
8361
39978
28167
8083
37137
25692
6846
32174
20871
8438
27989
16989
6855
24668
13723
7764
22242
11561
7323
21176
10029
7651
20200
8864
56114
9835
42602
9362
58848
44929
8523
62577
47921
8822 .
68384
53463
8301
74942
59474
81884
8923
66177
9221
79075
63256
8462
82038
66060
Denmark
208
5901
5080
200
5887
5055
243
5884
4946
250
5540
4645
192
5569
4605
5830
163
4745
224
5801
4706
6087
180
4920
212
6278
5312
200
8293
7376
8907
186
7871
8760
212
7670
344
11214
9883
10900
339
9561
364
39447
37659
39764
301
38035
44351
363.
42507
Republic of Korea (South Korea)
191
3261
1825
104
3139
1962
4015
133
3026
4722
258
3688
5070
186
3829
232
5303
3984
5924
274
4368
6394
245
4795
8633
297
6636
11794
349
9092
458
14121
10479
596
18836
13964
22790
575
17091
26656
1181
19635
2554
31387
22304
36154
2553
22899
3570
40157
24200

TiiI.tI '
—-

10570
20965
1976
31065
10934
The effectiveness of the patent system can
217-lv
30247
1977
11933
be partly measured by the number of patents
23514
30308
1978
1
1639
225 vi
30879
1979
taken out within the country and abroad and
10362
20188
1980
28683
by the use of patents within the country. In
6892
13429
29841
1981
our earlier paper we indicated some of the
8027
30668
16306
1982
10204
20913
factors which affected adversely the
31658
1983
10356
’
21758
31984
1984
utilisation of patents in India [Bagchi,
20162
33377
1985
39625
Banerjee and Bhattacharya 1984:300-02],
23648
38995
40875
1986
The situation has not improved since then.
23703
39897
1987
40980
23186
The data on applications by Indian nationals
38890
42872
1988
25329
42233
1989
43265
for patents abroad (Table 7A) and patents
26291
42860
43890
1990
granted to them by foreign countries
26434
43190
43404
1991
(Table 7B) reveal that India has a poor
28687
46520
1992
45911
record in this field in comparison with most
21334
29754
11471
1976
developed countries. The patents applied for
22684
31045
11811
1977
by Indian nationals abroad are only a fraction
22447
30530
1978
11445
of patents applied for by them at home, and
17772
24618
11303
1979
19622
the patents granted are an even smaller
28060
11000
1980
14622
21477
10945
1981
fraction: the proportion of patents granted
16180
23944
'1982
10681
to those applied for abroad seems to have
17720
25043
1983
declined rather than risen over time. There
16015
23666
1984
11333
27695
37530
are several reasons for this. One of them is
13512
1985
26187
35549
13919
4-1986
certainly the costliness of procedure for
21890
30413
14656
1987
taking out patents abroad: it generally costs
23134
31956
14921
1988
US S 1.000 or far more for completing all
24578
32879
1989
15468
35149
26226
the formalities in the US' and few cash15707
1990
355X|
26360
15819
1991
strapped government laboratories (which arc
3821
29753
15978
1992
major holders of Indian patents among
nationals) are prepared to engage in such a
2068
2276
821
1976
2097
1877
venture. Secondly, of course, the statistics
832
1977
21.30
1837
938
1978
also reveal the poor competitive spirit (and
214 1
189!
895
1979
strength) of even the few Indian firms or
1645
1453
964
1980
organisations which consider it worthwhile
; 776
1439
1085
1981
i v In
1530
to take out patents in foreign countries.
1982
1095
9
7
6
1983
1167
For a slightly closer look at the worth of
1089
877
966
1984
Indian patents, we have used the work of
1054
854
1985
917
a number of investigators attached to the
958
772
1036
1986
1129
917
CS1R and NISTADS in the field of
1090
1987
2815
2471
12331
1988
biotechnology [Gupta and Subbaram 1992;
2616
2277
1339
1989
Karki and Garg 1993]. Biotechnology in the
2376
2012
1788
1990
2609
sense of purposive use of biological
2308
1729
1991
3773
3410
organisms by human beings is, of course,
1844
1992
as old as the domestication of animals and
288
1976
1436
I the practice of agriculture. However,
274
170
1177
1977
427
biotechnology in the modern sense of
294
1978
989
1161
deliberate interferencein the basic structures
1034
1979
1632
1446
1241
1980
of biological organisms including their
1576
1319
1981
constituent cells and genes dates from the
2335
1556
1982
period after the second world war and the
2188
1599
1983
2068
vistas of genetic engineering opened up by
1984
1997
1919
2702
1985
the successful modelling of the genetic
1436
3642
1986
structure of the DNA molecule by Francis
1734
4872
1987
Crick and James Watson in 1953. The
1599
5699
1988
2791
intensive commercial exploitation of genetic
.
7021
1989
5208
9083
1990
engineering started in US in the 1970s. The
6138
13255
1991
beginnings of the university-industrial
6932
15957
1992
complex [a phrase due to Kenney 1986] in
s only the
1 (R) = Residentsand (NR) == Non Residents. 2 Until 1989.'Germany mean
biotechnology can be dated to the foundation Notes'
Federal Republic of Germany (FRG). However, since October 3. 1990 uen 17.';
of Genentech in the US in 1976. (Fransman
unified. But only after May 1, 1992 was the law of Germany extended to the
199! :5]. Soon, scores of firms had been set
Sources: 1 World Intellectual Property Organisation (WIPO). Industrial Property Mauwup with the help of risk embracing venture
various issues
WIPO.
2 WIPO, 1983: 100 Years PrvlecUan of Industrial Property Statistics. Geneva.
capital and the US government and courts

1506

Economic and Political Weekly

.
oa 1995
June -«•

rewarded all that effort by recognising the
patentability of life forms and thus creating
new barriers against the diffusion of the
patented inventions [Kenney 1986; Feller
1990].
In India, despite the creation of a much
acclaimed centre for biotechnology during
the last phase of the prime ministership of
Indira Gandhi, research in or commercial
exploitation ofbiotechnology ha> had a rather
poor record and India has fallen behind most
advanced market economics or the
burgeoning economics of East Asia in this
field also. Patent citation statistics used by
Gupta and Subbaram (1992) and Karki and
Gargi (1993) do nothing to dispel this
impression.
Karki and Garg (1993) based their
evaluation of the worth of Indian patents in
the field of biotechnology filed in the US
n citations given in the Science Citation
ir/er. This is again a selection and imperfect
method of evaluation but it gives some
indication of the degree of potential
international competitiveness of Indian
patents in this particular field.
The field of biotechnology in the study
by Karki and Garg was broadly defined to
include inventions broadly related to
"processes for the production of drugs,
medicines, biocides and food, including the
processes employing the use of micro­
organisms" [Karki and Garg 1993:167].
We have to remember in this context that
the Patents Act of 1970 docs not permit the
patenting of products or of living organisms,
invented or otherwise.4 In the field of
biotechnology thus defined, there was a
total number of 1,049 patents filed in India
over the period 1972-1990. Of these 750
were filed by foreigners (413 patentees)
and only 299 (about 28 per cent) by Indians .
'113 patentees). Eighteen multinational
^kupanies held about 40 per cent of the
^Breign patents, whereas in the case of Indian

e

1

patents public research organisations held
about 45 per cent of the patents [Gupta and
Subbaram 1992]. A scrutiny of the time
pattern of Indian-filed patents reveals no
upward trend. However, there was a spurt
over the period 1987-90; in four years 94
Indian patents in biotechnology were filed;
and in the three years of 1975-77,62 patents
had been taken out. Otherwise on an average
lOto 15 patents were filed by Indians in the
field of biotechnology during the period
1972 to 1986.
Among foreign countries the US and
Japan together accounted for 325 patents
filed.’ but in their case and in the case of
all foreign countries there is a distinct
downward trend in the number of patents
filed [Table 1 in Karki and Garg 1993:167],
Within the field of biotechnology, out of
the total of 1,049 patents the largest number
of patents (378 or 36 per cent) occurred in

•

the pharmaceuticals subsector, followed

;

I
...
|
■
j
I
j

|
,
I
■

Economic and Political Weekly

by the number belonging to unclassified
‘others’ (359 or 34 per cent) and then at
some distance by the number of patents (139
or 13 per cent) belonging to food industry

[Karki and Garg: 168. Table 3 J. These figures
give some indication of why the foreign
drugs and pharmaceuticals lobby.was so
active in trying to overturn the Act of 1970

Table 6A: Number of Patents Applied for bv Nationals
in Home and Foreign Countries, 1982 - 1986
Patents Applications by Nationals in_____
________ Foreign Countries________
Home Country
1984
1986
1982
1984
1986

Countries

1982

USA
UK
Japan
FRG
France

63316
20530
210897
30668
10681

Countries

________________ Patents Granted to the Nationals in___________________
Home Country
Foreign Countries_________
1982
1984
1986
1984
1986
1982

USA
UK
Japan
FRG
France

33896
4686
42223
8279
7764

61841
19093
256195
31984
11333

65487
22892
290238
40875
13419

69687
15865
27201
36841
14725

67197
16712
36505
39799
15502

140142
36284
71726
93523
37167

Table 6B- Number of Patents Granted to Nationals in Home and
Foreign Countries, 1982-1986 •

38364
4442
51690
11402
7651

38124
5403
51276
15347
9362

56179
11859
19329
35050
15133

56510
10496
24328
35141
12920

' 69266
20436
36536
50356
22306

Note: FRG = Federal Republic of Germany (at present Germany).
Source: WIPO : IPS. various issues.

Table 7A: Number of Applications for Patents from Indian Residents to
Foreign Countries, 1976-1989

Years

UK

USA

1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989

9
25
14
14
9
14

39
27
24
25
23

5
17
25
15
11
13
24

20
15
30
25
36
26
41
50

FRG

4
6
]
—
3

17
11
6
12

France

9
2
2
I
1

Japan

Australia

6

1
9
2
7
3
3
1
[
4
1

7
4
6

6
4
6
I

12
2
18
10
>0
14
10
25

12
]|

9
8
5
5
14

Canada

3
4

2
2
8

Total*
81
93
106
64
69
90
61
58
152
150
135
101
123
284

Table 7B: Number of Patents Granted to Indian Residents in Foreign Countries. 1976-1989
Years

UK

USA

1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989

17
12
10
5
3

18
17
17
15
10
6

10
6
9

14
12
10
18
12
14
14

5
2

FRG

France

1
2
3
1
j
i
5
4
9
6
2

8
5
1
—
!
2
—
4
I

2

Note: * Total includes other countries also.
Source: WIPO : IPS. various issues.

June 24, 1995

Japan

Canada

Australia

Total*

1
I
—
—
3
3
2

14
8
3
6

2
6
I
]
2
9
2
]
- •
1

76
63
55
40
50
53
40
50
38
58
62
48
64
41

—
I
1
—
9
1

5
4
5
5
4
2
4
1

5
1

saving bulk drugs, along with a five-year
and bring in the TRIPs provision of the new
exemption from price control for the newest
GATT treaty signed on December 15,1993.
drugs, strengthened the position of Indian
Tojudge the relative importance of Indian
companies. Quality control, professionalised
patents in the international context. Karki
management and R and D gave the domestic
and Garg analysed the patent citations for
firms a competitive environment; they
five successive years from the date of first
began to perform well even in the export
publication. They found only six citations
markets. According to one recent study, the
of Indian patents, of which three were filed
by the CSIR. two by the Central Council of domestic companies could control 70 per
cent of the domestic formulations market
Research in Ayurveda and Siddha and a
and 85 per cent of the bulk drugs market
sixth by an individual (P Khanna). However
poor the record might be as judged by this . and accounted for 85 per cent of the exports
of drugs (Business India, December 5-8,
measure, it still underlines the importance
1994, p 55). In another study, covering the
of utilising the resources of the CSIR and
period from 1989-90 to 1992-93 it has been
of paying more attention to the inheritance
found that in Indiatheleading pharmaceutical
from the traditional medical sciences of India
companies (42 companies) did well both in
and to the enormous stock of biological
terms of sales and profits [Bandopadhyay
resources occurring in nature in India.
and Das 1995]. It was also observed that the
The Indian drugs and pharmaceutical
domestic firms did better than MNCs both
industry is not alone in using patents as
in terms of rate of growth of sales and profit
competitive instruments. For example, in
margins (CapitalMarket, December5,1993,
the UK,, the pharmaceutical industry
pp 12-13 and Nachane 1995:263).
intensively exploited the patent system.
Barring thecaseofpenicillin, most antibiotics
On the basis of the GATT agreements,
product patents with a life-span of 20 years
and other new drugs were patented by such
would come into effect in India within the
firms as Pfizer, Parke Davis and Burroughs
year 2005, if not earlier. Several authors
Wellcome and the patents were used to
have discussed the possibly adverse impact
increase their competitive power or defend
of the new regime on the price and levels
entrenched positions. These firms have large
of production of drugs [Dhar and Rao 1993,
R and D outfits of their own and the US and
Thomas 1993; Prasad and Bhat 1993;Keayla
British firms captured a large size ofoverseas
1994; Sahai 1994], With the imposition of
markets by using patents and marketing
new intellectual property laws along with
strategies [Taylor and Silberston 1973:
chapter 10; Mamdani 1992:3-4], Pursuing
the progressive delicensing of drug
production
and decontrol of drug prices
a different strategy in the early 20th century
carried by the central government, there is
such as confiscation of many German patents
and blockading the markets of the western
every possibility that Indian companies
would face a situation close to the pre-1970
companies, Japanese firms were able to
period. How far the domestic firms will be
capture large markets for drugs and
pharmaceuticals [Banholomew, 1989:231 ].
able to swing the pendulum in their own
In British India, in the absence of patents
direction would most likely depend on the
for indigenous medicines (particularly
capabilities of the local firms on several
fronts. They might, for example, explore
ayurvedic), foreign pharmaceutical firms
markets for generic products whose patents
seized most of the modern pharmaceutical
have expired, try and improve the levels of
markets and thus they destroyed many of
the effective domestic pharmaceutical
R and D particularly in treatment of diseases
typical to tropical countries (where Indian
businesses [Bala 1991]. In the post­
independence period the inconsistencies of companies enjoyed traditional superiority)
and expand the production of the drugs in
government policy (particularly with regard
which India enjoys comparative cost
to R and D) often proved damaging to the
competitive strength of the local business
advantages. The domestic firms might also
units (Chaudhuri 1984].
collaborate with medium- and small-sized
foreign companies in order to get access to
However, the Patent Act 1970, through
its provision of process patenting for a short
markets in other countries.
Uptil now, around 7 per cent of the total
span of time (five years from the date of
sealing) rather than the right for product
patents granted in India have been related
patenting for a full length of time (i e, 14
todrugormedicines (Table8). If weexamine
the numbers of patents for processes of
years), gave the Indian pharmaceutical
manufacture of food, drugs or medicines
Industry a competitive edge over the rival
foreign companies. High tariff rates bn bulk
(which are valid for seven years from the
drugs and basic chemicals and the date of application) we observe (from
Table 9) that every year roughly 30 to 50
compulsion to develop alternative process
patents (in numbers) were granted to Indians
engineering skills helped the domestic firms
in these fields. If the domestic companies
to develop qunufacturing capabilities and
cannot develop proper infrastructure and
help them produce the relevant products at
marketing powers to utilise those patents
a cheaper cost from the basic stages. The
which they consider to be commercially
drug price control policy for major life­

1508

viable, then it would be very difficult for
them to gain competitive strength. The
problems have become further complicated
with the broadening of the definition of
'utilisation of patents’ afterthcGATT agreemenl; no penalties can generally be impose^
on the patentees just for non-use of patent
in a particular country, if it is being used at
least in any one country which is a member
of the World Trade Organisation (WTO)

IV
Lacklustre Performance of India’s
Innovation System
The Indian patent system is only a part
of the innovation system of the country.
The latter would include all those processes
and institutions which would aid or hinder
learning by doing, learning by using,
Table 8: Number of Patents Related to
Drugs or Medicines, India, 1986 -1994

Years

Patent
Applications

Patent
Granted

1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94

214 (6.13)
198 (5.73)
221 (6.14)
216 (5.90)
258 (6.86)
323 (9.09)
234 (6.75)
273 (7.06)

185 (8.70)
124 (5.89)
300 (8.86)
146 (7.72)
87 (5.84)
118 (7.04)
94 (7.39)
145 (8.30)

Notes: 1 Figures in brackets are in percentage
of total patents applications and
granted respectively
2 Separate lists for Indian and foreign
patents are not presented by the patent
office.
Source: Patent Office: Annual Report.
1990-91 onwards.
Table 9: Number of Patents Granted to the
Methods or Processes of Manufacture or
Food, Drugs or Medicines in India. ■
1994
1980-

Years

Indian

Total

1980-81
82
198183
198284
198385
198486
198587
198688
198789
198890
198991
199092
199193
199294
1993-

26
31
38
29
29
17
50
40
58
46
34
45
21
58

HI
121
148
HI
95
155
198
139
344
166
128
l0°
115

These patents are valid for 7 years from
the date of application or 5 years from
the date of sealing of the pate”
whichever period is shorter (s«
section 53(lXa)ofthe Patent AcL 19/W
Source: Patent Office : Annual Report, various

Note:

Economic and Political Weekly

June 24

incremental innovations on the shop floor,
component of that system is not persuasive
was in advance of South Korea down to the
the flow of adaptive innovations, locally
because in respect of the degree of
1970s. In 1970-71. Indian expenditure on
government regulation or the prominence of
innovated technologies and their use. and
R and D as a percentage of GNP was 0.35
the public sector, South Korea compared
the diffusion of productivity raising changes
per cent, way below the I per cent of GNP
well with India for most of the period
in general. There is plenty of evidence of
Mahalanobis had pleaded for in (he late
covered [Bagchi 1987; Ainsden 1989;
the malfunctioning of the Indian innovation
1950s |GOI 1994:50]. But at that time.
Haggard 1990; Wade 1990; Singh 1994:
system in this larger sense, especially in the
R and D expenditure as a proportion of
Lee 1995; Bcssant and Kaplinsky 1995].
non-agricultural sectors of the economy.
GNPai 0.34 percent was marginally below
There is also little evidence that the economic
The contrast between the malfunctioning
that of India (Bagchi 1987. 551. By 1982,
liberalisation process which received a strong
of the innovation system in the Indian
however, the percentage of R and D
impulse from 19857 did anything to improve
economy and its potential for synergistic
expenditure to GNP was already 0.95 in the
the innovational or technology absorption
contribution to the growth in productivity
case ofSouth Korea, whereas that percentage
record of Indian industry. The increase in
and in income can be easily illustrated by
was not reached in (he case of India until
firm size, increased foreign competition or
1986-87. In the Indian case, the
taking the case of the South Korean economy.
increase in the foreign equity component of
As in most other areas of modern
corresponding proportion marginally
capital invested in India were expected to
increased to 0.96 per cent in 1988-89 and
manufacturing and associated activities.
stimulate R and D activities and thcirquality.
South Korea was a late starter compared
then slipped to 0.89 per cent in 1990-91
On a study of the record during the years
(GOI 1992:50]. In the case of South Korea.
with India in setting up any kind of innovation
1985-1991 it was found, however, that
{he percentage of R and D expenditure to
system. For example, while the roots of the
"foreign equity [was] negatively associated
Indian CSIR go back to the second world
GNP had gone up to 1.9 per cent by 1988
with R and D intensity" (Alam 1993:52]
war period, the South Korean equivalent of IGOI 1994:380].
and firm size and increase in degree of
the Korea Institute of Science and
The contrast between India and South
competition through a greater degree of
Korea in respect of the private sector
Technology (KIST) was not established until
opening up of the foreign trade sector had
contribution to R and D expenditure is
1967 |Bagchi 1987:53]. Once it was set up.
no discernible impact on R and D activities.
equally stark, and it could be argued that
however, the South Korean government
On the contrary, a larger import of raw
look decisive steps to link up the KIST and
the failure of the Indian private sector to
materials and components through the easing
its successor. Korea Advanced Institute engage in R and D activities is a major factor
of the foreign trade regime, was also
Science and-Technology (KAIST). with
behind the poor performance of India’s
"negatively related with R and D activities”
innovation system, including (he patent
manufacturing units. These institutes were
system component of (hat larger system. In
(Alam 1993].
from the beginning mission-oriented, and
There is a provision in the Indian Patent
were expected to earn most of their income
1970-71. private funding of R and D
Act 1970 that every patentee and Ijvensee
from research contracted for with producing
accounted for less than 10 per cent of total
should regularly (after six months) keep the
units. But the latter were reciprocally
national R and D expenditure in India. By
Controller ol Patents informed about the
obliged to produce clear programmes for
1980-81 it amounted to about 14 per cent
actual utilisation or working of patents
absorption and adaptation of technology
ofthe national R and D expenditure, and in
(section 146(2) of Patent Act 1970). But in
1990-91 it fell short of that 14 per cent figure
imported from abroad and were therefore
reality, no compulsion was ever used to get
obliged to set up their own R and D units
[GOI 1992:49]. In contrast, in South Korea
or to go to a publicly sponsored R and D
such information from the patent holders
in 1970-71. private funds already accounted
even at the lime of renewal of patents. Each
set-up for chalking out a technology
for 33 percent of total R and D expenditure;
absorption path. By contrast, while
by 1982 private sources contributed 60 per year only about one-fourth of the patents in
force, contained information about the
recommendations were made by a number
cent of the national R and D expenditure
of review committees set up to examine (he
and by 1987 private funds accounted for status of the patents (whether they are
being utilised or not). So exhaustive data
working of CSIR laboratories effectively
80 percent of the national expenditure on
linking those laboratories up with the
R and D (Kim 1993:370],
on patents worked were never available.
activities of manufacturing units, the latter
The argument that excessive government
On the basis of the data available, it has
been found that only around 3 to 5 per cent
were not obliged to chalk out a programme
regulation or the excessive weight of the
of total patents in force were actually
lor absorbing or adapting imported
public sector in the economy are responsible
technology. (This remains the fly in the
worked in India (Table 10).
for the poor performance of the Indian
Again, in India a large number of patent
ointment spoiling the effectiveness of the
innovation system or (he private sector
Abid Hussain Committee recommendations
s
W
orked
in
I
ndia
under Different Fields. 1985-1992
T
able
10:
Nt
much
of
P
aient
obliging CSIR laboratories to cam 40 per
cent of their incomes from contract
Electrical
Total
Mechanical
Years
Chemical
research.) In fact, firms regularly opted for
and General
a foreign collaboration route, bypassing
3*>5
169
70
86
1985
various requirements regarding ceilings on
102
604
395
107
1986
payment of royalties for licences of patents
89
318
558
1987
or manufacturing blueprints obtained from
118
301
155
1988
foreign firms I Bagchi and Dasgupta 19811.
1989
Moreover. South Korea did not permit the
80
38
1990
growth of a Trojan horse in the form of
40
1991
210
93
52
a large number of foreign-comrollcd firms
63
156
271
1992
with only a marginal interest in the
Notes: I Annual Reports of the Patent Office did not present separate lists for Indian and foreign
indigenisation and adaptation of imported
patents worked.
technology?
2 Patents holders often did not disclose information regarding the working of patents though
One of the key aspects of a national system
lhere is a provision in the Patent Act to dp sp (sec Section 146(2) of the Patent Act 1970),
of innovation is the amount and quality of
so the list might not be exhaustive.
expenditure on R and D. Here again. India
Soio'cc: Same as Table 8.

Economic and Political Weekly

June 24, 1995

1509

applications are kept wailing, pending the
submission of the final examination report.
According to the Annual Report of the Patent
office only around 25 to 30 per cent of the
total patents to be examined in a year arc
actually being examined: (one reason for
this is the insufficiency of qualified staff in
the Patent Examiner section). Every year
around six to seven thousand patent
applications are being carried forward to the
next year for a future examination. Thus in
the process, the innovations often lose their
competitive edge and the patent applicants
often lose interest in obtaining their patents.
In India normally it takes 2 to 4 years to get
a patent finally scaled, even when applicants
are persistent. These data underscore the
lack-lastre performance of the Indian patent
system as an instrument of innovation and
competitiveness.
The success or failure of the innovation
system has ultimately to be judged by the
extent to which it promotes growth of
producti vity and national income per capita
in an economy. But within a capitalist system,
the use of R and D and patents for protecting
national markets and penetrating foreign
markets arc important criteria which can be
used for judging the effectiveness of the
innovation system of a country. By these
criteria the Indian patent system introduced
in 1972 can claim only a limited success at
best. This is not to deny the significant
advances made especially in the area of
drugs and pharmaceuticals obtained with the
help of the Patents Act of 1970 [see, for
example, Kcalya 1994]. This is also not a
suggestion that the scuttling of the 1970
patent system on the dictates of the new
World Trade Organisation or a further
crippling of the national innovation system,
through the sacrifice of national autonomy
in policy-making according to the IMFWorld Bank gospel, is a way forward. The
enquiry should bedirectcd towards designing
a national innovation system of which a
rationally constructed patent system will be
a major component.
Certain simple measures can be suggested
to improve the working of patents as
competitive weapons. They would include
wide and intensive use of the patent
information network and efficient
dissemination of such knowledge both
among large and small firms: extension of
service of the patent office for givingopinion
and suggestions to the domestic researchers
(or research units) about the scope for
patented inventions in specific fields;
employment of more professionals who are
able to read and write patents properly and
obey official formalities; and creation of
funds for development- of patents and for
management and marketing of domestic
patents. Active and well-maintained linkages
among research institutions, industrial
organisations and patent office are also

fees which are payable after three years and
attorney fees which are again exorbitant, if
we include all such fees the total cost might
cross even US $ 10.000. (Sec the Manual
for the Hand(inn ofApplications for Patents
Designs and Trade Marks throughout
World, (in short. Manual), Amsterdam
Octrooibureau Los cn Stigter. Supplement
No 70. April 1994. Section US. pp 29-35 and
also Jacobs 1994, pp U54-U59.)
The application fee for patents in Japan (since
January 1988) is 14.000 Japanese yen (or
about US S 110 at the 1988 conversion rate)
and the patent examination fee is 58.(XX)
Notes
Japanese Yen (or about US S 455). However,
in Japan patent renewal fees arc quite high
[Funding and assistance with intellectual inputs
The fee is about US $ 500 after nine years and
of the members of the International Development
then it is doubled after every two years, thus
Studies unit of Roskilde University Centre,
the fee becomes about USS 4,000 (or 512,(XX)
Denmark, arc gratefully acknowledged. In
Japanese Yen), if anyone wants to keep the
particular, wc are indebted to discussions with
patent valid up to 19 or 20 years. Moreover.
Laurids Lauridsen and John Martrinssen, who
the charge will be 10 per cent more (in yen)
have been collaborating in a joint research project
for each additional claim for invention. (See
on intellectual properly rights with the Centre for
the Manual Supplement No 58, September
Studies in Social Sciences, Calcutta. We are also
1988, Section on Japan, pp. I -18 and the IMF,
thankful to the Patent Office Library, Calcutta,
International Financial Statistics for the
conversion rates.)
for its help in gathering the data.]
*
However, in India the fee for patent registration
is negligible. Until 1992 it was within
1
In Japan, unless the applicant or a third party
makes a written request within a period of
US $ 20. In 1995 the fees were revised, still
one can take out patents in India at a cost
seven years from the date of filing of patent
within US S 30. However, these exclude the
applications, the patents will not be examined;
then the patent applications will be treated as
attorney fees which vary generally from US
S 100 to US S 300 depending on the nature
withdrawn. However the applications could be
converted into applications for utility models
ofcomplications ofthe patents (the information
is based on interviews with the Patent Agents
(minor invention). Similar types of rules are
followed in Germany also. In South Korea the
and the Patent Office : Annual Report).
applications could be left unexamined for five
4
However, under the Budapest Treaty 1977
years [Jacobs 1994: J-8.G-9, K-21 ]. in addition,
which is followed by several countries, viz.
in Japan, through a provisional publication of
US. UK, Germany. France, Japan and South
patents (Kokai) each patent application is laid
Korea deposits of micro-organisms are
open to the public inspection after 18 months
protectable. The US Patent and Trade Mark
Office (PTO) determined that’ non-human
froin the date ofapplication. Then the applicant
enjoys the implicit right to get compensation
multi-cellular living organisms including
from any third party who is commercially
animals are patentable (US Supreme Court
Judgment 1980, Ananda Chakraborty case).
working the invention sought to be patented.
However, the right can be exercised only after
However, in India there is still no national
facility for depositing micro-organisms.
the post-examination publication of patents
5
See Fransman and Tanaka (1995) for evidence
(Kokoku). But even then the law is strong
of the Japanese advances in biotechnology and
enough to protect the applicant against
Office of Technology Assessment (1984) for
infringement by others.
2
Utility models are minor innovations. They
the US data.
6
We have used the case of South Korea for
also i ndicate any novel device relating to shape,
illustrative purposes only. With only slight
construction or assemblage of articles. The
changes, the proposition about the catchingregistration laws are less strict here. The rights
up in national systems of innovation would go
conferred by utility models are similar to those
through in the eases of the People’s Republic
conferred by a patent, however utility models
of China and Taiwan as well [Bagchi
are protected for a shorter duration. Several.
1.987chapters 3 and4; Haggard l99O:chaplc«
nations such as Germany. Japan, Spain and
4 and 8; Wade 1990:chapters 5-9; Hong 199-.
South Korea give additional protection to these
Kim 1993; and Hou and Gee 19931.
utility models.
For the details regarding such liberalisation
3
Patenting as such is an expensive business in 7
policies see the Government of India. Rcumunu
the US. It often requires professionals who can
successfully draft the patent right which should
Survey. various issues since 1985.
be protected. However, in the US there is a
two-tier system regarding the payment of fees
References
for patents. The small entities, i e. independent
Alam, Ghayur (1993): Research andDeveh’P,n*ft
investors, small firms.with less than 500
bv Indian Industry: A Studv "J 1
employees and non-profit organisations
Determinants of Its Size and Scope. Cem generally enjoy a concession of 50 per cent
for Technology Studies. New Delhi.
regarding payment of such fees. However,
Amsden, Alice (1989): Asia's Next Giant.- •’«
the status must be established in respect of
Korea and Late Industrialisation, W
each patent applications. Still the total fees
University
Press. New York.
,
for patent registrations and maintenance are
Bagchi. A K (1987): Public Interx-enaon^
very high. In April 1994 the filing fees was
Industrial Restnicturinu in China, I'u w
US $ 355 for small Entities and US $ 710
Republic
of
Korea.
ILO-ARTEP.
New
1
for others; patent issue fees were US $ 585
Bagchi, A K. P Banerjee and U K “^1^|alion
for small entities and US $ 1170 for others.
(1984): -Indian Patents Act and Its
These exclude the renewal or maintenance

necessary for achieving the implicit or
explicit objectives underlying the creation
of a patent system. In-house patent search
service, effective screening of unworked
patents and lapsed patents to retrieve the
usable technologies, and impartingof training
to utilise international patent information,
could be considered further as some of the
vital steps to strengthen both the institutional
support and innovative environment of the
firms.

Economic and Political Weekly

Junc

TRIPS NEGOTIATIONS IN GATT - MAIN ISSUES
DR. ABDULQAWI

A. YUSUF, TECHNOLOGY PROGRAMME,UNCTAD

PRESENTATION AT THIRD- WORLD PATENT CONVENTION
HELD ON 15TH-161TT MARCH, 1990-------------------- ~

Distinguished participants and friends, I will hold this Session. It is very important
Session. The issue of Intellectual Property has been discussed for quite a long time.

For the developing countries, we all recognise the Intellectual Property Right, but
for some items which are very important to the people's life, such as pharmaceutical

brand and animal varieties, agriculture and so on and so forth and non-patentable.

As we have listened in the morning session that there are so many aggressive
moves launched by the developed countries to press us to amend our Patent Law

for their interest.
One of the important moves is to bring the Intellectual Property issue into the

GATT Negotiation in the topic of TRIP, Trade Related international Property
Negotiations. Therefore, in this session we are very pleased to have
Dr. Abdulqawi Yusuf from the Technology Programme, UNCTAD to tell us about
what is going on in the Trade Negotiations in GATT. Let me invite Mr.Yusuf,please.

Dr. Abdulqawi Yusuf, Technology Programme, UNCTAD, Geneva - Thank you
very much, Madam Chairperson and Mr. Co-Chairperson, it is a very daunting

task for me to speak to you about the TRIPS Negotiations in the presence of
some of the major actors in those negotiations. Who have been involved in the
Uruguay Round since its very beginning like Ambassador Jamal and Ambassador
Zutshi.

But I will try to give you an overview and a summary of the main issues

that are at stake in those negotiations, especially, as seen by an observer.

I will, first of all, briefly address the genesis of these negotiations and then move

on to the proposals that have been presented by the developed countries in order
to realise the goals that they have fixed for themselves during these negotiations.
I will then set out the implications of these proposals for the developing countries
and the reactions or the responses provided by them.

The Punta del Este

Declaration on the Uruguay Round defined two objectives, as far as the TRIPS
negotiations were concerned. The first objective was to clarify GATT provisions

2

and elaborate as appropriate new rules and disciplines in order to reduce the
distortions and impediments to international trade and taking into account the

need to promote effective and adequate protection of Intellectual Property
Rights and to ensure that measures and procedures to enforce Intellectual
Rights do not themselves become barriers to legitimate trade.

This objective was interpretted in different ways by the participants to the

GATT negotiations. For the developing countries, the main issue was the
clarification of existing GATT principles and GATT provisions on Intellectual
Property in order to ensure that measures and procedures to enforce Intellectual

Property would not constitute a barrier to legitimate trade; whereas the deve­

loped countries put the main emphasis on the account to be taken of the need
to promote effective and adequate protection of Intellectual Property. Thus,
the latter group, argued that the national laws and regulations which existed

in most countries were inadequate, as far as the protection of Intellectual
Property is concerned and that their enforcement was weak.

This applied also

in their views, in the existing international conventions like the Paris Convention
and the Berne Convention, which they had characterised as toothless Conventions.

The second objective was to develop a multi-lateral framework of principles and
rules concerning the international trade in counterfeit goods.

This was an

objective that was shared by all the participants in the negotiations.

The deve­

loping countries felt that they could join an International Code on Counterfeit

Goods and that this objective should receive maximum attention as far as the
TRIPS negotiations were concerned. However, the developed countries, who
first floated this idea in the late 70's and early 80's felt that it was already
outdated and that what was needed now was strong and more effective norms

and standards on Intellectual Property coupled with enforcement, measures. So,
they maintained that a Code on Counterfeit goods was not really the major

objective and should not be the main focus of the negotiations, but that the
elaboration of standards and norms, which would go beyond the existing
Conventions should be the objective of the Negotiations.

This gave rise , of

course, to an animated debate on what would be the main focus of the nego­
tiations and which objectives should be pursued by the participants to the
negotiations.
The turning point of this debate came in April, 1989 with the adoption of the
TNC,

April next, i.e. the Ministerial text of the mid-term review of the MTN

Negotiations.

This turning point vindicated their position held on the developed

3

countries as far as the interpretation of the mandate of the Punta del Estei
Declaration was concerned. It vindicated their position on several points.

First of all, the TNC text of April 1989 listed the TRIPS issues which should
be debated and discussed at the Uruguay Round of Negotiations.

And it listed

these issues as the following :

1.

The applicability of the basic principles of the GATT and of
relevant International Intellectual Property Agreements or
Conventions ;

2.

The provision of adequate standards and principles concerning the
availability, scope and use of Trade related Intellectual Property
Rights ;

3.

The provisions of effective and appropriate measures for the
enforcement of Trade Related Intellectual Property Rights ;

4.

The provisions of effective and expeditious procedures for the
multi-lateral prevention and settlement of disputes between
Governemnts including the Applicability of GATT Procedures ; and

5.

Transnational arrangements aiming at the fullest participation and
the results of the Negotiations.

So, as you can see, the position advocated by the developed countries, which
was to elaborate norms and standards of Intellectual Property ; to establish
effective enforcement measures at the national level for these norms and
standards and to link these two to the Dispute Settlement Provisions of GATT
and to examine the applicability GATT's dispute settlement procedures were actually

confirmed and affirmed in the TNC Declaration or Text of April, 1988.

Two other paragraphs, one on transitional arrangements in order to ensure the
fullest participation to the negotiations or through the results of the negotiations

and the other one on the concerns of the developing countries were added to
this list of issues that should be examined by the negotiators in the TRIPS

Negotiations.

The paragraph addressing the development needs of the developing countries is
couched in a very cautious language and reads as follows :

" That the participants agree that consideration will be given to
concerns raised by participants related to the underlying policy
objectives of their national systems for the protection of
Intellectual Property including developmental and technological
objectives."

Before turning to the proposals presented st> far by delegations, it would be
useful to examine very briefly what exists today at the international level

and what is being sought by the proponents of the new system of Intellectual
Property Rights, which should be negotiated in the Uruguay Round of Nego­

tiations.

What do we have today at the international level ?

As part of an overall system of norms and principles governing Intellectual
Property Rights, we have two sets of Instruments i.e the national laws and

regulations of the countries of the world and the international conventions on

Intellectual Property Rights.

These two sets bf instruments form together

the Intellectual Property System at the international level.

The existing

conventions make provision for the existence of national legislation, which
are different from each other, to enable individual States to design their
legal systems in a way which corresponds to their national interests and to

their technological and economic development objectives.

The International Conventions, to which I am referring here are the two
most important ones, i.e. the Paris Convention on Industrial Property/

protection and the Berne Convention on Copyright. There are a number of
other conventions which deal with more specific objects of intellectual

property rights. These International Conventions have certain common
features.

One basic feature which is shared by all these Conventions is the

principle of national treatment. This principle has been included in the
Conventions in order to facilitate the application of national laws to the
nationals of all the members of the Union in an equal manner in the sense
that foreigners are entitled to the same treatmentas nationals. Of course,

the Conventions themselves establish certain minimum standards which

should be taken into account in the formulation of national laws and regulations,
but they leave much discretion and leeway to the governments to regulate the
acquisition and enjoyment of Intellectual Property Right in a way which is in

consonance with the public interests and public policy objectives of the State
granting such rights to foreigners and to its own nationals. Thus, the

international conventions allow the member States the freedom to determine

the rights and obligations of the property-holder and the level and scope of
protection to be granted. It is, therefore, up to the member States to

lay down the requirements for granting such rights in their national laws
and regulations.

5

The other international instrument which contains some provisions relevant

to Intellectual Property Protection is GATT. GATT contains certain
provisions which are of relevance to Intellectual Property, but which were

primarily aimed at ensuring that the adoption by governments of measures
to enforce laws and regulations on intellectual property rights would not
result in arbitrary and unjustifiable obstacles to international trade. Thus,

the GATT provisions on Intellectual property Rights are of a permissive

nature, in the sense that they allow governments to adopt whatever laws
and regulations they deem necessary on Intellectual Property Rights so long

as those laws and regulations do not constitute an arbitrary and unjustifiable
obstacle to international trade.

This has been the situation up to recently

when the TRIPS Negotiations were launched in 1986.

Now, what are the objectives underlying the TRIPS Negotiations ?

What

is the substance of the proposals that have been tabled by the developed

countries who are the proponents of this new approach to the regulation of

intellectual property rights at the international level.

These proposals would

first of all, imply the adoption of a set of minimum standards and norms of

world wide application on IPRS.

These minimum standards and norms would

be based on the laws and regulations which are at present in force in the

technologically most advanced countries of the world. However, it should be

recalled that to-day's industrialised countries made full use in the past of

the freedom to determine the scope and level of intellectual industries or to
develop local competitive capacity.

According to these proposals, enforcement measures at the national level

would also be based, as far as possible, on those already existing in the laws

and regulations of the most technologically advanced countries. Of course,

when you talk about enforcement measures, you talk about administrative
and judicial procedures and what is being sought here is the worldwide
uniformisation and harmonisation of the administrative and judicial procedures

necessary for the enforcement of Intellectual Property Rights.

The standards norms and enforcement measures established at an eventual
TRIPS agreement would be linked to the dispute settlement procedures

of the GATT and to the framework of rights and obligations on trade in
goods.

Thus, party, which would not apply the obligations undertaken in

an IPR Agreement would be sanctioned for a non-compliance with this

6

obligation and would see its advantages and rights under the GATT
framework withdrawn by other contracting Party, which might feel that
there has been an impairment and nullification of their advantages from an

IPR Agreement. Now, let us look for a moment at the precise nature of

the standards and norms which would form part of an eventual IPR Agreement,
as envisaged by the proposals of the developed countries in the area of patents
since the subject-matter of our discussions here is mainly on Patents.

These proposals would imply the extension of Patent Protection to plants,
plant varieties and animals. They would imply the extension of Patent

Protection to chemical and pharmaceutical products, to food products ;
thus restricting or abolishing totally the freedom that Governments have

enjoyed up to now to exclude certain products from patentability in conformity
with their developmental and technological needs.

With respect to duration,

they would fix a minimum of 20 years duration for patent protection in all

countries.

As regards local working, there would be no obligation on the

foreign patentee to work his invention in the country granting him the patent.

With respect to compulsory licensing, no compulsory licenses would be granted
except on judicial review and according to some proposals, no compulsory

licenses should be granted at all.

These are just some of the examples of the provisions that would in substance
be included in a future agreement on TRIPS in the area of patents. Similarly,
high standards of protection are proposed for trade marks, copy-right and

integrated circuits.

What are the implications of these proposals for the

developing countries ?

As you know, the granting of Patent protection and of

Intellectual Property Rights in general, is based on a tension between two

public policy objectives. On the one hand, the need to provide incentives to
private individuals or enterprises in order to promote creativity and innovative­

ness ; and on the other hand, the need to ensure that the fruits of that

creativity are disseminated to those who could benefit from it in a way that

is conducive to the economic welfare and well-being of the society granting
this monopolistic and exclusive right.

The challenge of the law, therefore, is to strike a balance between these

two public policy objectives and to find the degree of protection most
compatible with the desired social goal. It would then be wrong to

surmise that the objective of providing incentives should take precedence
over the social needs for diffusion of knowledge.

However, it seems that

the proposals now being considered in the TRIPS Negotiations are based on
this assumption suggest that priority be given to the provision of incentives
rather than to the dissemination of technological knowledge. Nevertheless,

the protection of technology is not an isolated issue in itself, but must be

seen along side the access to an promotion of technology and the promotion

of technological innovation. So, as Surendra Patel said earlier, the rights of IPR
owner must be balanced by the obligations of these IPR owners.

Developing

Countries have always placed a major emphasis in their national legislation

on IPR and on Patents, in particular, on adequate disclosure of the patented
product or process, on the local working of such an invention, on compulsory
licensing and on the possibility of parallel imports.

The other major emphasis of legislation in developing countries and up to a
very recent period, in the legislation also of most developed countries, was

the control of the abusive use of IPRs. Governments had the discretion to
lay down the terms of IPRs they grant and the conditions under which these

rights should be exercised.

But this power would be lost, if the present

proposals were to be adopted in an IPR Agreement. There would be no

countervailing limitation on the IPR owners as to how they may use or abuse

their rights. Restrictive practices are wide-spread in licensing agreements,
especially, between enterprises of industrialised countries and enterprises of
developing countries.

An attempt was made in the negotiations on an

international Code of Conduct on the Transfer of Technology to deal international!
with this type of abusive practices so as to eliminate them.

These efforts

have not yet succeded because of the deadlock in the code negotiations.

Since these proposals do not take into account the concerns of the developing

countries, how should they respond to them? I can only give you my own
personal view on this matter.

Upto now we have had two phases of the

TRIPS Negotiations and the developing countries have adopted certain
strategies at each one of these two phases.

The first phase of the negotiation

started with the Punta del Este Declaration and ended with the adoption of
the April TNC Text of 1989 while the second phase was introduced with the

adoption of that text

is still under way.

During the first phase of the

negotiations, the developing countries tried to avoid any substantive nego­

tiations on the elaboration of norms and standards on IPR within the GATT
framework.

They tried to put the main emphasis on the elaboration of a

counterfeit code and on the clarification of GATT provisions on IPRs. They
did not make any detailed proposals on the issues that were under negotiations.

This strategy came to an end with the adoption of the APril TNC text which
spelled out the specific issues to ben'egotiated from that moment onwards, the

developing countries have been trying to underline the basic principles which
should inspire and inform an International Agreement on IPRs in the Uruguay
Round of Negotiations.

However, they have not. yet addressed the bolts and

nuts of such an Agreement in the sense that they have not yet tabled detailed

provisions which could be considered as a counter-proposal to the proposals
presented by the developed countries.

In my view, it is high time that the developing countries presented their own

detailed proposals on the issues under discussion. You may recall that in the
1970's, the developing countries set out to revise the Paris Convention because

they were not satisfied with the provisions of the Paris Convention.

They are

not up to now satisfied with certain aspects of the Paris Convention. Justice
Iyer underlined that this morning. Now they are being asked to adopt norms

and standards above and in addition to the Paris Convention with which they

were not satisfied.

Therefore, they should come forward with a response

based on their national legislation and on the public policy objectives underlying

that national legislation.

Even the April, 1989 TNC Text on TRIPS tfecognizes

the need to take into account such public policy objectives. I believe that
concrete proposals by the developing countries which clearly articulate their

specific concerns in the area of TRIPS are called for at this juncture.

The

developing countries should see to it that any text which emerges if a text
ever emerges from these negotiations, fully reflects their concerns in a most

detailed fashion.

They should strive to have their concerns and aspirations

fully taken into consideration and placed on an equal footing with the proposals

of their partners from the developed world.
Thank you, Mr. Chairman.

_o^|

*.

£>

fl-

cJLoV2- I—X2X2)L

ZD>vv\-*-^-U

MXro-^

^SXYl Xjo^cnT x C\J<JU«jvvMjJl

*JO-e>ns Lvv^

URUGUAY ROUND NEGOTIATIONS

The following report is prepared by Dinesh Abrol, Joint Convenor,
National Working Group on Patent Laws, and is based on
participation in the NGO GATT Steering Committee Meeting in
Brussels from November 28 to December 1, 1990 and the lobby work
during the GATT conference from December 3-8 1990. The report is
presented in two parts.
In part I, the comments deal with the
progress in the Uruguay Round of GATT Negotiations and the
implications for developing countries. In part II, the proposals
of NGO meeting are reported and discussed from the point of view
of the tasks ahead for the National Working Group on Patent Laws
in India.
Part I
The message from Brussels is loud and clear.
The threat of
recolonization for the developing world is not over and has only
been postponed by a few months.
Perhaps, this may also not hold
true for long. The arm twisting by industrialised world will
start soon to force the developing countries to come to terms
with the Geneva Process which is to start again from January 15,
1991.

Non-governmental organisations are very concerned about the
current directions in the Uruguay Round Negotiations.
These
negotiations will deeply affect people's capacity, in the world
as a whole, to decide about their own development in a democratic
and sovereign manner. The NGOs are concerned about the impression
being created that the governments of some countries including
India are bent on destroying multilateralism in trade.
They are
being warned of the choice between a collapse of the system and
triggering of a depression.
There are predictions of gloom and
doom being made.
Developing countries are being threatened of
dire consequences of the bilateral arm twisting which will follow
the failure of the round.
The European community and the U.S.
tried their best to involve the developing countries in sharing
blame for the failure of the round.
Germany held a press
conference and accused India of blocking progress in the
negotiations because of its stand on TRIPS.
Carla Hills of U.S.
met the Indian Commerce Minister, Prof. Swamy and spoke of lack
of co-operation from India on the negotiations on TRIPS and
Financial Services. It is another matter that thanks to the
failure of the U.S. and the European Community (EC) to reach an
agreement on Agriculture, progress in the other fourteen topics
had to be stopped on the last but one day of the GATT conference.
Developing countries marginalised
Right through developing countries were marginalized as
participants in the negotiations.
In many green room (1)
discussions, they were prevented from even being associated with
the drafting of agreements.
In the greenroom on TRIPS, only
after protest, Egypt was allowed to join the negotiations on
behalf of the African world.
The practice of permitting ten

parties each from the developing and industrialized world meant
that less than 10 percent of the contracting parties among
developing countries
were
able to ' participate
in the
final drafting of agreements in the various specific green rooms.
Developing
countries
are
partly
to
be
blamed
for
this marginalisation.
They did not make any concerted effort to
have their voice heard.
There was only one press conference by
the informal grouping of developing countries.
In contrast, the
European Community and the U.S. held an average of two press
conferences per day.
In addition, several individual European
countries were separately holding press conferences.
The
informal grouping of developing countries met only once to
discuss their marginalisation.

Developing countries stand leade.rless
The lack of leadership within developing world has been the main
reason for marginalisation at the Uruguay Round Negotiations.
It
would not be wrong to say that the shadow of April 1989
compromise by India on the subject of TRIPS was still very much
evident on the face of developing world.
It appears that all the
bilateral efforts made by the subsequent government had not
erased the scars left by the decision to agree to discuss the
topic of substantive norms and standards of intellectual property
in the forum of GATT.

In the only press conference held by the informal group
of developing countries, the stand put forward was quite weak.
Although the statement made by Brazil on behalf of the informal
group of developing countries expressed clearly the anguish and
resentment of developing countries, it lacked teeth.
While the
neglect of the concerns of developing countries in the areas of
agriculture, textiles and market access was pointed out, the
field was left wide open to compromisies in the new subjects such
as TRIPS, TRIMS and Services.
The ambassador from Brazil had no
option but to state that "the developing world was disunited on
the new areas.
He had to admit that there were tradeoffs
involved and each area would be examined on its merit by the
concerned developing country.
The lack of leadership was reflected in the absence of a role
played by G15 and G77. G15 met to only discuss the setting up of
its secretariat.
The Uruguay Round Negotiations was not even an
agenda item in their meeting.

Firm leadership needed

Formally speaking, the African world had reiterated firmly its to
opposition to the proposals 'of the industrialised world on the
new areas.
India is publicly standing as a wall on the issue of
TRIPS. Peru, Egypt and many other developing countries are quite
agitated with the way the negotiations', have been handled by the
fellow countries.
They are willing tc make a common cause. But
there is no one to lead developing world.
The developing world

failed in its duty towards its people. If it does not get united
to deal with the threats to its sovereignty and well being. India
should take a firm stand on the interests of developing
countries.

Currently, developing countries including India are prepared to
tradeoff the new areas for concessions in the traditional topics
such as agriculture, textiles, tropical products and market
access
This misfortune was not only discernible in the
conference but this view was also privately discussed everywhere
in the corridors. It is public knowledge that concessions will be
okayed in the area of TRIPS, TRIMS and Services if some crumbs
are thrown in the area of agriculture and textiles to the
developing world.
The people of developing world should thank
the European farmers who have saved them for the time being from
the GATTastrophe

GATT Balance Sheet
To formulate our future strategy, it is necessary to prepare at
this juncture a technical cum political balance sheet on the
important topics.
I deal The topics relating to such as
textiles, tropical products, agriculture,. TRIMS, Services and
TRIPS are reviewed here below with the interests of developing
countries in view.

The key issues in the chairman's text are "integration process",
"product coverage", "growth rates", "transitional safeguards" and
"strengthened GATT rules".
The objective of integration is to
dismantle Multi-Fibre Arrangements (MFA)
and other GATT
inconsistent restrictions in a progressive manner.
The modality
selected for the removal of the MFA restriction in the chairman's
text provides only for a step by step integration.
Immediately,
only 10% of the textile products would be gattified.
The next
15% of the proposed liberalization of textile products would
occur only at the end of ten years.
The proposed next
installment of further 20% liberalization would materialize only
at the end of 15 years. This implies that the chairman's number
provide for 45 percent of the total imports volume to be
integrated into GATT by the last stage.
That leaves 55 percent
to be integrated overnight when the transition period expires.
These figures speak infact for themselves.
During the whole of
the transition period,
if only 45 percent can be agreed upon for
integration, it is inconceivable that 55 percent can be
integrated at the end particularly when it is likely to contain
the core of protection.
It seems to be totally incredible
because the importing industrialized countries are insisting on
including the entire "section XI of the HS code" as the product
coverage of the transitional arrangement. This will bring under
its purview textile raw materials like raw natural fibres, both
processed and unprocessed, which have been outside the scope of
the MFA. This means that rather than gattifying textiles
industrialised countries are expandng
the basket of products
under MFA.

Further, the attempt of EC to classify the products for
restrictions into three categories- most sensitive (43.3%),
sensitive (26.1%) and non-sensitive (30.7%) clarifies also loudly
that the restrictions in the most sensitive group would not be
touched at all during the transitional period.
It is told that
the same situation is
likely to prevail in other importing
countries, particularly in Canada and the Nordic countries where
restrictions are concentrated in the clothing segment.
This
expansion of MFA to include pure silk and natural fibres, to
classify products into three categories and to provide for sub­
product wise quotas rather than global quotas should make the
intentions of industrialized countries quite clear. Those who
have still some illusion regarding the nature of concessions
being accorded in textiles to the developing world including
India should revise their opinion.
The terms to be provided for growth and flexibility (switching
between subproduct categories and time spans in using quotas) is
also an important issue for the developing world. There are also
issues relating to the base levels and whether these should be
first increased, the growth rates on the base levels during the
integration process and the question of minimum growth rates.
There are further questions whether during the transition period,
the present MFA sanctioned selective safeguards,
namely
restrictions based on the source of import should continue or
whether there is need for a non-discriminatory, approach in its
application.

Tropical Products

Although India does not have much direct interest
in tropical
products (addition of new products and tariff cuts),
it should
be made here clear that the offers have been thrown to divide the
developing world.
A recent study completed by UNCTAD indicates
that industrialized countries gain much more by their "revised
offers" for liberalised trade through tariff concessions in
Tropical Products than the Third World Countries. Of the $ 746
million of additional products under the revised offers, only
about $ 245 million would'come from the Third World Countries or
a 1.7%
increase in their exports.
In terms of benefits to the
Third World countries, the effect of revised offers in absolute
terms range from $ 140,000 for Norway to $ 140 million for EEC,
and 0,2% increase in the case of the US to 13.6% for New Zealand.
The imports from the African region would decline by $ 118
million, due mainly to erosion or loss of preferential margins
currently enjoyed by these countries, principally on the EEC
markets.
The Latin American gain, 95%, is mainly on the EC
markets, while Australia (42.1%), EEC (21%) and Japan 20%)
account for the 83% increase from Asia.
The industrialised
countries as a group are the largest gainers from the "revised
offers".
Several factors are responsible for these results.
Firstly, in a product like coffee which alone accounts for 75% of
the trade covered by the "revised offers", the offers of tariff
reduction on an MFN (most-favoured-nation) basis will not create
growth because third world countries already enjoy preferential

rates that in many cases are zero.
Although the tariff
elimination would result
in dramatic increase in imports of
processed coffee, but at least in the short to medium term
stimulation of processing i the Third World is unlikely. Also,
for products also produced in the North, such as cut flowers and
processed products, liberalization offers on the MFN basis bring
benefits not only to the Third World Countries but other too gain
in a big way.
Agriculture
The conflict over what would be substantial and progressive
reduction of support and protection to agriculture in the EC so
as to minimise trade distortion has overshadowed the concerns of
developing
countries.
The
concerns
such
as
food
security\sovereignty, export\ ecological dumping of farm products
from the North in the South and the right of nations to protect
consumers and to ameliorate unemployment, malnutrition and rural
underdevelopment, were completely neglected in the negotiations.

The issues requiring special attention from the point of view of
developing countries on the topic of agriculture are "special and
differential treatment",
"anti-dumping disciplines",
"special
safeguards" "speed and rate of cuts", "scope and specificity of
product coverage", "criteria to be used for exemption of certain
products",
"modalities for tariffication and reduction",
"reduction of border protection and export support merely on the
basis of percentage figures or also on strengthened GATT
disciplines and rules and sanitary and phyto-sanitary provisions.
From the standpoint of developing countries, the major issue is
special and differential treatment to Third World countries.
While there is general agreement that this has to be permitted,
but the treatment in what form is yet unresolved. The chairman's
text
and
some
of
the
proposals
and
offers
would
provide derogations only so long as domestic price in Third world
countries is not higher than world prices at border - a price
which infact is politically determined by the subsidised exports

Industrialized countries must reduce their subsidies first to
zero and ask then a reduction in subsidies from developing world
(under whatever name) of the EC, US and other exporters.
The next demanding same treatment on the reduction of subsidies
to the developing countries as to the industrialized world is
totally unacceptable.

There is now overwhelming evidence that the agricultural policies
of industrialized countries, in particular the subsidized dumping
of surplus output, have contributed to a deterioration in export
earning and terms of trade for the south.
In addition, by
diminishing the capacity of the producers to feed their countries
and systematically undermining efforts to encourage selfreliance, industrialized countries have-and-are contributing to
world hunger.

5

A high share of agriculture in our GDP, the high percentage of
the population deriving their livelihood from agriculture,
predominance of small and uneconomic holdings, imperfections in
the input and product markets in the agricultural sector and the
high proportion of food stuffs in the allocation of household
budget in these countries,
has necessitated government
intervention for development and maintenance of public sector
infrastructural facilities and supply of credit and other inputs
at subsidized prices in many developing countries including
India.

None of these subsidies is aimed at generating structural
surpluses which are then disposed of in the world market, thereby
distorting trade. For these reasons, linking the flexibility and
commitment by developing countries to free at frontier price
(politically determined by the industrialized world) is not
acceptable to developing countries.
This may be also kept in
mind that for a long time to come many major trading partners
would have their domestic prices higher than free at frontier
prices. The proposed provision of special and differential
treatment is therefore completely unbalanced and unacceptable.

Developing countries must be exempted from commitments for
tariffication.
The indent of the chairman's text relating to
developing countries on the issue of border controls is neither
sufficient nor adequate.
For a developing country like India,
with large segments of population at subsistence level, price
fluctuations of agricultural commodities can have serious social
and political implications.
In such a situation, border
protection by means of Quantitative Restrictions
(QRs)
for stability for developing countries like India is fully
justified. On the lack of possibilities to resort to measures
which are consistent with the present provisions of- Article XVIII
for balance of payments reasons or commensurate with their trade,
development and financial needs, any concession by developing
countries to the industrialized world can play havoc with the
population of their countries.
TRIMS

In TRIMS, the key issue is whether there should be a prohibition
of some trade related investment measures (TRIMS).
Developing
countries on the other hand, have argued that they cannot accept
any blanket prohibition of any TRIM.
Developing countries have
pointed out that they need TRIMS in order to ensure that the
foreign investment is utilized in consonance with the overall
development strategy of their economies.
For development
purposes, the developing countries impose on foreign investors
requirements related to local content, export performance and
transfer of technology.
TRIMS are required to control the
Restrictive Business Practices (RBPs) of transnationals.
These
measures can be used to neutralize the effects of anti­
competitive behaviour and practices such as restrictions of
purchases, sale and distribution channels; price manipulation;
market allocation; etc.
Developing countries are still

6

struggling to get the major trading partners to agree that what
is required is a case-by-case examination of the investment
measures, a determination of adverse trade effects, if any, and a
formulation of measures to eliminate them.
SERVICES

In
services,
significant
issues
remaining
unresolved
are:"application
of
MFN
principle",
"definition
of
services","definition of commercial presence", "transparency",
etc.
There is as yet no definition of "service provider" and
hence it is not clear whether it would cover enterprises or
individuals.
The new definition about establishment of
commercial presence could result in foreign service enterprises
getting a right of establishment. This implies that while it is
uncertain whether the labour related services would be included
in the agreement, but the agreement creates definitely space for
foreign service providers to obtain backdoor entry into related
services and goods.

The US is unwilling to grant MFN principle without derogations.
There are derogations included in respect of benefits it accords
to countries under its bilateral commerce and navigation
treaties.
These
derogations
would
enable
where
it
is multilaterally agreed, non-application of this principle
to activities in specific sectors covered by other international
and bilateral agreements of the U.S. and other industrialized
countries.
On
the
question
of
provisions
for
increasing participation of Third World Countries in world trade
and expansion of their service exports, the instrumentality is
subjected to application of the provisions of agreements relating
to progressive liberalization, market access and commercial
establishment/presence.
The discussions have covered the content of the proposed annexes
for telecommunications,construction, professional services,
financial services and labour mobility.
The U.S. and other
industrialized countries oppose any provisions or annexes for
labour services enabling mobility (as different from individual
immigration) and for visa and work permits for labour and
professional services involving labour mobility.
In the
telecommunications sector, the U.S. and other industrialized
countries want to prevent the cross subsidisation of services.
In India, the practice of cross-subsidisation of rural services
by charging higher fees for some of the services used by business
or well-off customers will become unjustified if the agreement is
allowed to go through as such. Once this principle gets accepted
in the telecommunications sector, it is certain that similar
demands will be made in other sectors too.
TRIPS

The negotiations on Trips stand now at a critical juncture. It is
believed that the green room on Trips was busy drafting closing
paras of the final agreement when the secretary, commerce decided
to pull out the delegation from the exercise because of the
failure of the round on the subject of agriculture. It is certain

that had there occurred a break through on the night of 6th
December in the agriculture green room, the Indian delegation
would gave landed in the country with a text which could only
have meant a funeral for the Indian Patent Act, 1970 and
technological self reliance.

Firstly, the imposition of this text would have implied the
inclusion of sui generis plant protection and micro organisms as
a patentable subject matter. The sui generis protection which we
would have been required to grant has to be compatible with the
draft new act appearing in the diplomatic conference for the
revision of the International convention for the protection of
new varieties of plants (UPOV 1990). Under the proposed amended
legislation, the new provision regarding the exemption to
breeders restricts severely the traditional freedom available to
the plant breeders to use plant material of any kind.

Further, the amended Upov convention provides now also for a
cross linkage between the plant breeders rights and the -rights of
gene patenting.
In the conclusion of foreign collaborations, we
would have opened ourselves to a blackmail on the restrictions in
respect of the rights related to gene patenting.

These provisions would have meant a serious setback to the
availability of seeds. Indian agriculture would have suffered
beyond repair. The introduction of new varieties would have got
slowed down in India. Furthermore, this protection would have
also implied a heavy foreign exchange burden because the breeders
have been forced to go to foreign property owners to obtain
licenses against high royalties .

In the area of micro organisms, we would have been faced with
very similar problems. In the case of micro organisms no written
descriptions are possible. This means that the provision
replacing disclosure is also violated. We would have also paved
the way for the introduction of reversal of burden of proof
through back door in the Indian Patent Act.
Secondly, an imposition of this agreement would have implied the
giving up of license of right and compulsory licensing. A set of
extremely weak provisions relating to the grant of non voluntary
licenses and the control of restrictive business practices would
have taken the place of the current rights relating to revocation
of patentee's rights, compulsory licensing and license of right.
These rights have been enshrined in the Indian Patent Act, 1970
with the aim to protect the interests of self reliance and
development in our country. We would have been forced to accept
much higher obligations arising out of uniform substantive norms
and standards on IPRs. Across the board this would have resulted
in adverse consequences for the access to and diffusion of
foreign technologies . The agreement would have meant increase in
the cost of production and importation of goods on account of
lesser competition in technology market.

8

Comparing the latest text with the proposals of industrialized
countries, it emerges that the principal concession made to
developing countries
is the provision
on
transitional
arrangements . This is a time bound mechanism aimed at allowing
governments to bring their nation laws in to conformity with a
TRIPS agreement. It does not there fore correspond to any form of
special and differential treatment for developing countries in
view of their low level of technological development. Developing
countries must be exempted from the higher obligations arising
out of upward harmonization.
At the moment the chairperson has accepted to refer only two
issues for political decision to the ministerial green room, that
is the gattability of TRIPS agreement and the exclusion in
respect of protectable subject matters. Proposals by 14
developing countries on crucial issues have
been totally
ignored. These
issues include: preservation of
Berne
convention in its entirety, protection of computer programmes by
a special regime, exclusion of certain subject matters form
patentability, compulsory licensing in the case of abuse of
patent rights, determination of duration of patent protection by
national laws,protection of layout designs on the basis of
Washington Convention, exclusion of trade secrets from TRIPS
agreement, control of restrictive practices arising from IPRs,
and recognition of the limited financial and resource
capabilities of developing countries in respect of enforcement.
FINAL ACT
A number of issues relating to Final Act of the Uruguay Round
Negotiations are left unresolved. It is yet to be decided whether
or not the various agreements on
trade in goods. Trade in
Services,
Trade related intellectual property Rights (TRIPS)
will be
separate instruments or those in goods and on TRIPS
would be combined in to one and automatically lodged in the GATT.

It remains also unresolved whether GATT should be created to deal
with and administer all Uruguay Round
agreements? Should that
organisation deal with trade and development issues or these
issues should be dealt with in the GATT?
Lastly, it has to be decided whether the outcomes are going to be
incorporated in to a single legal instrument forcing everyone to
sign and accept the entire package of results or whether the
principles of international law for negotiating and concluding
treaties and amendments should continue to prevail.

The proposal to conclude the Uruguay Round with a single protocol
must be squarely rejected as the rights of national legislature
would be unacceptably restricted. National parliaments must
retain the full rights to ratify the agreements being drawn up in
the Uruguay Round Negotiations.

Part II
Non-governmental organisations from 27 developing and developed
countries participated in the conference "Bringing GATT out of
the Shadows", held in Brussels from November 28 to Dec. 2, 1990.
I participated on the behalf of National Working Group on Patent
Laws, India.
The list of names of delegates and countries is
enclosed as annexure I.

On the opening day of this conference, there were presentations
by the members of the European Community Liaison Committee and
Novib.
The Novib representative gave an overview of proceedings
of the seminar "GATT, Uruguay Round and Development", held in the
Hague in June 1990.
The EC representative explained the latest
position of the EC.
On the first day, the introductory session was followed by a
round table on the agenda and perspective of NGOs on the Uruguay
Round.
There was considerable debate on the issue of
the negotiation rights of the governments which do not have
legitimate power to govern their own countries in the eyes of
NGOs.
This led the discussions to the areas such as sovereignty
of nation states, multilateralism, natural justice, people's
interests and internationalism.
The round table provided a good
scope for the delegates to learn from each other about their
perspective.

On the second day, the discussions moved into the phase of topic
based deliberations.
The sectoral discussions covered
agriculture, services, TRIPS, TRIMS, functioning of the GATT
system, Textiles and Manufactured Goods and Environment.
It can
be seen that
the subject of Environment which is not accorded
the status of a separate topic in GATT, was accorded due place by
the NGOs.
Several NGOs present in the conference were
specialists in the area of environment. It was also evident that
the NGOs felt that the world division of labour must undergo a
radical change and provide opportunities to developing countries
to diversify their export baskets. This led the working group on
textiles to expand its scope to include manufactured goods.
The
sectoral statements are enclosed as annexure II.
On the third day, the conference met again in plenary session to
finalize the statements. In addition to the sectoral statements,
the conference adopted a general declaration entitled " A
People"s GATT FOR WORLD DEVELOPMENT. The general declaration has
two parts: Preamble and ten Demands.
A copy of this declaration
is enclosed as annexure III.
On the fourth day, the conference deliberated on the strategy for
lobbying and the long term action plan of NGOs on the issue of
the Uruguay Round Negotiations.
During the negotiations, between december 3-8, the activities
consisted of both meetings with the public as well as press
briefings.
Round table discussions on the topics of Uruguay

10

Round were held at Hotel Fimotle. An alternative press centre had
been created at the same hotel to provide opportunity to
progressive journalists to cover the proceedings of the GATT
conference. Several press interviews had also been organized for
the Southern delegates.
The Southern delegates were asked to
participate in many of the public debates. I, myself participated
in the debate on " Democracy, Sovereignty and
Development at
stake" and in the round table on " Intellectual property, gene
patenting".
In these public debates, the delegates from
farmers organisations, church, green movement and other
progressive NGOs of the North also participated.
The public
debate and the lobby work were quite successful in achieving
their purpose.

The official delegations of several developing countries were
approached in particular to disseminate NGO viewpoint.
It may be
mentioned that the Indian delegation was quite receptive to the
viewpoint of NGOs.
The Secretary, Commerce as well as the
Minister of Commerce, were quite accessible to the NGOs.
An
observation is here in order about the expansion and continuity
of the team selected for the Indian delegation. The official team
should be technically strengthened . And in particular its
technical leadership must be provided continuity to ensure smooth
functioning in the Geneva negotiations which start now from Jan.
15, 1991/
The long term strategy of NGOs is as follows :

a.

integrate the future interventions with the work on
UNCTAD VIII and World Environment Conference.

b.

share information among the participants.

c.

disseminate the general declaration and sectoral
statements to the fellow citizens of their respective
countries.

It was decided to meet on December 8, 1990 to chalk out
international co-ordination.
Unfortunately, I could not be
present as I had to leave for Delhi on 7 th forenoon.
The
proposals from National Working Group on Patent Laws on
international co-ordination to the organizers were as follows:

a.

act as a clearing house of information on the Round for
developing countries.

b.

get this general declaration signed by other NGOs and
eminent personalities.

c.

organize joint protest actions on declared days in the
respective countries.

11

WTO

National Working Group on Patent Laws (India) :
National Agenda on WTO Issues

The World Trade Organisation (WTO) has been
in operation for more than three years. The balancesheet of its working has only confirmed the
reservations and apprehensions expressed from
time to time by the National Working Group on
Patent Laws (NWGPL). [NWGPLhas been analysing
GATT/WTO issues forthe last 10 years.] The unequal
nature of the WTO Agreements has been aggravated
by the built-in biases in its functioning. At its very first
Ministerial Conference held in Singapore in
December, 1996, industrialised countries succeeded
in imposing the investment issue on its agenda. The
USA chose to withhold application of the Most
Favoured Nation (MFN) clause in the General
Agreement on Trade in Services (GATS) for over
three years and wrested additional concessions
from developing countries in the process. Pressures
were brought on developing countries to amend
their intellectual property laws much in advance
of the time-frame mutually agreed and incorporated
in the 'transitional arrangements’ of TRIPs
Agreement. The dispute settlement mechanism,
which was looked upon as a strong and favourable
feature of the multilateral system from the viewpoint
of developing countries, has come to be used more
as an instrument of pressuring developing countries
into submission. The disputes raised by USA and EU
against India in regard to implementation of
transitional arrangements on product patents and
exclusive marketing rights are a case in point. The
findings o? the dispute settlement body have

introduced unwarranted and subjective elements
such as the panellists’ interpretation of “negotiating
history" and “balance of advantages". What is worse,
the findings virtually prescribe a specific course of
action for the sovereign Indian Parliament to follow,
IDMA Bulletin XXIX (12)

on the ground of providing “legal security” to foreign
monopolists. Initiatives have also been taken by
lobbies of vested interests to extend the copyrights
to databases, to multilateralise UPOV and to
legitimise MNCs’ continuing bio-piracy of rich and
diverse biological resources of developing countries.
More important, industrial countries are practising
unilateral exclusionary regimes banning the transfer
of technology in the name of preventing proliferation
of the so-called “dual use” technologies. On top of all
this, industrialised countries have not relented their
pressure on bringing in “new issues" under different
pretexts ranging from environment and child labour
to human rights and good governance.
II

The challenges posed by the WTO to the
autonomous management of national economy have
been compounded by two other features of the
process of globalisation. First, enormous pressure is
being brought on the developing countries to pare
down and restrict the role of the state to its law and
order functions only. The economic activities,
particularly those of interventionist and directional
nature intended to promote socio-economic goals
that have their foundation outside the profit
maximisation calculus, are required to be shed in the
name of promoting efficiency and productivity. The
chief instrument used for the purpose is the narrowly
defined fiscal discipline based on the arbitrary premise
that all government expenditure is, by definition,
profligate and, conversely, all release of resources
in favour of the private sector is efficient.
Second, a virtually independent global regime of
international finance has come into existence. It is
characterised by enormous movements of finance

289

’capital across the national borders, not easily
amenable to influence or control of even the most
powerful central banks and the International Monetary
Fund. This has resulted in severe diminution, if not
virtual eclipse, of the autonomy of financial
management, as far as the nation states of the
' developing world are concerned. The recent events
in the South Asian countries have dramatically
demonstrated the plight of the “tiger” economies in
the face of the onslaught of the international finance
capital.
Ill
The national agenda on WTO issues has to be
formulated in this wider context. The major task
facing us in the economic sphere is to make a
^^termined and concerted bid to restore a measure

of autonomy in the management of the national
economy. A comprehensive initiative will have to be
developed in regard to our stand on the host of
issues that are confronting us in the forum of WTO.
They fall under five headings: “Investment”,
“Technology”, “Services”, “Trade”, and “New
Issues”. NWGPL propose the basic elements of
such an initiative under each of the headings in the
section that follows.
Considering the seriousness of the challenge
facing us, NWGPL believes that a national consensus,
cutting across political parties, should be built along
these lines. Furthermore, it is imperative to garner
support of other developing countries to the thrust of
our stand as elaborated here. Recent events in
^>uth East Asia have created a more receptive
environment for re-energising cooperation
among developing countries.

The Second Ministerial Conference of WTO will
be due in less than a year’s time. WTO Agreements
such as TRIPs, TRIMs, Trade in Agriculture, have
built-in provisions for a review process which will
form an integral part of the agenda of the conference.
Pressures will start building up on developing
countries to fall in line with the formulations whose
content and directions would have been
predetermined by the industrialised countries. It is all
IDMA Bulletin XXIX (12)

the more necessary, therefore, that we loste no
time in launching the national as well as the
international initiatives in this regard.

IV
INVESTMENT

A far-reaching move on establishing a multilateral
regime on investment is the top priority of the industrial
countries. It should be remembered that while
negotiating the General Agreement on Trade in
Services industrialised countries did not succeed in
building in an unqualified ‘right to establish’. Such a
right will constitute the cornerstone of the multilateral
discipline on investment which the industrialised
countries would like to establish. The regime may
cover foreign direct investment as well as portfolio
investment. All regulation of such investment, which
is currently an integral part of the exercise of the
sovereign economic power of the nation states, will
have to be brought in conformity with the multilateral
discipline. In the scheme of things of the impending
multilateral discipline, such regulations will be treated
as simply the barriers to be negotiated away. In our
context, this will eventually necessitate drastic
amendment of national laws such, as ID&R Act,
FERA, MRTP, Company Law, and Taxation Laws.

Unrestricted inward and outward movement
of portfolio investment, free access to
international borrowing, full freedom for
investors to channel their funds into profitable
opportunities including speculative and
unproductive ones, - all these have been
responsiblefor the collapse of the capital markets
and currencies in the South East Asian countries.
The limitations of the policies and instrumentalities
at the disposal of the International Monetary Fund
stand exposed. More disconcerting, the system as it
functions today has little to offer except deeper
embroilment and even greater dependence. Mexico,
Thailand, South Korea, Indonesia - all present
agonising proof of the serious shortcomings
and dangerous implications of the market-based
approach to the question of capital flows.
Unfortunately, however, the protagonists of a
290

multilateral discipline on investment in the WTO are
unrepentant.

It is of utmost importance to counter this move
strongly in the WTO. This will have to be
complemented by resisting further moves for
liberalising financial services in the context of the
negotiations in GATS.
SERVICES
This Agreement provides a permanent forum for
liberalisation of trade in services. We have so far
resisted the pressures to provide large-scale
openings across-the-board. In the first three years of
operation of this agreement, the pressure was
relatively not too heavy as the United States
themselves were holding back the MFN application.
They have since agreed to take on the MFN obligation
and in the process, have extracted additional
concessions mainly from South Asian countries. We
have been able to get away somewhat lightly by only
marginally enhancing our offer. However, pressures
for further opening up will mount continually and
more so, in the run-up to the second Ministerial
Conference. In the light of the experience of South
East Asian countries, we must halt the process of
integration of the national financial sector with
the global financial network. No further move to
liberalise financial services should be allowed. We
must retain the authority to regulate foreign
portfolio investment through measures such as
differential capital gains taxation and prescribing
lock-in periods so as to minimise the
destabilising effects of these speculative capital
movements. We must retain the authority to closely
monitor foreign borrowing and curb the tendency
to substitute domestic savings by foreign
savings. We must not facilitate the easy option of
excessive dependence on foreign funding for the
long gestation infrastructural investment through
opening up of the insurance and pension funds
sectors. We must also continue with the selective
approach to direct foreign investment. Last, but
not the least, we must recognise that maintaining
controls on capital account is a necessary condition
of preserving a degree of autonomy of our national
financial management.

IDMA Bulletin XXIX (12)

TRADE

There are two areas which will require urgent
attention. First, our subsisting right under Article
XVIIIB of GATT must be preserved without any
further dilution. As it is, the understandings reached
in 1979 and 1994 have already circumscribed this
right substantially. Our trading partners have forced
on us a short time span for removal of quantitative
restrictions on all imports, including all kinds of
consumer and other goods now being produced in
the small, cottage and household sectors. We are
also under pressure to reduce our customs tariffs to
the levels obtaining in industrialised countries. In the
coming three to five years, we will experience the
disrupting effects on production and employment in
these sectors. While this is serious enough, a more
serious threat is impending. We will be asked to
renounce our right to impose quantiative controls
in order to safeguard our external financial
position. In concert with other developing countries,
we must resist these pressures and protect our right
under GATT. We must also seek modification of
the existing understandings under this Article
so as to enable us to reimpose quantitative
controls as necessary, at short notice, and
without first resorting to less effective price­
based measures. Second, as the Agreement on
Trade in Agriculture comes in for review, industrialised
countries who are large exporters of agricultural
commodities will target their moves on the Indian
market, as they did on the Japanese and Korean
markets during the Uruguay Round. Our productivity
in agriculture is low and with such productivity we
cannot hope to compete successfully in many
products in the world markets. In the medium run, we
are likely to face severe competition not only from
developed countries but also from our neighbours in
Asia. The levels of subsidisation and protection
continue to remain high in developed countries
and their capacity to subsidise agriculture is
much greater. Progressive integration with the world
market in agricultural commodities will have varying
impacts on different regions of the country and
poorer regions may suffer while richer regions may
gain. Our agricultural trade policy, therefore, will

291

•

■ have to be devised carefully. We will have to
safeguard our autonomy in formulating support
policies for agriculture. Similarly, a degree of
flexibility in devising an appropriate border
regime in terms of tariffs as well as quantitative
measures will have to be retained. More important,
the objective of ensuring food security cannot be
allowed to be compromised or diluted.
TECHNOLOGY

The theme of technology covers the whole area
cf new international regimes on intellectual
property protection, including the protection of
plant varieties, the patenting of life forms and micro
organisms, the protection of the database and the
larger question of conservation of bio-diversity,
^Recognition of the contribution of traditional

communities to knowledge and technology and
prevention of bio-piracy. Effects of the demanding
global regimes on intellectual property protection
are already making themselves felt. The legislation
that has served the country well in the regime of
industrial patents has been questioned and pressures
are being exercised for its revision to suit the interests
of the big multinationals. Under such regimes, the
Research & Development (R&D) activity may
become largely subordinate to the priorities of
the multinationals. As in the case of software, low
wages of our intellectual workers may attract the
attention of the big business in the industrial R&D.
But that will not necessarily strengthen the national
research base, nor will it make the R&D activity, part
of the national vision and plan of development. The
^Ret result of these regimes will be to make access to
new knowledge, technologies, skills and databases
more expensive, if not unattainable. It is argued that
aggressive "promotion of patent literacy” may enable
us to meet the challenge. But the enormous lags
from which we suffer in many areas of research and
development expose the gross inadequacy aspect.
The unilateral exclusionary regimes that some of the
industrialised countries are practising in the name of
preventing the proliferation of the so-called “dual
use" only lay bare the desire to dominate that is at the
root of the initiative to forge new international regimes
IDMA Bulletin XXIX (12)

in the vital areas of technology, information and
knowledge.

We will have to resist the revision of our patent
laws under pressure. More important, our patent
regime will have to be appropriately strengthened
to escape through the scissor blades of the
omnibus patent protection demanded by the
TRIPs discipline, on the one hand, and the unilateral
denial practised by industrial countries under their
exclusionary national legislation, on the other.

The TRI Ps Agreement requires that the signatory
countries should establish protection for plant
varieties either by providing a patent protection or by
instituting an effective ‘sui generis’ system or by
combination thereof. There is nothing in the
provisions of this agreement which requires us to
become a party to an existing international regime
such as the UPOV Convention.
Nevertheless,
strong pressures are building up to make India
sign the UPOV Convention. We must resist these
pressures.
The U POV is essentially a system evolved by the
breeders of plant varieties in the industrialised
countries. These breeders are not farmers of our
conception. These breeders represent essentially
half-a-dozen multinational conglomerates who have
acquired oligopolistic control on the crucial part of
agri-business. It is their rights which are sought to be
protected by the UPOV Convention. For industrialised
countries where, either the contribution of agriculture
to GDP or the proportion of the workforce dependent
on agriculture, expressed in percentage terms, rarely
exceeds a single digit figure, protection of rights of
this kind of breeders is an understandable
proposition. For India, where one-third of GDP
comes from agriculture and two-thirds of workforce
is dependent on agriculture, rights of the farmers
as breeders are far more important. The UPOV
does not recognise the rights of the farmer­
breeder of this type.
Research in India on breeding plant varieties
has taken place almost entirely in public institutions
like agricultural Universities and Indian Council of
292

Agricultural Research. Commendable successes
have been achieved by this setup in the past, without
our having been a signatory to a system of protection
of breeder’s rights as contained in UPOV.

The focus of Indian research in agriculture
has to be on the requirements and the problems
of a vast number of resource-poor, marginal and
subsistence farmers. Moreover, the research has
to respond to the varying agro-climatic conditions
and vast areas of rain-fed agriculture and dry farming.
The direction of private sector research the world
over has been towards promoting cash crops
benefiting resource-rich farmers for whom agriculture
is more like an industry. It is this market which
assures good returns for investments by the private
sector breeders and researchers. Largely, the
requirements of Indian agriculture will have to
be met by research conducted by public
institutions not looking for profits.

Equally, the low-cost diffusion of better
varieties is crucial for development of Indian
agriculture and for promoting food security. The
emergence of a few hundred small seed companies
who engage mainly in multiplication of seeds and
diffusion of new varieties has played a crucial role in
this regard. Their rights to multiply improved seeds
and sell them need to be protected and not restricted
by creating a system of protection of the so-called
breeders’ rights.
Above all, the rights of farmers as breeders
need to be protected in any ‘sui generis’ system
designed to respond to our needs. Equally, the
cumulative and collective contribution of generations
of farming communities in evolving a whole range of
different varieties responding to the different agroclimatic conditions, needs and tastes also will have to
be recognised in such a system. Last, but not the
least, the system that we evolve should be such that
it preserves and strengthens the gains made by
developing countries in the negotiations on the
Convention on Biological Diversity and not in the
opposite direction.

IDMA Bulletin XXIX (12)

The subject of national legislation on bio-diversity
in the context of the International Convention on
Biological Diversity (CBD) is of great importance.
Historically, it should be remembered that the
negotiations on the CBD and the negotiations on the
WTO Agreement, including the Agreement on TRIPs,
were somewhat parallel. The Uruguay Round
negotiations were dominated by the ideology of the
so-called and ’free’ market operations. The thrust
and emphasis of those negotiations was removal of
‘distortions’ to trade. Developing countries yielded
considerable ground in these negotiations due to
this overwhelming thrust of the industrialised
countries. In areas like intellectual property protection,
this amounted to substantial erosion of autonomous
decision-making for developing countries.

In the light of this experience, developing
countries tried to build in some concepts in the
negotiations on CBD, partly to effect some retrieval
and partly to put up some counter positions. In this,
they achieved a partial success. Thus, in striking
contrast to the WTO Agreements, CBD explicitly
asserts sovereign right of the nation state on its
biological resources. Similarly, while dealing with
access to genetic resources and access to transfer
of technology, developing countries soughtto achieve
a kind of balance of mutual advantages by linking the
two concepts. Again, recognising the possible conflict
between the intellectual property rites regime under
TRIPs and the objectives and provisions of the CBD,
it was laid down that patents and other intellectual
property rights should be made supportive of and
should not be allowed to run counter to the objectives
of the CBD. The primacy of the objective of avoiding
damage to biological diversity has been recognised
in the context of the relationship of the CBD with
other International Conventions.

One important innovation introduced by CBD is
that it explicilty recognises the close and traditional
dependence of local communities embodying
traditional lifestyles on biological resources and the
desirability of sharing equitably benefits arising from
the use of the traditional knowledge, innovations and
practices.

293

Our national legislation on conserving biological
diversity must necessarily internalise the strong points
and opportunities provided by the CBD, particularly
keeping in view the constricting effects of the TRIPs
regime and the urgent need to counter them. Most
important, the national legislation should not merely
facilitate foreigners’ access to our biological
resources. In other words, it should not merely serve
the objective of bio-prospecting. It should reassert
the national sovereignty on biological resources;
recognise the role of local communities; provide
some counter weight to adverse effects of TRIPs
Agreement and incorporate explicit provisions
recognising a nexus between transfer of
technology and access to resources.

.NEW ISSUES

We will have to resist the introduction of themes
like social clause, human rights and good governance
in the context of the trade negotiations. More
important, we will have to bring on the agenda some
of the untenable [s. 301 of U.S. trade law] and

(B.K. Keayla)
Convenor

(Dr. Surendra J. Patel)
Co-Chairman

exclusionary [ban on the transfer of technology on
the ground of the so-called ‘dual use’] laws and
practices of the industrial nations. We will have to
table our own new issues, e.g., free movement of
natural persons from labour surplus countries to
labour deficit countries; non-discriminatory treatment
in regard to sharing the burden of social security;
abrogation of national laws having extraterritorial
implications; international regulation of the conduct
of the transnational corporations.

Last, but not the least, we have to place our
agenda on the WTO issues in the wider perspective
of the universal goal of creating a world order which
is more equitable, humane and free of exploitation.
To this end, we should try to build a parallel system
of international trade and economic cooperation
through an expanded Global System of Trade
Preferences among developing countries (GSTP). A
call to strengthen the regional cooperation and to
revive the international cooperation among the
developing countries should form an integral part
of our agenda.

(Justice V.R. Krishna Iyer)
Patron

■©**^**•1
(Dr. Arun Ghosh)
Senior Member

(Dr. Amit Sen Gupta)

Member
IDMA Bulletin XXIX (12)

(Dinesh Abrol)
Co-Convenor

(K. Ashok Rao)
Member

(Prof. S.K. Mukherjee)
Member

294

TRIPS

New Patent Regime:

Implications for Domestic Industry,

Research & Development and Consumers**
B.K. Keayla*

PART IV
GROWTH OF PHARMACEUTICAL
INDUSTRY IN INDIA
(A) Process Research
Table 1 indicates the basic drugs manufactured
by the domestic sector companies in India based on
indigenously developed process technologies.
Table 2 indicate the time lag between the introduc­
tion of new drug in the world market and its introduc­
tion in India after the domestic enterprises have
developed technologies to manufacture the prod­
ucts. In view of indigenously developed process tech­
nologies, the pharmaceutical industry has been able
to produce basic drugs covering various therapeutic
groups and achieve near self-sufficiency in the pro­
duction of bulk drugs in the country. The industry has
also developed capabilities of producing enough sur­
plus of basic drugs and formulations for exports
worldwide.
(b) Production

^(i) Pharmaceutical Industry

After the Patents Act, 1970 was enacted, the
production of pharmaceutical products has grown
more than sixteen-fold: from Rs. 500 crores in 1974
to over Rs. 8,000 crores in 1994-95. In recent years,
there has been a sharp rise in exports also by the
‘Shri B.K. Keayla, former Commissioner of Payments,
GO!, is Convener, National Working Group on Patent Laws
(Centre for Study of GATT Issues), New Delhi
"Parts I to III has been published In the IDMA Bulletin
Vol XXVI, No. 46 dated 14 December 1995

IDMA Bulletin XXVI (47)

industry: between 1985-86 and 1994-95 exports
have grown fourteen times from Rs.140 crores to
over Rs. 2,000 crores. The domestic industry has
thus greatly helped in providing not only drug security
in the country but has also succeeded in getting
access to foreign markets both in the developed and
developing countries. The Indian industry has
emerged as world leader in production of bulk drugs
like Ciprofloxacin, Dextrapropoxyphene, Ethambutol, Ibuprofen, Norfloxacin, Sulphamethoxazol,
Trimethoprim, etc. Ranbaxy, Cipla, Cadila, Alembic,
Lupin, Torrent, Sarabhai, etc. have emerged as
major Indian companies meeting requirements of all
kinds of drugs in the country.
(il) Pesticides Industry
The pesticides industry in India has made im­
pressive progress and today more than 60 technical
grade pesticides are being successfully manufac­
tured in the country. Some 135 units are currently
engaged in the manufacture of these technical grade
pesticides and over 500 units are making pesticide
formulations. As a result of the increased production
of pesticides in the country import of technical grade
pesticides has come down considerably. The esti­
mated production of technical grade pesticides dur­
ing 1994-95 is over 85,800 MT from an annual
installed capacity of 1.25 lakh MT.

In order to use the idle capacity available with
pesticide units the country has been able to enter the
competitive field of export of pesticides, During 199394 the industry had exported pesticides valued at
261.20 crores.

1378

Table 2
Time Lag Between Introduction of a New Drug in the World Market and its Introduction in India
Drug

Introduced (Year) in
Indian Market by
World Market
by the inventor
domestic cos.

Time lag:
Introduction
In India (Yrs.)

Salbutamol

1973

1977

4

Mebendazole

1974

1978

4
6

Rifampicin

1974

1980

Naproxen

1978

1982

4

Bromhexin

1976

1982

6

Ranitidine

1981

1985

4

Captopril

1981

1985

4

Norfloxacin

1984

1988

4

The industry has started producing some new
pesticides but are continuing to import the intermedi­
ates in the absence of technology for producing
them. Efforts are being made to acquire the right
technology to manufacture intermediates for pesti­
cides like Butachlor, Endosulfan, etc.

The capacity and production of some of the im­
portant technical pesticides during the years 1992-93
and 1993-94 are depicted in Table 3.
(c)

Prices

There is competitive environment in the pharma-.
^eutical field because of the patent system and as
Buch pharmaceutical products are available in India

at the lowest price compared to the other countries.
As against these, prior to the enactment of the Indian
Patents Act, 1970 the prices of drugs in India were
“amongst the highest in the world" as commented by
an American Senate Committee headed by Senator
Kefauver. The industry in India was then dominated
by the drug multi-national companies who could use
the colonial product patent regime provided by the
Patents and Designs Act of 1911, to reap enormous
profits from the Indian markets. The growth of the
IDMA Bulletin XXVI (47)

domestic pharmaceutical industry due to the Patents
Act of 1970 reversed the situation on the price front.

PARTV
NEW PATENT REGIME UNDER TRIPS
AGREEMENT
I. Main Features
(a) Preamble
The preamble of the TRIPS Agreement “recog­
nizes the need for multilateral framework of the prin­
ciples, rules and discipline in international trade in
counterfeit". [According to U.S. interpretation, the
goods produced in India even by legally taking
process patents, are counterfeit goods.] The pre­
amble also “recognises the intellectual property
rights as private rights". Even though many other
countries including India are not members of the
Paris Convention, according to Article 2 of the
TRIPS Agreement "the members shall comply
with Articles 1 through 12 and Article 19 of the
Paris Convention (1967)."
1380

-

plant varieties either by patents or by an
effective sui generis system or by any com­
bination thereof.

Thus the scope of patentability has been ex­
tended to the entire industrial and agriculture sectors
and to an extent the biological sector also. No flexi­
bility is available to any country to exclude certain
vital areas of economy from patentability in the do­
mestic laws.

(d)

Working of Patents : a non-issue

An important aspect of working of the patent in
the new patent regime is being totally changed. Im­
ports are generally not regarded as working of the
patent in the national laws. All along the patent hold­
ers had the obligation to work the patent as an
important element of the system. Even the Paris
Convention recognises working of the Patent in the
country which grants the Patent Rights under the
Paris Convention (Art. 5A). The TRIPs Agreement,
according to Article 27, provides that: "patents shall
be available and patent rights enjoyable without dis­
crimination as to the place of invention, the field of
technology and whether products are imported or
locally produced".

(e)

Authorization for Use of Patent

Art. 31 deals with “other use without authorization
of the right holder". The provisions under this article
are in no way comparable to the usual provisions of
“compulsory licensing", "licences of right" or “revoca­
tion of patents" for non-working. For commercial use,
it would not be possible to issue any authorization as
the scope of authorization under this article is for a
limited period and for a limited purpose.
Unless the authorization or sub-licensing is for
commercial purpose without any condition or restric­
tion, this article provides absolute monopoly to the
patent holder. Even the authrization for other uses
which are generally for experimental purposes for
research or for educational purposes, the conditions
are quite unreasonable. In such cases also, the “right
holder shall be paid adequate remuneration in the
circumstances of each case taking into account the
economic value of the authorization". Compensation
at economic value for non-economic purposes virtu­
ally removes the possibility of transfer or diffusion of
technology at low cost in public interest.

Virtually the scope of authorization under this
article is for a limited purpose and limited duration for
non-commercial purposes only, which will not serve
any purpose of meeting the requirements of general
public when the patent holder is exploiting the market
in monopolistic manner.

The provision for providing patent protection for
imported products at par with locally produced prod­
ucts is a major deviation. Even while granting exclu­
sive rights under Art. 28 for products and processes,
exclusive rights have been given for making, using,
offering for sale, selling or importing. The implication
of this provision is that the patent holders will have no
obligation as such towards the national Government
conferring the patent rights under the new patent
system. There will be free flow of imports of patented
products. It will not be possible to regulate the prices.
As price control system cannot be extended to im­
ported products, patented products would be sold at

Article 33 deals with the term of protection which
shall not end before the expiration of a period of
twenty years counted from the filing date. Since pat­
entability extends to products or processes, the term
would be applied for twenty years for product patent
and then twenty years for process patent particularly
in chemical field, including drugs and pesticides. In
the case of drugs and medicines, patents are avail­
able in U.S.A, for usage form, dosage form and

relatively much higher prices. The dependence upon
imports would increase substantially.

combinations. Table 4 gives an idea of new combi­
nations for which patents are being taken in U.S.A.

IDMA Bulletin XXVI (47)

(f)

Term of the Patent

1332

even when product patent on the basic drug expired
long back.

The patent protection under the TRIPs patent
system thus would be used for extending monopoly
by taking process patents and patents for usage
form, dosage form and combination form. This mo­
nopoly would be extended to the existing products
where the product patents have expired long back.
New processes would be patented and new
dosage form, etc. would also be patented. This
kind of protection would have a far reaching im­
plication in a country like India and in a period of
10-15 years the patent protection in some form or
the other would cover almost 70-80 per cent, if
not more, of turnover in the pharmaceutical field.
It would become impossible for the domestic industry
Fto subsist without new products and it would also
affect their business in the existing products. Their
survival would be under a serious question mark.

(g)

Reversal of Burden of Proof

Article 34 provides for reversal of burden of proof
during the process patent regime. The onus of prov­
ing that the new process is totally different than the
patented process would lie with the defendant and he
will have to prove that he is not guilty. This provision
would also be misused by powerful MNCs to curb
competition from others even when their process
may be different. Keeping this in view, the legal
system to check infringement has to be carefully
evolved.

PART VI
TRANSITIONAL ARRANGEMENTS AND
PATENTS (AMENDMENT) BILL, 1995
(a) Transitional Arrangements
Part Vi of the TRIPs Agreement deals with the
transitional arrangements. Developing countries are
entitled to delay the application of the TRIPs Agree­
ment by five years as against one year for the the
developed countries from the date of entry into force

IDMA Bulletin XXVI (47)

of the agreement establishing the World Trade Or­
ganisation (WTO) which was January 1,1995. Coun­
tries who do not extend product patent protection to
areas of technology not so protectable on 1.1.95 (like
India where technologies relating to atomic energy
and chemical based products are exempt from prod­
uct patent) can delay the application of the provisions
of the product patents to such areas of technology for
an additional period of five years. This transitional
arrangement has been set out in Article 65 of the
TRIPs Agreement. '
The above consideration has, however, been
drastically curtailed in paragraphs 8 & 9 of Article 70
of TRIPs Agreement. In the fields of technologies
relating to pharmaceutical and agriculture chemical
products, “means (arrangements) for accepting pa­
tent applications commensurate with the obligations
under Article 27 of TRIPs Agreement will have to be
established (by January 1 st, 1995) when the World
Trade Organisation comes into force. "Further exclu­
sive market rights will also have to be provided for
these applicants for a period of five years from 1995
onward itself after they have taken the marketing
approval from the concerned national drug/pesticide

control authorities. Such arrangements will obviously
have to be established by changing the existing
patent laws by Parliament.
The grant of exclusive marketing right is as good
as the product patent for pharmaceuticals and agro
chemicals. The exclusive rights shall get established
from 1995 itself for new products and not that the new
applicants will have to wait for a period of ten years
for enforcing the product patent rights.
Even for those developing countries who do not
have product patent system for pharmaceutical and
agro chemicals, almost all the provisions relating to
the new patent regime under the TRIPS agreement
will come into force in a period of five years i.e. by
2000 A.D. As stated earlier, some of the important
provision will come into force even from the year
1995. Thus consequences of high monopolistic
prices and inability of producing new drugs by

1384

PART VII
IMPACT OF THE PROPOSED PATENT
REGIME ON PHARMACEUTICAL SECTOR

tries for many other medicines is given in the Annexure attached.
(b) Impact on Availability

The specific fall-out of the changes that would be
made in the patent laws on the basis of provision in
the TRIPs Agreement would be manifold. The TRIPS
Agreement is a disaster for consumers all over the
world and for small and medium scale industries in
the developing world including India. The consumer
would be hit by high prices and erratic availability of
pharmaceuticals, pesticides, seeds, etc. and domes­
tic industry would face the question of survival. In the
words of Mr.Ralph Nadar, a well known consumers
advocate in U.S.A., the consumer in U.S.A, would
also be hit. He made the following statement at the
National Press Club (U.S.A.) on April 12,1994:

"Nothing is more likely to pull down our pres­
ent US consumer and environmental projections
and derail future advance than the proposed ex­
pansion of a global trade agreement called the
Uruguay Round of the General Agreement on
Tariffs and Trade (GA TT)." This statement applies
to all Agreements under the Final Act including the
TRIPS Agreement.
(a) Impact on Prices

The main impact would be on the prices of med­
icines which would go up several times making it
extremely difficult for the poor people to afford them.
Two specific examples of drug marketed by the same
MNCs in four countries are given here to support this
^oint. In India there is process patent at present for

The availability of new drugs from indigenous
sources of the domestic companies would be totally
out of question. Dependence upon imports would go
up as it has started happening is some Latin Ameri­
can countries, Canada and even Italy, who have
changed their patent laws recently. Our country
would also face similar phenomena in the coming
future.
The following report from SCRIP of May 24,
1994, substantiates this point:

"ALIFAR DENOUNCES US PATENT
MOVES
Plant closures in Chile and increased levels of
drug import to Mexico have followed the introduc­
tion on 'monopolistic' patent laws in these coun­
tries. Although both laws were drawn up in line
with US requirements, there is renewed pressure
from the US to increase patent protection periods
from 15 to 20 years in Chile and from 20 to 23
years in Mexico, according to speakers at the 15th
meeting of the confederation of Latin American
Industry associations (Alifar).

It is because of the patent system in these coun­
tries that the price differential is so high, as indicated
in Table 5.

The trade benefits and investments which
were promised is exchange for the implementa­
tion of 'US-style'patent laws have never material­
ized, the Chilean representatives maintained. The
Argentinian government 'should look at its neigh­
bors, see what is happening to us, and realise that
the promises were false', Muriam Orellana, exec­
utive director of the Chilean national industry as­
sociation, (Asilfa), declared. (The Argentinian
draft patent law currently being considered by
Senate).

When our country will switch over to new TRIPS
patent system, the prices are bound to go up very
high. The price comparison between the four coun­

Asilfa President Jose Plubins commented that
five multinationals — Pfizer, Parke - Davis, Squib,
Bayer and Schering AG had Closed manufacturing

medicines whereas in three other countries, viz. Pa­
kistan, UK, and U.S.A., there is product patent re­
gime for medicines.

IDMA Bulletin XXVI (47)

1386

Table 6: Leading Companies by Nominal Pharma R&D spending in pharmaceuticals,
Script Review 1993-94
Company

R&D as %

Sales

R&D

($ mill.)

(S mill.)

of sales

'

1.

BMS

4,439.2

657.0

14.8

2.

Glaxo

4,679.5

654.2

13.9

3.

Hoechst

4,410.6

613.3

13.9

4.

SB

3,668.8

552.5

15.1

5.

Bayer

4,237.8

487.2

11.5

6.

Sandoz

3,464.1

484.1

14.0
15.8

7.

J&J

2,652.0

419.0

|81.

B.Ingelheim

1,914.4

367.0

19.2

Rhone-Poulenc

2,784.6

350.9

12.6

10.

MMD

2,211.0

329.0

14.9

(d) Impact on Research and Development
The impact on domestic research and develop­
ment activity in the developing countries would also
be tremendous. Due to paucity of funds, particularly
in drugs and pharmaceuticals field, the research in
the public and private sectors in our country has been
mainly concentrated on developing process technol­
ogies. This kind of research effort going on would be
severely affected as there would be no immedediate
use of process technologies for new drugs in the new
patent regime as it would not be possible to commer­
cially exploit them. For basic research neither funds

nor capabilities to exploit any such invention world­
wide are available with the domestic companies.
They do not have infrastructure to match the MNCs
for registering patents worldwide and promoting and
marketing their products in various countries.
It would be relevant to mention here that U.S.
Pharmaceutical industry spent $8.2 billion in 1990,
S9.1 billion in 1-991, $10.96 billion in 1992 and $12.6
billion in 1993 on R&D, and their worldwide sales
during 1990 was $57.4 billion. With enormous re­
IDMA Bulletin XXVI (47)

sources only MNCs can afford to spend large sums
on R&D. For MNCs, the entire world is market for
them and they spend large sums on R&D to monop­
olise the markets world over with their innovation
products. Table 6 gives an idea of sale turnover and
investment in R&D of the top ten MNCs.
It will be observed from Table 6 that Ingelheim
spent 19.2% of their total sales on R&D. Compared
to this, Ranbaxy, the largest Indian company, in­
vested last year over 6% of its sales on R&D. We are
substantially low in profits and volume of sales for
committing our resources for R&D. Sales of our large
enterprises have to multiply manifold before they
could make any worthwhile investment in R&D. The
total pharmaceutical production in India is around
$2500 million whereas almost all the 10 MNCs (Table
6) individually are having sales more than what India
is producing. Further, our total expenditure on R&D
is about $50 million per annum for drugs and phar­
maceuticals. There is thus virtually no comparison.

The profitability of the Indian industry for various
reasons is also quite low. In the past, it has been
1388

Lyco's Search: WORLD TRADE ORGANISATION AND PATiI3|il7Si<ww.lycos.com/cgi-bin/pursuit?quer...LD+TRADE+ORGANISATION+AND+PATENTS&cat^dir

LYCOS’ Your Personal Internet Guide

Get Online - CheckEmail - MyLycps

Lycos Network Tripodcom j Angelfiro.conil MailCitV\dorn I WhoWtierekCom { IIotBot.cdni

Looking for new customers?

Learn about

barter r»m «bobex®

Click here to visit site

Adyaiicgd Search
Search Guard
Help

Search for
(?) New Search

J Search These Results

■ Save on books about WORLD TRADE

J? Click to Find & Buy Music

ORGANISATION AND PATENTS
start HERE: Click here for business news!

Web Sites

Other Articles

Categories

Web Sites

News & Media

• FURTHER PATENT AND INTELLECTUAL PROPERTY OFFICES AROUND THE
WORLD
FURTHER PATENT AND INTELLECTUAL PROPERTY OFFICES AROUND THE
WORLD (IN ALPHABETICAL ORDER) Andorran (AD) Trade Mark Office
Australian (AU) Industrial Property Organisation Austrian (AT) Patent Office
Belgian (BE) Patent Office Brazilian (BR) Patent Office Canadian (CA) Intellectual

IwHSMLfl
•—7-5557—J k ,
save up to vu a, on hooks.

http://ounvorld.compuserve.com/homepages/kehlpatent/fupaipo.htni
compuserve.com

9

• Spruson & Ferguson - Patent & Trade Mark Attorneys - Introduction
SPRUSON&FERGUSON Patent & Trade Mark Attorneys since 1887 Introduction The Australian Industrial
Property Organisation (AIPO) comprising the Patent Office, Trade Marks Office and Designs Office in
Canberra is the authority which registers patents, trade marks and designs in Australia
http://www.sprusons.com.au/intro.html
com.au

^)INDOlink News from India - Parliament approves Patents Bill amidst protests
INDOlink News from India Parliament approves Patents Bill amidst protests March 14,1999 - The
/sA*>-^Sbntroversial Patents (Amendment) Bill 1998, was passed by Parliament when Rajya Sabha approved the
'
legislation on Saturday though opposition opted for a walkout and Congress alleged
http://www.indolink.com/INDNews/DNUmain/mnO31399.html
indolink.com

• New HAI publication: Power. Patents and Pills
Health Action International Report Examines Impact of Trade Agreements on Consumers' Access to Drugs
In the Health Action International (HAI) publication, Power, Patents and Pills recently released, a number of
consumer representatives suggest that intellectual property agreements
http://www.haiweb.org/pubs/gatt-pub.html
haiweb.org

• 1997 Policy Programme - Trade and Industry Bureau

1 ol'3

7/19/99 12:50 PM

Lycos Search: WORLD TRADE ORGANISATION AND PATiB^iTSnvw.lycos.com/cgi-bin/pursuit?qucr...LD+TRADE+ORGANISATION+AND+PATENTS&cat=dii

MESSAGE For the Hong Kong Special Administrative Region to continue to achieve economic success, it is
imperative that it continues to pursue policies to promote free trade and free enterprise. We are committed to
doing this, to encouraging competitiveness and to seeking the
http://www.info.gov.hk/pa97/english/ptib.htm
gov.hk

Information Technology in Qatar
qatar_title.gif (3559 bytes) Information Technology in Qatar Legal Environment The State of Qatar has a
modern legal system based on the Sharia (Islam Law). All the major investment, property rights, legal
statutes and codes are very similar to those of neighboring Gulf countries
http://gunJkul.american.edu/CARMEL/SR3362A/LEGAL.HTML
amencan.edu

The WTO millstone - [March 16,19981 - The Hindustan Times
Front Page City States Nation Foreign Economy Sports Opinion Editorial Cartoon Home Advertise Search
Archive Feedback About Us InfoTech ShowBuz Sunday L&S Metro Classifieds Stocks Tenders Front Page
City States Nation Foreign Economy Sports Opinion Editorial Cartoon Home The
http://www.hindustantimes.eom/ht/nonfram/160398/detEdi02.htm
hindustantimes.com

WTO for scrapping of import curbs - [April 18,19981 - The Hindustan Times
Front Page City States Nation Foreign Economy Sports Opinion Editorial Cartoon Infotech Home Advertise
Search Archive Feedback About Us NetFile ShowBuz Sunday L&S Metro Classifieds Stocks Front Page City
States Nation Foreign Economy Sports Opinion Editorial Cartoon Infotech
http7/www.hindustantimes.com/nonfram/180498/detEco02.htm
hindustantimes.com

Swedish Trade Online in Australia, Searchresults
//‘Client-Side Search Engine * //"Copyright (C) 1996 * //"by Brock Williams *//**//*
* //"You are granted permission* //"to use this code as long * //"as this and all Copyright * //"notices stay with
it. * //"Please send comments to: * //"brock
http://www.swedishtrade.org.au/Code/javasear.htm
org.au

The Hindustan Times - Economy - [March 13,1998]
Front Page City States Nation Foreign Economy Sports Opinion Editorial Cartoon Home Advertise Search
Archive Feedback About Us InfoTech ShowBuz Sunday L&S Metro Classifieds Stocks Tenders Front Page
City States Nation Foreign Economy Sports Opinion Editorial Cartoon Home Dilution
http://www.hindustantimes.com/nonfram/130398/eco.htm
hindustantimes.com

« back ■ next»

& Trv Elle/Maxim +650 others-FREE!

Search for world

trade'organisation i
----------------------------------- 2—----------- ------- i
New Search O Search These Results

AdyajipgjI.S^rch
Search Guard
H£1R

Try your search for WORLD TRADE ORGANISATION AND PATENTS on

Looking for new customers?

2of3

7/19/99 12:51 PM

Lycfls Search: WORLD TRADE ORGANISATION AND PA'fiB}i:T9nvw.lycos.com/cgi-bin/pursuit?quer...LD+TRADE+ORGANISATION+AND+PATENTS&cat=dir

Click here to visit site
Tools Help Chat Clubs Boards Email Calendar FTP Search Alerts Build Home Pages My Lycos
Find Stocks News Weather MP3 Pictures Yellow Pages Cities People Road Mags Buy Books Music

Copyright © 1999 Lycos, Inc. All Rights Reserved. Lycos® Is a
registered trademark of Carnegie Mellon University.
Our Privacy Vow Terms and Conditions Standard Advertising Terms and Conditions

3 of 3

7/19/99 12:52 PM

INDOlink News from India - Parliament approves Patents Bill amidst protests

http://www.indolink.com/INDNews/DNUmain/mn031399.html

IND0/AY
IMMEDIATE OPENINGS

SefftwrePraftsstofflate
■ ' -: ' •

'’

......... . ■ ■

.................. ......................... ..........

,

.

Parliament approves Patents Bill amidst protests

I—----- ———---- ———
March 14,1999 — The controversial Patents (Amendment) Bill 1998, was passed
by Parliament when Rajya Sabha approved the legislation on Saturday though
opposition opted for a walkout and Congress alleged that the provision of the Bill
would be detrimental to the National interests.

When Deputy Chairman Najma Heptulla asked Mr. Gurudas Dasgupta (CPI) after
industry minister had replied whether CPI was withdrawing its statutory resolution
opposing the Bill CPI members first pressed for a division and then the opposition
members walked out of the House while BJP and Congress voted together to
ensure the smooth passage of the Bill which was earlier passed by the lower house
on Thursday. Opposition walked out alleging that the government had kept the
house in dark about the recommendation of the Law Commission, which said that
the provisions of the Bill were detrimental to national interest.

Yoga.
videofor

itttetes

& Active

i

Industry minister Mr. Bakht observed that the Government had to secure the
passage of the Bill tq meet its obligations under the World Trade Organisation but
national interest are supreme. Under this Bill the India pharmaceuticaircompahies
would have to restructure themselves but have time till 2005 when a new
legislation would have to be brought forward to give effect to the countries
international obligations in the pharmaceuticals sector. He said that objections
raised by the Law Commission had already been attended and various doubts
raised have been answered. But Left party members in Rajya Sabha vehemently
opposed the Patents (Amendment) Bill warning it would adversely affect the
national interest.

toBrttftials

1 of2

7/20/99 5:11 PM

INDOlink News from India - Parliament approves Patents Bill amidst protests

http://www.indolink.com/TNDNews/DNUmain/mn031399.html

Get the Latest News .Delivered to Your Coni

INDgZ/Kfc|

India News

Advertise on INDOZ/wfc---------------------

Copyright ■© 1999 GENIUS Technologies, Inc. /Ml Rights Reserved.
INDOlink, GENIUS, and their respective logos arc trademarks of GENIUS Technologies, Inc.

2 of 2

7/20/99 5:11 PM

THURSDAY,
JULY 29, 1999

Patents Act changes soon to
protect traditional remedies
Calcutta, July 28: India will
soon amend ‘grey areas’ of its
Patents Act to safeguard tradi­
tional knowledge as the intern­
ational agreement on Trade Re­
lated Intellectual Property •
Rights (TRIPS) is against the
country’s interest, a Union Ind­
ustry Ministry official said
here on Wednesday.
“The Indian patents act ne­
eds to be more flexible so as
not to let another ■ ’haldi’,
‘karela’ or ‘jamun’ fiasco hap­
pen," Joint Secretary of Minis­
try A Ahmed told an.interact­
ive session to collate views for
amendment of the law.

Ahmed said the Ministry
will hold about 20 sessions in
various cities all over the coun­
try to generate opinions of emi­
nent scientists, academicians, ■
industrialists, chambers of
commerce and NGOs to influe­
nce policy-level decision mak­
ing for the amendment.
“The ministry is seeking to
balance India’s international
obligations with the imperati­
ves of public and national inte­
rests,” he said.
The sessions also assume im­
portance in the context of the
recent amendments to the Pat­
ents Act approved by Parliam­

ent in the last session to com­
ply with certain, obligations
under the TRIPS agreement,
he said.
The ministry will receive
suggestions and opinions on
the issue of proposed amendm­
ents to the act at its website
http://www.Nic.In/did and a
mailbox did@ub.Nic till Aug­
ust, 1999, he said.
He said disputes with the
USA and EC over the last set of
amendments to the act before
the WTO had been recently res­
olved in consonance with Ind­
ian concerns of public interest
and national security • PTI

PATENTS - A DESIGN FOR DISASTER

Disease controlled by Amelioration of diseases depends
upon medical personnel, health infrastructure and
pharmaceutical industry.

In India we have a good

infrastructure of pharmaceutical industry.
Our phar­
maceutical industry produces most of the basic drugs in
bulk and has brought self reliance in drugs.
This is
due to the provisions of Indian Patents Act, 1970.
Now, drugs are going to come under a new Patent regime.

This patent regime is being forced on many developing
countries and India also.
Now health aspects of the
drugs become secondary to trading aspect of drugs.

Five decades back, it was felt that there is a need for
all the countries of the world to have a fair trade in

consumer goods, food products, industrial component
parts etc.
A good intention indeed I
The discussion
was initiated and one of its aim was to assist the third
world countries to improve their trade and economy.

Several rounds of trade negotiations were held in various
countries.
Eighth round of negotiations was held in
Uruguay.
The negotiations were dragged on for more than
six years.
Before the negotiations were concluded,
Dunkel, tne Director of General Agreement on Tarrifs and
Trade (GATT) presented a draft known as Dunkel Draft

Treaty (DDT) in 1991 and asked all the partners either
to accept or reject and there was no scope for negotia­
tions.
The contents of DDT was in favour of developed

countries, a definate deviation from the original goal 1
The discussion was held in the background of globalisation
a warning of disaster to come.
The real actors on whose
behalf this was done were the MNC's, whose global

expansion can take place only by limiting the soverignity
of nations.
Meanwhile the third world countries had received a lot
of loan from international agencies (IMF, WB) supported

by developed countries.
It was possible to pressurise
because the US became domir^nt after the collaps of the

Soviet Union and East European countries.

The developed

countries mainly the US used tnis opportunity to bring
pressuse on the third world countries to accept DDT.

Remember tnat India opposed the move in the beginning
but later accepted.
It can be concluded that there was
change in the stage of the play from United Nations to

trinity of GATT, IMF & WB.
GATT

There are various issues in

- 2 -

Lets discuss the issue of patents in relation to

Pharmaceuticals.

patent issue along with other eight issues are
discussed under intellectual property rights.

Patent is a recognition given, right granted by the
government to investors for a specific period to
exclude other individuals and enterprises from infringing
a patented product or process or both.
Patents are

granted to encourage invention and to secure that
invention worked on commercial scale to the fullest
extent, to benefit mankind.

In India, tne patent regime is tnere since 1856.

A

very favourable patent system evolved only after

independence, after indepth studies and debates,
leading to Indian Patents Act, 1970.
effective in 1972.

It became

The salient features of IPA 70 are :
Product patent is granted to all except for food,
medicines, substances produced by chemical processes.
Process patent is given to food, medicines and
substances produced by chemical processess.
Invention^relating to atomic energy, agriculture
and horticultural products are not patentable.
Patents last for 10-14 years.
For food, drugs
and substances produced by chemical processes it
lasts for 7 years from the date of application
or 5 years from the date of securing a patent,

whichever is earlier.
The Indian Patents Act gave boost to Indian Pharmaceu­
tical Industry.
As a result, we could achieve self

sufficiency in medicine.

We could produce 100 basic

drugs, 65 - 70 % of the bulk drugs needed for our

country were manufactured in India.
international market.

We entered

New drugs were produced in 3-4

years after tne drug was released elsewhere, by inno­
vative processes.
The prices were once highest in
India, oefore IPA 70 and reduced drastically and were
the lowest.
We have exported about 640 crores of drugs to other

countries in 1989-90 and today the export is worth
2000 crores.

- 3 -

Exploitation by the MNC's was kept low.
A good achievement indeed 1

The IPA 70 protects the interests of both investors and
consumers.

National interest is given priority, over the

interests of the patentee and it helped India develop novel

processes in drug production.
The aim of the DDT is to reverse the IPA.

DDT demand that

there be no restriction on foreign equity participation, no
restriction in the area of investment, no licensing system,
no export obligation and DDT wants foreign investments to

be treated at par with investment of the domestic companies.
This helps global planning through conditionalities of TRIMS.

Ricner nations will be given the freedom to exploit the
resources and market of poorer nations.
The developed
nation will find a free access to the resources of raw
materials in the developed nations

As a result, the cost of the drugs in developing countries
will go up, adding misery to the lives of common man.

it

may result in closure of industrial units of Indian origin
leading to unemployment. Developed countries will get huge
royalty out of patents as the control on product patents

will remain with developed countries.

Now WTO replaces GATT

and India has subscribed to it in 1994.

Citing the dangers

of WTO “The Tentacles of WTO reach every nook and corner of

public life.

It regulates industrial products, trade

It
related investment and intelletual property matters.
has complete control over the agricultural services sector
and telecommunication and information technology.

It is

aimed to convert all human life into a big market all human
values into exchange commodities".

Twisting of the Patents issue is part of the globalisation,

privatisation strategy. The western world with its surpluses
is looking towards less developed world and its aim is not
only selling their goods but also stop other countries use
SAT and become dependent.
It is a blueprint for a vicious
economic recolonisation of the third world and redivision of
the world by the advanced capatalist countries.
The pro­
ponents of new patents are telling that there is no
alternative.
Such lies can convince the common man

4

It is not for promoting development, co-operation and
accomodating the entry of developing countries on the
world stage.
Instead, it aims at establishing insidious
control over the decision making process on the countries

of the South.

The recommendations go far beyond the

perview of trade and infact the draft comes as a blatant
attach on our economy and political soverignity.

Patents bill was hurriedly presented in the parliament.
External compulsion being the main reason - WTO, WB and
the pressure of the US government.

The need of the hour is for every Indian to register the

protest, otherwise the dangers of neocolonisation will not
be far off to see.

Dr. Prakash C Rao
Secretary
Drug Action Form

Karnataka

73/2, I (R) Block,
Rajajinagar,
Bangalore 560 010.
Tel : 3379016.

Outcomes of Copenhagen+5 and their implications for WHO
The Twenty-fourth Special Session of the General Assembly entitled “World
Summit for Social Development and beyond: achieving social development for all in a
globalizing world” (Copenhagen + 5) was held in Geneva from 26 to 30 June 2000. It
brought together senior representatives of the Member States including around 30 Heads
of State and Government to discuss the progress in achieving targets set at the
Copenhagen Summit five years ago. It set a new action plan and refined targets for
implementing the Copenhagen Declaration and Programme of Action-

Since the Copenhagen summit the world has changed. A rapid globalization
process has posed new challenges to social and economic development. However,
international understanding of the issues of poverty reduction, employment, social
protection, health, education and their linkages with economic growth have been further
advanced. The growing awareness of the positive impact of effective social policies,
including policies in health, education, social protection, etc., on economic and social
development has created the imperative of reassessing priorities for creating a more
enabling environment for full social development.

“Copenhagen+5” responded to the advances in development thinking by
recognizing that effective social policies themselves can largely determine the success
of economic policies (in this case, “success” to mean equitable distribution of benefits
of economic growth); by acknowledging the need for strengthening developing countries’
and disadvantaged societies’ capacities to harness benefits of globalization and mitigate
its negative effects; by underscoring the importance of full employment including
occupational health and safety; by emphasizing the issue of gender equality and the rights
of indigenous population; by endorsing the need for urgent actions against HIV/AIDS,
malaria, tuberculosis, and other endemic, communicable and chronic diseases that inhibit
social and economic development; and by calling for intersectoral approaches and a
closer partnership among the international development agencies, governments, civil
society groups and the private sector.
The outcomes of “Copenhagen+5” contain a lot of positive and challenging
implications for WHO. The political declaration mentions health twice. Paragraph 7 of
the Political Declaration reads: “...We are convinced that universal access to high

quality education, ...health and other basic social services ...are essential for the
achievement of the objectives of the Copenhagen Declaration and Programme of
Action Paragraph 7 bis continues: “We affirm bur pledge to place particularfocus on
and give priority attention to the fight against the world-wide conditions that pose severe
threats to the health, safety, peace, security and the well-being of our people. Among this
conditions are: chronic hunger, malnutrition ... endemic, communicable and chronic
diseases, in particular HIV/AIDS, malaria and tuberculosis”.
The final Outcomes document mentions WHO seven times in various contexts.
The most significant results from a strategic point of view include the following:

1.

That health is no longer confined to the narrow issue of delivery of basic services
(Commitment 6) but is now seen as a key component of poverty reduction

strategies (Commitment 2) as well as strategies for promoting full employment
(Commitment 3). In fact, WHO’s poverty and health strategy is specifically
specified as the model to be followed.
2.

That “organizations of the United Nations system” (i.e. including Bretton Woods)
are specifically requested to work with WHO “to integrate the health dimension
into their policies and programmes”. A very specific list of economic,
environmental and social issues is listed (para 83). (See below)

3.

That WHO is mandated to undertake a range of measures related to the
implications of trade in health goods and services to meet the needs of poor people.
Ln addition para 80 also agrees the right of countries to “protect and advance access
to life-saving, essential medicines “through the exercise of options available under
international agreements.

The table below quotes some paragraphs from the final outcomes document
(10 commitments), which have most significance for WHO and offer opportunities for
the organization to pursue its corporate strategy with much wider scopes.

Commitment

WHO-relevant Paragraphs

1. To create an economic, political, social, 10 (c) bis "Reduce negative impacts of
cultural and legal environment that will enable international financial turbulence on social and
people to achieve social development
economic development, inter alia, through ...
taking measures to protect basic social services,
The commitment places primary responsibility on in particular education and health, in the policies
governments for creating conducive social, and programmes adopted by countries when
economic and political environments for “people- dealing with internationalfinancial crises”;
centred development”. It recognises the need for
the reduction of negative impacts of international 16 (a) "Promoting increased corporate awareness
financial turbulence on social and economic of the inter-relationship between social
development, correctly acknowledges the positive development and economic growth.
interaction among environmental, economic, and
social policies, and recommends more crosssectoral approaches.

2. To eradicate poverty in the world, through 27bis "In the context of comprehensive national
decisive national actions and international strategies on poverty eradication, integrate
cooperation, as an ethical, social, political and policies at all levels including .... Giving priority
to investments in education and health, social
economic imperative of humankind.
protection and basic social services... ”
The commitment urges countries to incorporate
concrete poverty reduction targets and relevant 27 bis (u) "Using health policies as an instrument
strategies in their national policies, employ multi­ for poverty eradication, along the lines of the
sectoral approaches to poverty, give priority to World Health Organization (WHO) strategy on

2

investments in health and education, and use poverty and health, develop sustainable and
health policies as a means for poverty reduction. effectively managed pro-poor health systems

which focus on the major diseases and health
problems affecting the poor, achieving greater
equity in health financing, and take also into
account the provision of and universal access to
high quality primary health care throughout the
life cycle, including sexual and reproductive
health care, not later than 2015, as well as health
education programmes, clean water and safe
sanitation, nutrition, food security and
immunisation programmes”

"Expand opportunities for productive
basic priority of our economic and social employment, including self-employment ... by
policies, and to enable all men and women to investing in the development of human resources
attain secure and sustainable livelihoods through
and employability, especially through
freely chosen productive employment and work, education ... occupational safety and health”.
3. To promote the goal offull employment as a 36.

The main focus of commitment 3 is on the issue
of child labour, women’s employment, and most
importantly for WHO, employability and a safe
work environment.
The commitment puts
significant attention on work-related injuries and
occupational diseases, and their economic
implications for individuals and the entire health
systems.

38 (d) "Promoting safe and healthy settings at
work in order to improve working conditions and
to reduce the impact on individuals and health
care systems of occupational accidents and
diseases".

It is quite remarkable that the need for changing
policy regarding full employment is justified on
the grounds of excess health care costs caused by
occupational diseases and work-related injuries.

4. Promote social integration by fostering 21bis “Recognize the contribution of indigenous
societies that are stable, safe and just and that people to society, promote ways ofgiving them
are based on the promotion and protection of all greater responsibility for their own affairs
human rights, as well as on non-discrimination, through, inter alia:
tolerance, respect for diversity, equality of
opportunity, solidarity, and participation of all (ajSeeking means ofgiving them effective voice in
people, including disadvantaged and vulnerable decisions directly affecting them;
groups and persons.
(b)Encouraging United Nations agencies within
The main issues of the commitment are the rights their respective mandates to take effective
of the disabled, indigenous people and migrants, programmatic measuresfor engaging indigenous
people in matters relevant to their interests and
gender issues, and ageing.
concerns”.
60. “Exchange views and information on national

experience and best practices in designing and

3

implementing policies and programmes on
ageing".
61. “Empower persons with disabilities to play
theirfull role in society. Special attention
should be given to women and children with
disabilities and to persons with developmental,
mental andpsychiatric disabilities ”.
6 Ibis “Ensure access to employmentfor persons
with disabilities through the organization and
design of the workplace environment and improve
their employability through measures which
enhance education and acquisition of skills;
through rehabilitation within the community
wherever possible; and other direct measures,
which may include incentives to enterprises to
employ people with disabilities ”.

72. “Ensure gender mainstreaming in the
implementation of each of the further initiatives
related to each of the commitments made at the
Summit, considering the specific roles and needs
of women in all areas of social development, by,
inter alia, evaluating the gender implications of
proposals and taking action to correct situations
The commitment calls for building capacities at in which women are disadvantaged. The use of
different levels for gender analysis, evaluation of positive or affirmative action and empowerment
program and policy outcomes from a gender programmes is commended to both Governments
perspective, and producing gender desegregated and international organizations”.

5. To promote full respectfor human dignity and
to achieve equality and equity between women
and men and to recognize and enhance the
participation and leadership roles of women in
political, civil, economic, social and cultural life
and in development.

statistics.

73 bis. “Increased efforts are needed to provide
It talks about the importance of health services for equal access to education, health, and social
safe motherhood, and stresses gender aspect of services and to ensure women’s and girls ’ rights
to education and the enjoyment of the highest
HIV/AIDS.

attainable standard ofphysical and mental health
and well-being throughout the life cycle, as well
as adequate, affordable and universally accessible
health care and services including sexual and
reproductive health, particularly in the face of the
HIV/AIDSpandemic; they are also necessary with
regard to the growing proportion of older
women ",
73ter.“Ensure that- the reduction of maternal
morbidity and mortality is a health sector priority
and that women have ready access to essential
obstetric care, well equipped and adequately
staffed maternal health care services, skilled

4

attendants at delivery, emergency obstetric care,
effective referral and transport to higher levels of
care when necessary, posl-partum care andfamily
planning in order to, inter alia, promote safe
motherhood, and give priority attention to
measures to prevent, detect and treat breast,
cervical and ovarian cancer and osteoporosis, and
sexually-transmitted
infections,
including
HIV/AIDS".
6. To promote and attain the goals of universal 73 bis. “Ensure appropriate and effective
and equitable access to quality education, the expenditure of resources for universal access to
highest attainable standard of physical and basic education and primary health care, within
mental health, and the access of all to primary the country context, in recognition of the positive
health care, making particular efforts to rectify impact this can have on economic and social
inequalities relating to social conditions and development, with particular efforts to target the
without distinction as to race, national origin, special needs of vulnerable and disadvantaged
gender, age or disability; respecting and groups".
promoting our common and particular cultures;
Governments ’
primary
striving to strengthen the role of culture in 74. “Recognize
development; preserving the essential bases of responsibility for providing or ensuring access to
people-centred sustainable development; and basic social servicesfor all; develop sustainable,
contributing to the full development of human pro-poor health and education systems by
resources and to social development, with the promoting community participation in planning
purpose of eradicating poverty, promoting full and managing basic social services, including
and productive employment andfostering social health promotion and disease prevention;
integration.
diversify approaches to meet local needs, to the
extent possible utilising local skills and
The commitment calls governments to ensure resources”.
provision of and access to basic social services
for all, develop pro-poor health systems, improve 74bis. “Improve the performance of health care
their performance, and combat those major systems, in particular at the primary health care
infectious and non-communicable diseases that level, by broadening access to health care ”.
inhibit economic and social development.

75. “Take all appropriate measures to ensure that
infectious andparasitic diseases, such as malaria,
tuberculosis, leprosy and schistosomiasis, neither
continue to take their devastating toll nor impede
economic and social progress; and strengthen
national and international efforts to combat these
diseases, inter alia, through capacity building in
the developing countries with the cooperation of
the World Health Organization including support
The commitment encourages WHO to foster for research centres”.

The commitment pays significant attention to the
issue of HIV/AIDS. It suggests strengthening
political commitment and efforts at the
international and national levels against
HIV/AIDS, with a focus on developing countries.
The major attention is on the prevention of the
infection’s transmission.

partnership with the private sector, particularly
pharmaceutical industry, to increase investment in
finding remedies for the diseases of developing
countries, and for making medicines more easily
available to poor countries. The attention is

78. “Encourage, at all levels, arrangements and

incentives to mobilize commercial enterprises,
especially in pharmaceuticals, to invest in
research aimed at finding remedies that can be

5

focused on the essential medicines and the role of provided at affordable prices for diseases that
intellectual property rights for promoting further particularly afflict people in developing countries,
and invite the World Health Organization to
research.

The commitment contains very significant
messages for WHO regarding its role in the
globalization process. Such role is seen as
building capacities at different levels in analyzing
health consequences of international agreements
and in designing appropriate policy responses to
them.

consider improving partnerships between the
public and private sectors in the area of health
research ”.

82. “Invite the World Health Organization, in
collaboration with UNCTAD, the World Trade
Organization and other concerned agencies, to
help strengthen the capacities of developing
countries, particularly the least developed
The most important message for WHO is that the countries to analyze the consequences of
commitment urges other UN organisations to agreements on trade in health servicesfor health
establish a closer cooperation and partnership equity and the ability to meet the health needs of
with WHO, in order to incorporate health people living in poverty, and to develop policies to
dimensions into their sectoral policies and ensure the promotion and protection of national
programmes, and to support countries to do the health services
same.

82bis. “Invite the World Health Organization to
cooperate with Governments, at their request, and
with international organizations in monitoring
and analyzing the pharmaceutical and public
health implications of relevant international
agreements, including trade agreements, so that
Governments can effectively assess and
subsequently develop pharmaceutical and health
policies and regulatory measures that address
their concerns and priorities, and are able to
maximize the positive and mitigate the negative
impact of those agreements”.

83. “Invite the organizations of the United Nations
system to cooperate with the World Health
Organization to integrate the health dimension
into their policies andprogrammes, in view of the
close interdependence between health and other
fields and the fact that solutions to good health
may often be found outside of the health sector
itself; such cooperation may build on initiatives
undertaken in one or more of the following areas:
health and employment, health and education,
health and macroeconomic policy, health and
environment, health and transport, health and
nutrition, health and food security, health and
housing, development of more equitable health
financing systems and trade in health goods and
services”.

6

83bis "Invite the United Nations system to support
national efforts, where appropriate, to build on
initiatives undertaken in one or more of the abovementionedfields”.
7. To accelerate the economic, social and human 97bis “Support the recommendations contained in
resource development of Africa and the least the Report of the Secretary-General (A/52/871S/1998/318) and in that context await the outcome
developed countries.
of the open-ended ad hoc working group on the
In this commitment, the most relevant theme for causes of conflict andpromotion ofdurable peace
WHO is the issue of HIV/AIDS and socio­ and sustainable development in Africa”.

economic development in Africa.
The
commitments pay a special attention to the
problem of AIDS among youth, and suggest some
concrete targets for reducing the prevalence and
the rate of the infection. Prevention of the
transmission of HIV is seen as a priority.

98. “Support African Governments in expanding
and strengthening programmes related to young
people and HIV/AIDS through developing a
collective strategy with the donor community,
international organizations and non-governmental
organizations, facilitated by the establishment of
national young people's task forces, in order to
ensure the necessary multi-sectoral response and
the interventions to raise the awareness and
address the needs ofyoung people, as well as the
needs of those living with HIV/AIDS and children
orphaned by AIDS”.

99d. “Develop a core set of indicators and tools to
monitor implementation ofyouth programmes and
progress towards achievement of the target to
reduce infection levels in youngpeople by 25% by
2005”.
8. To ensure that when structural adjustment 106. “Establish participatory mechanisms to
programmes are agreed, to they include social undertake assessment of the social impact of
development goals, in particular eradicating structural adjustment programmes and reform
poverty, promoting full and productive packages before, during and after the
employment, and enhancing social integration
implementation process with a view to mitigating
their negative impact and developing policies to
The commitment calls for establishing improve their positive impact on social
participatoiy mechanisms for the assessment of development goals. Such assessments might
social impacts of adjustment policies. The involve the support and cooperation of the United
commitment invites United Nations system to Nations system, including the Bretton Woods
cooperate with Bretton Woods Institutions in this institutions, regional development banks and
area. For WHO this means more active organizations of civil society”.

participation in the PRSP and debt relief process,
which are the subject of the main focus of
commitment 8.

7

WTO/TRIPS Agreement, the Doha Declaration and the Intellectual Property

Bill 2003, Sri Lanka
By Dr K Balasubramaniam
“No one should be tooled by the festive atmosphere of these celebrations. Outside there is anguish and
fear, insecurity about jobs and what Thoreau described as a ‘life of quiet desperation"1.

This statement was made by the Secretary General of United Nations Conference on Trade and
Development (UNCTAD). The festive atmosphere was a party in Geneva May 1998. The Trade Ministers
were toasting fifty years of free trade. But the UN building where the celebration was taking place had to
be surrounded by heavily armed security personnel to protect the revellers from people all over the world
who had assembled in Geneva to protest against the World Trade Organisation (WTO).
Why this fear and anguish, insecurity about jobs and life of quiet desperation? The answer is globalization
and liberalization and multilateral trade agreements which represent an unprecedented, transfer of power
over economic functioning from the heads of Nation - States to the dominant actors in the market place
namely the Transnational Corporations (TNCs).

While thousands of people were expressing their fear and anguish in Geneva, nearly a million people
worldwide from all social sectors including farmers, indigenous people, workers, women, ethnic groups and
the unemployed were expressing their rejection of WTO, the multilateral trading system and neoliberal
policies. They were participating in the first international action of People’s Global Action (PGA) against
'free1 trade and WTO. Global street parties were celebrated in 35 cities all over the world, including
Geneva, Birmingham, Sydney, Toronto and Prague, with several thousand people in each city against the
WTO and their neoliberal policies.
On May 18,1998, 23 regional conferences against the WTO were held in India. On May 1,1998 hundreds
of thousands of peasants and workers, participating in a massive national rally, called upon the Indian
government to withdraw from the WTO. People's Global Action, a worldwide alliance of organizations and
grassroots movements from 56 countries of all continents was formed in February 1998. The manifesto is
available at ww.agp.org.

The WTO, WB and IMF are three neocolonialist international agencies used and controlled by the rich
industrialized nations particularly G7 to continue the agenda of the colonialists.
People from developed and developing countries have repeatedly assembled at the meetings of WTO,
WB/IMF and G8. These included massive protests in Geneva, Seattle, Toronto, Washington, Prague,
Davos, Genova and recently Evian.
When fifty to hundred thousands of people assemble together, it is possible that a section of the protestors
become violent. Unfortunately the main stream media coverage was corporate led and therefore
concentrated on the sensationalism of the violent aspects of the protest without looking into examining and
analyzing the real issues. The protestors' message is to show their concerns that globalization and

liberalization focus on economic growth and do not accommodate public health principles, social values,
nor do they address issues of social development and equity essential to human development.

Doha Declaration on the TRIPS Agreement and Public Health
The Seattle WTO Ministerial Conference seems to have been a turning point for developing countries.
Since then, there has been an organized and sustained campaign by developing countries supported by
NGOs including the Third World Network (TWN) Health Action International (HAI) Consumer Project on
Technology (CPT) OXFAM, Medecins sans Frontieres (MSF) to solve the conflicts and controversies and
clarify that the TRIPS Agreement should not prevent governments from taking measures in favour of public
health.
This process, initiated by the Africa Group of countries with active support from the majority of the
developing countries including India and Sri Lanka, saw the developing countries demanding a common
understanding on the TRIPS Agreement. This common understanding was that the Agreement allowed
the degree of flexibility necessary to meet public health objectives, particularly in relation to compulsory
licenses, parallel importation and exceptions to patent rights. This was thought necessary, not so much
because the TRIPS Agreement lacked clarity, but more because of the political obstacles that were put in
their way in attempting to put into effect the inherent flexibility of the TRIPS Agreement at the national level.
The developing countries were moved to take this action in order to give effect to the conviction that the
TRIPS Agreement and its provisions should not prevent WTO Members from adopting measures
necessary to protect public health, including measures to ensure access to affordable medicines.
At the Fourth WTO Ministerial Conference (9-14 November 2001) held in Doha, Qatar, WTO Members took
the unprecedented step of adopting a special declaration on issues related to the TRIPS Agreement and
Public Health.

The Doha Declaration thus represents a political victory for developing countries including Sri Lanka and
India. It is a strong, political statement, which provides a degree of security and acts as a sheet anchor for
developing countries in adopting national level measures necessary to meet public health objectives
against the fear of very costly legal battles. However, the Declaration was only the first step. The real test
of the success of the Declaration rests at the national level whether or not developing countries will proceed
to lako tho necessary measures at the national level to put into effect public health safeguards provided for
In tho I RIPS Agreement and reiterated and recognized in the Doha Declaration. Why-did-lndia-neFtakeany-of-these-neeessaiy-measures^y-Indiarraonsumera-neetpan-answer^

The Intellectual Property Bill 2003, Sri Lanka
The Intellectual Property Bill 2003 Sri Lanka was placed on the order paper of Parliament 21st May 2003.
The Supreme Court assembled on 6lh June to hear three petitions and to determine whether the Intellectual
Property Bill 2003 or any provision thereof was inconsistent with the Constitution of Sri Lanka.
The petitioners' contention was chiefly based on the position that the mitigatory features which were
incorporated in the TRIPS Agreement have not been included in the Bill.
1

Doha Io Delhi - a retreat on healthcare. Having fought and won at Doha will India surrender at Delhi? by NB Zaveri.

-2-

Tho petitioners cited three examples as important issues that should have been taken into consideration.

Articles 30 & 31 of the TRIPS Agreement which provide for a State to make provision for the use of
the subject matter of a patent for the domestic market without the prior authorization of the patent
holder in certain situations such as national emergencies.
The Doha Declaration on the TRIPS Agreement and Public Health which makes provisions for
compulsory licensing and parallel importing of pharmaceuticals to meet national health
emergencies.
The TRIPS Agreement includes several other mitigatory measures which are allowed under the
agreement.

a.

b.

c.

The judges noted that none of these measures have been incorporated in the Bill. They added that these
provisions were specifically included so that TRIPS consistent public health safeguards can be provided for
in national intellectual property bills. The judges determined that several clauses in the Intellectual Property
Bill 2003 were inconsistent with the Article 12 (1) of the constitution.
The present Bill, therefore, needs to be amended to include public health safeguards provided for in the
TRIPS Agreement and underscored in the Doha Declaration. These safeguards include government use,
parallel imports and compulsory licensing.
In order to examine and analyze the present scenario related to Intellectual Property Bill 2003 and to
propose appropriate amendments to the Bill, the Ministry of Health, Nutrition and Welfare and the
Department of Commerce, Ministry of Commerce and Consumer Affairs requested Health Action
International Asia - Pacific to organize a National Seminar on "The TRIPS Agreement, the Intellectual
Property Bill and Public Health”. This was convened on 4lh July 2003 in Colombo.

All stakeholders in the health and pharmaceutical fields were invited. The 76 participants included:

1.

2.
3.
4.
5.

6.

Officials from the
- Ministry of Heath, Nutrition and Welfare
Ministry of Commerce and Consumer affairs
I u(j<il Dlvlulon, Mlnluliy of Forolgn Affairs
- Customs Department
Attorney General’s Department
The Director, National Intellectual Property Office
A member of the Intellectual Property Advisory Commission
Senior staff members from the Departments of Pharmacology, Faculties of Medicine
Representatives from
■
\
- Research Institutes
- .NGOs, ’ ■ ■/ .
'

- .■Pharmaceutical Manufacturer's Associations- Media
Health activists

-3-

Reports of the proceedings of the seminar and issues related to the Intellectual Property bill were carried in
the Sri Lankan media.2

The objective of the seminar was to propose appropriate policy options & TRIPS consistent safeguards
including provisions ‘or government use, parallel imports and compulsory licensing and to present them to
the government for consideration by the drafters of the amendments. One resource person presented a
paper entitled "TRIPS Consistent Provisions to Safeguard the Public Health Objectives of the Government”.
This was discussed by a panel of seven resource persons and later submitted to the Ministry of Health for
follow-up.

I take this opportunity to give you good news.

Patent-free innovation possible
A group of top scientists, economists and NGOs (including HAIAP) sent a letter on 7lh July to Kamal Idiris,
Director General of the World Intellectual Property Organization (WIPO) asking him to promote "open”,
models of innovation that do not rely on patents.
The response was swift and very positive. WIPO Assistant Director General and Legal Council Francis
Gurry issued a statement which appeared in Nature Vol. 424, 10th July 2003 that read as follows:
"The use of open and collaborative development models for research and innovation is a very important
and interesting development, especially in areas where technology approaches the domain of basic
science and scientific discovery. The Director General of WIPO looks forward with enthusiasm to taking up
the invitation to organize a conference to explore the scope and application of these models as vehicles for
encouraging innovation".
We were surprised at how fast they responded. We are not aware of any other cases where WIPO has
agreed to hold a meeting that will explore the benefits of no Intellectual Property (IP) or weak IP in the
context of development of public goods.

It is relevant to note that WIPO is the UN agency mandated to implement the Paris Convention on
Protection of Intellectual Property till the WTO was established on 1s' January 1995.

This is a very promising initiative to solve the controversy of patents, commercial R & D and financial
incentives.

i.
II.
ill.
iv.

Patents Bill: Patents to get priority in new draft - Daily Mirror 4th July 2003
Patents Rights in New Bill by Kishani S Fernando - Daily Mirror 5th July 2003
IP Bill: Narrow Escape from a National Disaster by Dilshani Samaraweera - The Business Standard 11th July
2003
Access to Drugs - a human right; Supreme Court Judgment gives hope to poor patients by Kishanie, S Fernando
- Dally Mirror 11 July 2003

-4-

h(tp://www.cptcch.org'ip/wipo/kamil-idris-7july2003.pdl'

.7 July 2003
Director General
Dr. Kamil Idris, Director General
World Intellectual Property Organization
Geneva, Switzerland
Dear Dr. Idris:

In recent years there has been an explosion of open and collaborative
projects to create public goods. These projects arc extremely
important, and they raise profound questions regarding appropriate
intellectual property policies. They also provide evidence that one can
achieve a high level ol' innovation in some areas of the modern cconomy
without intellectual property protection, and indeed excessive,
unhalanced, or poorly'clcsigned intellectual property prolcc(ions may be
cpun(cr-pro(iiicnYcr~Wc ask (hat the World Intellectual Property
Organization convene a meeting in calendar year 2004 to examine these
new open collaborative development models, and to discuss their

7/8/2003

Page 2 of 12

relevance for public policy. (See Appendix following signatures for
examples of open collaborative projects to create public goods).

Sincerely,
(in alphabetical order)

Alan Asher
Consumers Association
London, UK
Dr. K. Balasubramaniam
Co-ordinator of Health Action International, Asia Pacific
Columbo, Sri Lanka

Konrad Becker, Director
Institute for New Culture Technologies /tO
Vienna, Austria

Jtechai Bcnklcr
Wofcssor of Law
Yale Law School
New Haven, CT USA
Jonathan Berger
Law and Treatment Access Unit
AIDS Law Project
University of the Witwatersrand
South Africa
James Boyle
Professor of Law
Duke Law School
Durham, NC USA

Diane Cabell
I*pctor, Clinical Programs, Berkman Center for Internet & Society
llarvard Law School
Cambridge, MA, USA

Darius Cuplinskas
Director, Information Program
Open Society Institute
Budapest, Hungary
Marie de Ccnival
Chargee de mission ETAPSUD
Agcnce Nationale de Rcchcrchcs sur Ic Sida (A.N.R.S.)
INSERM 379 "Epidemiologic ct Sciences Socialcs appliquccs a I'innovation
medicale"
Marseille, France

7/8/2003

Page 4 of 12

Cape Town, South Africa
Gwen Hinzc
Staff Lawyer
Electronic Frontier Foundation
San Francisco, CA USA
Ellen F.M. 't Hocn LL.M.
Medccins sans Fronticrcs
Access to Essential Medicines Campaign
Paris, France

Jeanette Hofmann
Nexus & Social Science Research Center
Berlin, Germany

Aidan Hollis
Associate Professor, Department of Economics,
ii versity of Calgary, and
) MacDonald Chair in Industrial Economics
Competition Bureau, Industry Canada
Gatineau, Quebec Canada

«

Dr Tim Hubbard
Head of Human Genome Analysis
Wellcome Trust Sanger Institute
Cambridge, UK
Nobuo Ikeda
Senior Fellow, Research Institute of Economy, Trade and Industry
Tokyo, Japan

Professor Wilmot James
Chair, Africa Genome Initiative
Social Cohesion & Integration Research Programme
man Sciences Research Council
pc Town, South Africa

N

Niyada Kiatying-Angsulcc, Ph.D.
Drug Study Group
Thailand

Philippa Lawson
Senior Counsel, Public Interest Advocacy Centre
Ottawa, Canada
Lawrence Lessig
Professor at Law and Executive Director of the Center for Internet and
Society
Stanford Law School
Stanford, CA USA

7/8/2003

Universile de la Mediterranee
Marseille, France'

Ebon Moglen
Professor of Law & Legal History
Columbia University
General Counsel, Free Software Foundation
NY, NY USA
Ralph Nader
Consumer Advocate
Washington, DC USA

Hce-Scob Nam, Patent Attorney
Intellectual Property Left
Korea Progressive Network J1NBONET
Korea
James Orbinski MD
Associate Professor
Centre for International Health
University ofToronto, Canada
Bruce Perens
Director, Software in the Public Interest Inc.
Co-Foundcr, Open Source Initiative, Linux Standard Base
USA

Greg Pomcrantz,
Fellow, Information Law Institute, New York University
New York, NY USA

Lauric Racine
President, Center for the Public Domain
Durham, NC USA
Eric S. Raymond
President, Open Source Initiative
USA

Juan Rovira
Senior Health Economist
The World Bank

Frederic M. Scherer
Emeritus, John F. Kennedy School, Harvard University
Cambridge, MA USA

Mark Silbcrgcld
Consumer Federation of America

i age (5oii.

Committee on intellectual property
The I lague, the Netherlands
Victoria Villamar
le Bureau Europeen des Unions de Consommateurs/
European Consumers' Organisation
Brussels, Belgium
Robert Weissman
Essential Action
Washington, DC USA

Professor Jonathan Zitlrain
Co-Director, Berkman Center for Internet & Society
Harvard Law School
Cambridge MA USA

APPENDIX
Open collaborative projects to create public goods

These arc some of (he projects (hat could be discussed:
I.

The IETF and Open Network Protocols.

The Internet Engineering Task Force has worked for years to develop the
public domain protocols that are essential for the operation of the
Internet, an open network that has replaced a number of proprietary
alternatives. It is important that WIPO acknowledge the success and
importance of the Internet, and appreciate and understand the way the
IETF functions.
The IETF is currently struggling with problems setting open standards.
When the IETF seeks to adopt a standard, there is uncertainty if anyone
will later claim the standard infringes a patent. One suggestion to
address this problem is to create a system whereby a standards
organization could announce an intention to adopt a standard, and after
a reasonable period for disclosure, prevent parties from later enforcing
non-disclosed infringement claims.
2.

Development of Free and Open Software

This movement is highly decentralized, competitive, entrepreneurial,
heterogeneous, and devoted to the publishing of software that is freely
distributed and open. It includes projects (hat embrace the GNU General
Public License (GPL), which uses copyright licenses to require that
modified versions also be free software, and projects such as FreeBSD,
which use minimal licensing restrictions and permit anyone to make
non-frcc modified versions, as well as projects such as MySQL, which

7/8/2003

digital copyright regimes permit such practices as hypertext linking,
the use of materials in search engines such as Google, and liberal views
toward fair use.

4.

The Human Genome Project (I IGP).

In an April 14, 2003 state, the heads of state for the France, the US,
the UK, Germany, Japan and China issued a statement, which noted that:
"Scientists from six countries have completed the essential sequence of
three billion base pairs ofDNA of the human genome, the molecular
instruction book of human life. .. This information is now freely
available to the world without constraints via public databases on the
World Wide Web."
If Presidents Jacques Chirac and George Bush, Prime Ministers Tony Blair
and Junichiro Koizumi, Chancellor Gerhard Schroeder and Premier WEN
Jiabao can collaborate on a statement to herald efforts to create a
public domain database, free from intellectual properly claims, it is
time for the World Intellectual Property Organization to better
appreciate why these governments did not want the Human Genome patented.
5.

The SNP Consortium

A different example of a project to create a public domain database
involves single nucleotide polymorphisms (SNPs), which are thought to
have great significance in biomedical research. In 1999, the SNP
Consortium was organized as a non-profit foundation to provide public
data on SNPs. The SNP Consortium is composed of the Wellcome Trust and
11 pharmaceutical and technological companies including Amersham
Bioscicnccs, AstraZeneca, Aventis, Bayer, Bristol-Myers Squibb Company.
I loffmann-LaRochc, GSK, IBM, Motorola, Novartis, Pfizer and Searle. The
work was preformed by (he Stanford Human Genome Ccntcrm, Washington
University School of Medicine (St. Louis), (he Sanger Centre and the
Whitehead Institute for Biomedical Research. The mission of the SNP
consortium was to develop up to 300,()()() SNPs distributed evenly
throughout the human genome and to make the information related to these
SNPs available to the public without intellectual property restrictions.
By 2001 it had exceeded expectations, and more than 1.5 million SNPs
were discovered and made available to researchers worldwide. The SNPs
consortium, the I IGP and other similar projects represent different
,
notions regarding the intellectual properly rules for databases, and
more information about these projects would be useful in evaluating
assumptions and informing debates in the WIPO Standing Committee on
Copyright as it considers current proposals to convene a diplomatic
conference to adopt a treaty on new sui generis intellectual property
rules for databases.

6.

Open Academic and Scientific Journals

7/8/2003

Page 12 oT I

(he new jobs created, and the increased safety and efficiency for
services more than outweighed the money we would get from charging especially when you consider the additional bureaucracy that would be
needed to manage cost recovery. We think that judgement has proven
valid, as the world-wide market for GPS applications and services now
exceeds $8 billion annually."
James Love, Director, Consumer Project on Technology
h(lp;//www.cptech.org, mai I to: jamcs.love@cplecb.org
tel. +1.202.387.8030, mobile+1.202.361.3040

James Love, Director, Consumer Project on Technology
htlp://www.cptech.org, miiiHoijtuncs.loveff/’epIcch.org
tel. +1.202.387.8030, mobile +1.202.361.3040

7/8/2003

nation al e c o m o mi e s
Round of 'negotiations' Expressions like 'GATTstrophe', 'recolomsation',
scrutiny and were kept as a 'design for disaster', 'con­
secret preserve for trade quest by patent' and 'patent
with TRIPS agreement provisions which are vital if millions of people in
officials. Not only the pub­ folly' to describe the Final
Conducted by •
The General Agreement Sri Lanka are to have regular access to quality drugs at affordable pri­
lic but even other Minis­ Act gained currency.
• on Tariffs and Trade
tries or departments in the
The Final Act is not limi­
Dr.
Koththamalli
(GATT) came into force in ces. Health Action thus invited Dr. Balasubramaniam to explain the
national
governments ted to interborder trade is­
the mid 1940s. A new TRIPS provisions relating to patent rights and patient rights. Dr. Bala­
nior official of the Trade dustrialized countries but were not aware of the pro­ sues but the very function­
round of negotiations on
Ministry. There was no in return got little by way ceedings. For example, the ing of national economies
GATT began in Uruguay, subramaniam is widely regarded as world expert on drug pricing and
.technical support. Several of tariff reductions in agri­ Health Ministers or even and their accessibility to
in South America ory Sep­ national drug policies.
the World Health Organi­ TNCs in terms of financ­
small developing countries culture and textiles.
tember 20,- 1986. The
■ were represented by" the
Adding more confusion zation did not know about ing productive infrastruc­
GATT. Agreement was be guided by the objective the G77 know what was to USTR to investigate andI Trade Counsellor of the to the asymmetry of the the TRIPS Agreement till ture and market outlets.
confined to goods only. of development of devel- follow; how a master plan retaliate against countries> country's Permanent Mis- 'negotiating process' was it was finalized.
It sets forth rules govern­
But the developed coun­ oping countries and not would unfold - deception', which allegedly deny "ade-• sion to the UN in Geneva. the fact that no record of
The impact of the ing:
tries wanted to enlarge the just be concerned with lib- by design - the great be- quate and effective protec-• It is not unusual to see the TRIPS discussions was Agreement would affect • Intellectual Property
scope of GATT to several eralization and dismantling .trayal - broken promise.
tion Of IPRs". Super 301 some of these Trade Coun- made, in line with the gen­ each and every consumer
Rights;
other areas besides goods the existing regulatory ‘ In June 1988, the Asso-'' mandated the USTR to re­■ sellors. in Geneva being eral practice within GATT. in the world. However, « Foreign Investment;
in the new round which structures. National regu- ciation oi Iransnational ‘taliate against foreigni driven from one commit- Proposals have no recog­ consumers were left out.
• Infrastructural Services
came to be known as the latory frameworks Were to Corporations (TNCs) of practices which are unjus­■ tee. meeting to another. nized source and only
- Telecommunication,
In view of how the soUruguay Round of Nego- be respected. .
tifiable and burden or re­■ How can a single'negotia- those who participated, if called 'negotiations' took
Air Transport, Banking,
'gKions. These negotiaIt was .also agreed that submitted a joint paper to strict US commerce. The: tor' deal with teams of spe- they can yet remember, place and the Agreement
Finance and Insurance;
TOns went on till 1994 in negotiations on Intellectual GATT on IPRs. The AsSd- US is.ode of. the major' cialists and experts? The will know why certain was arrived at, the Final o Professional Services;
Geneva.
Property Rights (IPRs) ciation, not a member of/ trading partners of most issues under 'negotiations' provisions were adopted.
•
Health and Safety
Act has been described as
There was initial unity of should follow the approach GATT, first placed IPRs onl developing countries.
were extremely complex
Standards; and
There is no background the most non-transparent,
opposition by G77 (Group already contained in Arti-~ the GATT Agenda.
' The stage was now set: in nature. And there wasJ material that will be vital non-accountable, anti-peo- • Entire Trade in Goods
1 of the GAT1
Treaty" Within two months, in for arm-twisting, to force no coordination among de- to interpret the various., pie and pro-TNC Agreeof Developing Countries) cle________
.
The rules are all de­
led by Brazil, and India winch ensured that every ~August 1988, US President cbiintries to change their veloping countries. The re­ rules that have been writ­ ment in the history of in­ signed to allow maximum
when the major trading Member State had the free- Ronald Reagan signed the national legislation on pat- suit of the asymmetry was ten into the Agreement or ternational negotiations freedom for corporate de­
powers, at the start of the dom to pursue its own re- Omnibus Trade and Com- ents and to bring recalci- that the so-called 'negoti- at least to find out the and agreements.
cision-making and to mini­
negotiations in 1986, at­ gjrhe of protection of intel- petitiveness Act of 1988. trant. countries back to ating process' did not in- premises and intent of the
The TRIPS Agreement, mize the role of national
tempted to enlarge the lectual property and which This Act created two pro­ talks.There was hardly any volve give and take.
in particular, will deny bil­ governments in the econo­
adopted texts.
scope of GATT to include merely required that no visions: Super'301 and 'negotiations' in the real
It was give and give all . Further asymmetry: The lions of poor men, women my.
services, intellectual prop- :Member State.may use this Special 301.
In short, the Final Act
sense, of the word.
the iway for 'developing composition of each work­ and children all over the
erty and investment in ad- ;freedom arbitrarily and in
These provisions • ■me.negotiators
■ The'.negotiators tor
for tne
the countries. Heads I win : ing group was determined world access to even a represents an unpreceden­
dition to goods. A compro- ;a discriminatory manner strengthened the ability of 5deyeldped countries had Tails you lose as far as the at the presiding officer's limited number of basic ted transfer of power over
mise was reached.
;against the products or the United States Trade with them
‘
functioning
teams compris­ developed countries were direction and not as a re­ essential drugs for the economic
It was agreed that nego- ggoods imported from an- Representative (USTR) to ing hundreds of experts concerned.
sult of a consensus or of a treatment of common ill­ from the heads of nation­
tiators' relating to services . other country. The devel- retaliate against countries and specialists who were
states to the dominant ac­
Developing countries search for a balanced rep­ nesses.
were to be conducted out­ oping countries were satis­ for ’unfair trade practices very knowledgeable in the made several concessions, resentation
There was massive op­ tors in the international
______ of countries at
side the jurisdictional fied with this arrangement including alleged inade­ issues under discussion. ......
______
... . . different
___ ...levels of devel- position in several member market place, namely the
in terms
of agreeing„ to the
framework of GATT. —
and formal
------ ----------------talks started in quate protection of IPRs’.
countries to the Final Act transnational corporations.
Developing countries, on higher levels of protection opment.
These negotiations would January 11>87. Little did . Special 301 requires the the other hand, sent a se- of IPRs demanded by in(To be continued)
The ' entire Uruguay when it was concluded.
By Dr K Balasubramaniam

(Advisor and Co-ordi- At a recent seminar and elsewhere it was clear that many health offi­
. natnr. Health Action
cials and ethers involved in drafting relevant iaws are not quite dear
International Asia - Pa-

Health Action v

Dailyf/lirror

News

Saturday July 5, 2003

3

Patients9 rights in new Bill
By Kishanle S. Fernando

manufacturers, lawyers, dustry. The Intellectual equally.
other countries, Sri Lanka year, and despite repeated rights are protected in manufacture, transport and
With the Supreme Court and health activists took Property' Bill 2003 includ­
The Judges said there has failed to fulfill its in­ inquiries and requests, it draft legislation of this sale. This cannot be done
striking down several pat­ part in yesterday's moti­ ing the patent laws was in­ could not be equality ternational obligations and- was only made available kind. ■
by Drug control authori­
ent rights provisions in the vating dialogue at the troduced to meet Sri Lan­ among those who were un­ the health needs of the to the public on May 26,
Gothami Indikadahena, ties due to the lack of
abortive Intellectual Prop­ BMICH, with the focus on ka's international obliga­ equal pointing out at there public, by not incorporat­ leaving just two days for Deputy Director of Com­ qualified graduate phar­
erty' Bill as a violation of the "TRIPS Agreement, tions under various con­ was no level playing field ing these mitigatory meas­ the public to examine the merce made a presentation macists and also due to
the people's fundamental the Intellectual Property ventions and the World when powerful multi-na­ ures into the final Draft Bill and to challenge it for on TRIPS consistent pro­ some 8.000 varieties of
rights, top officials and Bill and Public Health.
Trade
Organisation tional companies were pit­ Bill.
any inconsistencies with visions to safe guard pub­ drugs being imported.
health activists met yester­
The driving force behind (WTO) agreement on the ted against defenceless
lic health objectives of the (According to Professor
Dr. D. M. Karunaratne, the Constitution.
day to discuss proposals the move to put patients Trade Related aspects of people.
including Senaka Bibile only 300Rohan Edirisinghe of Government
Director of the National
for a new Bill.
rights before patent rights Intellectual
Propertv
It was observed that al­ Intellectual Property Of­ the Centre for Policy Al­ some proposed amend­ 400 varieties would be
The aim was to ensure was Dr. K. Balasubrama- Rights (TRIPS).
though the TRIPS agree­ fice replying to the allega­ ternatives reiterating the ments in conformity with sufficient). He stressed
that millions of Sri Lan­ niam, Advisor and Coordi­ Attorney M. Sumathiran ment strengthens the posi­ tions that the provision for position said a mere publi­ the decision of the Su­ that public health protec­
kans would be able to ob­ nator of Health Action In­ discussed the Supreme tion of the patent holders, .compulsory licensing was cation of an advertisement preme Court.
tion should not be guided
tain safe and efficacious ternational Asia Pacific. Court's June 17 decision who are predominantly- removed at the last minute in the paper calling for
Prof. Tuly de Silva, Past by multi nationals. Sri
drugs at affordable prices He said the long term ob­ which struck down the In­ based in developed coun­ from the Bill said in 1998 suggestions for the draft President of the Pharma­ Lanka cannot afford to go
and that the rights of pa­ jective of the seminar was tellectual Property Bill as tries, it also provides for the Committee on Intellec­ Bill was not adequate no­ ceutical Society of Sri to international courts to
tients were given priority to ensure that Sri Lanka inconsistent with the Con­ mitigatory measures to en­ tual Property removed it tice.-The final version of Lanka said if the new Bill protect its rights and as
over the patent rights of had regular access to qual­ stitution of Sri Lanka, The sure patients are treated in because it could be a de­ the Bill should have been with TRIPS consistent such all measures should
global companies.
ity medicines which were judges determined that a more 'equitable' manner. terrent to foreign invest­ made available for public provisions on parallel im­ be taken for protection in
This came after the Su­ safe and effective at prices several clauses of the Bill
porting and compulsory li­ the new laws.
These measures were ment.
scrutiny.
preme Court in a powerful consumers in Sri Lanka dealing with patents were deliberately included in
The seminar was organ­
Attorney Sharmila An­ . He also said that the censing becomes law,
act of judicial activism re­ could afford.
inconsistent with Article the TRIPS agreement to thony of the Centre for State had an obligation un­ health professionals and ized by the Ministry of
minded government offi­
However this is depend­ 12 (1), which guaranteed minimise abuse of the mo­ Policy Alternatives said der International law, consumers need to be as­ Health in collaboration
cials that their main duty ent on the National Patent equal rights as well- as nopoly rights granted un­ the whole process of pre­ TRIPs and the Constitu­ sured that the drugs that with the Department of
was to protect the rights of Law which-is the policy equal protection. There­ der a patent and to ensure senting the Bill lacked in tion. The Attorney Gener­ are put on the market are Commerce and HAIAP
the people and not of glob­ instrument to make availa­ fore the provisions of the that the needs of public transparency.
als Department in particu­ of good quality safe and with the support of the
al companies.
ble low cost quality drugs TRIPS agreement cannot health are met.
She said although the lar has a responsibility to effective He stressed that South East Asia Regional
Ministry Officials, doc­ and also develop the na­ be applicable to de loped
While these measures Bill was published in the ensure that the state obli­ quality control should be Office of the World Health
tors, pharmacists, local tional pharmaceutical in- and developing cc ntries are widely prevalent in gazette on April 25 this gations under human sustained at the point of Organisation.

Commuter complaints

1 tiirttJ-------- :

National Intellectual Property Office says the next draft of the Bill would incorporate
compulsory licensing and parallel importing

By Dilsbani Samaraweera

he Ministry of
Health called for
a hasty meeting
last week of the local
health sector. Organised
by Health Action
International on behalf
of the Ministry Health,
the event assembled the
various stakeholders of
the health sector rang-.
ing from consumer
groups to doctors to
local and international
manufacturers of
pharmaceuticals to
various local authori­
ties. This came fast in
the heels of the Intellec­
tual Property OP) Bill
unveiled by the Minis­
try of Commerce and
Consumer Affairs.
Not surprisingly, the
general attitude towards
the fete of the IP Bill struct down unceremo­
niously as violating
fundamental rights by
the Supreme Court - was one of relief.
As a representative
from the Action Com­
mittee on Justice for -■- -■ '■
Patients put it “What if

T

this Bill actually we- ■
.. " asitis?How:

referring to the tight
patentjprotection
awarded by the IP Bill

___ of_2003.tp both products
and processes while
being extremely relaxed
in alleviating provisos.
For instance the Bill
makes no mention of
compulsory licensing
and allowances made
for parallel importing
was deemed inadequate.
Nevertheless, they are
the most basic of public
health defences granted
to World Trade Organi­
sation (WTO) member
states by the TRIPS
(Agreement nn TreHa...

Related Aspects of

w is it that a Bill - judged unconstitutional
Hights .-could have?
the threshold of Parliament in
spite of both the Legal Draftsman’s office and

Alternatives (CPA)
countries can be expect­ point out that if an IP
Property Advisory
regime does not incorcharged lack of trans­
Commission and State
ed by September at the
porate adequate safety
parency in drafting the
Counsel N. WigWTO ministerial
Bill.
measures to enable
neswaran - maintained
meeting in Cancun.
M. Sumanthiran,
that there was no
The second provision access to cheap drugs,
Attorney-at-Law, CPA,
secrecy in drafting the
Sri Lanka’s 19 million
of parallel importing
Bill.
population
slackens patent grip
In reply to
would be
over a country by
left to the “Despite repeated requests we the difficul­
widening purchase
ty of obtain­
tender
choice. It capitalises on
could
not
obtain
a
copy
of
the
ing a copy
mercies of
different prices, set by
of the BUI,
drug manufacturers for interna­
Bill. When we finally got the
Mr. Eliyattional
the same drug, in
hamby
pharma­
different parts of the
Bill we had less than a day to laughingly
world. Resorting to this ceutical
pointed out
provision Governments corpora­
read the bill and lodge an
that “These
tions in
can import the same
days even
the event
drugs from other parts
of the world priced
of a health entry with the Supreme
the President is__
In context of the local
’ having
The all­
health system, the
trouble
pervading
concerns were with
said “Despite repeated
getting at the Govern­
question therefore was
regard to accessibility
why the proposed IP Bill requests we could not
ment Printer You
and availability of
did not make use of the obtain a copy of the
should have contacted
medicinal drugs. The IP two basic measures
BilL When we finally
your MP.”
Bill’s unreserved patent advocated in TRIPS on
got the Bill we had less
While this did raise a
than a day to ■' • i the
protection, for a period
laugh, many including
behalf of public wel­
of 20 years on both
local manufacturers of
fare? Particularly since bill and lodge an entry
products and processes, even the developed west with the Supreme
medicinal drugs and.
Court.”
effectively cuts off
including those with
consumers seem to view
Why is it, queries the
access to generic drugs. highly advanced domes­
the shot down IP Bill as
CPA, that the Bill was
Because once patent
a narrow escape from a
tic pharmaceutical
not freely available for
national disaster
protection is obtained
industries, have
for an item - in this case pounced
_ ___________________________________________
The
a particular drug - only on these
“These days even the
the patent holder would safety
have the right to manu­ provisions
President is having trouble
facture, sell, import and to pillow
export the item during
their
getting at the Government .
rhe patent period.
. publics.
-Which-means-both.tlte';'7

be outlawed.
Currently Sri Lanka
is hugely dependent on
the Attorney General’s office?”
India for generics, but
once these drugs are
The catch here is that less developed and
Rights) agreement.
patented in Sri Lanka
developing countries at the importation of
drugs manufactured
The right of compul­
a disadvantage - thev
through compulsory
sory licensing is an
generics would be
illegal.
escape valve for Gcrern- license must be predom­ cannot manufactur
inantly sold locally. This home and it is uncle
The fear is that
ments from patent
whether another coun­
limits the option of
obligations. It can be
.. ithout generics to hold
manufacture for export. try can do so on their
down prices, the retail
invoked at times of
behalf. Therefore the
national health crisis or TRIPS also does not
prices of drugs would
subject of compulsory
specify whether a
sky rocket. Medical
anti-competitive prac­
licensing has been
country without the
tices by patent holcs-s.
sources stress that even
required expertise could under constant debate.
limited access to gener­
Resorting to it a GovHowever, local WTO
ics and cheaper drugs is
ernment can compulso­ award a compulsory
Committee sources from a necessity in Sri
licence to a third party,
rily licence - even
the Department of
based in another coun­
Lanka, as ?
>-ity of
without the patent
Commerce are uuiifident the
-mat
nnot
that a resolution favour­ afford branded patent
third party to manufec- needed drugs.
’■*> • xa
fv* druv
This ambiguity leaves able to less developed
protected drugs. They

e

of Heath
draft of the
Action
____________________
I? Bill
International pointed
public scrutiny? And - - would incorporate the
out that the US Govern­ how is it that a Bill suggested safeguards of
ment - the strongest
judged unconstitutional compulsofyficensing
lobbyist at the XVTO in
and violating Fundaand paralid importing.
favour of patent rights - mental Rights of
itself controlled private citizens of this country could have made its way
sector dictated drug
to the threshold of.
prices by threatening
Parliament in spite of
compulsory licensing
both the Legal Drafts- •
during nothing more
man’s office and the
devastating than 10
Attorney General’s
reported cases of
office?
anthrax.
The State - represent­
The IP Bill also came
under fire from various ed by Dn D. M. Karunaratne, the Director of
other quarters. On top
of accusations of being IntsllsciiiQl ProDcrtv
President’s Counsel Ben
biased in favour of
Eliyathamby, Member
corporate rights, the
of the Intellectual
Centre for Policy

TRIPS »nd Patents: effects on medicinal drugs
Many argue that patenting causes price increases of drags. An
a
I 1RIPS or the Agreement on

Trade Related Aspect? of
Intellectual Property Rights is one
of the most contentious international trea­ International Monetary Fund research by A. Subramanian shows that drug
ties of all time. It came into force in 1995
and aims at awarding the same level of prices in Malaysia - where patent protection exists - are 20% to 760%
protection to Intellectual Property as to
any other product traded among the World higher than in India - where patent protection is limited and generics
Trade Organisation (WTO) membership.
Therefore the concepts of National compete with branded drugs. In Egypt, with the introduction of product
Treatment and Most Favoured Nation
Treatment are applicable towards Intellec­ patents, prices of drags increased between five and six times.
tual Property as well. As a result member
states are bound to treat nationals of oth­
These two reasons block competition on
er member states the same as ones own
price. Measures like parallel importing
nationals when it comes to Intellectual
rights and compulsory licensing were
Property rights and any advantages, fa­
The minimum welfare loss due to patents
USS 3.5 billion-USS 10.8 billion.
adopted to counter these unfair and even
vours, privileges or immunity granted to
anti-competitive advantages transmitted
one must be extended to all.
Income gains by foreign patent owners
USS 2.1 billion - USS 14.4 billion.
to patent holders through patent rights.
Sri Lanka signed the General Agree­
Those in favour of patent rights argue
ment on Tariffs and Trade (GATT) in 1994
that the minimum patent period of 20
along with another 124 nations.
ment of IP rights in various degrees lion.
years does not mean 20 years of commer­
In 1995 GATT transformed into the among different WTO countries indicates
Many also argue that patenting causes cial opportunity.
present WTO. As a founder member of a shift in resultant benefits in favour of price increases of drugs. An Internation­
This is because the patent rights are cal­
GATT Sri Lanka became a member of the the technologically advanced countries. al Monetary Fund research by A Subrama- culated from the time of patent applica­
WTO while still bound by the require­ This is particularly acute where essential nian shows that drug prices in Malaysia • tion. The activities of actually obtaining
ments of GATT. These include the TRIPS items like medicinal drugs are concerned. where patent protection exists - are 20% the patent, and in the case of drugs, the
agreement and the implementation of the
A recent World Bank study shows the to 760% higher than in India - where pat­ clinical trials and various other legal bar­
TRIPS advocated Intellectual Property (IP) gainers and the losers in dollars. The min­ ent protection is limited and generics com­ riers, are time consuming but are taken off
regime.
imum welfare loss to a sample of develop­ pete with branded drugs. In Egypt* "Hh the granted 20-year period. These process­
Patent protection, like other Intellectu­ ing countries (Argentina, Brazil, India, the introduction of product patents, pric­ es limit the actual sales pebiod when the
al Property Rights, is expected to boost Mexico, Korea and Taiwan) due to patents es of drugs increased between five and six drug is in the market, to around eight
creativity and encourage innovation on medicinal drugs, was between USS 3.5 times.
years from the allocated 20. Given the huge
through legal protection provided to inven­ billion - USS 10.8 billion. Meanwhile the
This r>se in pricing is due to two reasons. costs of research and development, drug
tions and the guarantee of commercial income gains by foreign patent owners Patenting stops the creation of generics. manufacturers say, patent protection is
returns to inventors. However, the enforce-. were between USS 2.1 billion - US$ 14.4 bil- Patenting also creates drug monopolies. essential for cost recovery.

X

Therefore WTO negotiations have aimed
at achieving degree of balance between
profit and public welfare. As it currently
stands TRIPS allows patent rights to man­
ufacturers while also ensuring that Gov­
ernments can revoke or over-ride patent
rights in certain specified situations in the
public interest
The deadline to provide patent protec­
tion to pharmaceutical products is Janu­
ary 2005.-DS

fasttrack
In favour of Patent Rights
Those in favour of patent rights argue that
the minimum patent period of 20 years does
not mean 20 years of commercial
opportunity.
This is because the patent rights are
calculated from the time of patent
application. The activities of actually
obtaining the patent, and in the case of
drugs, the clinical trials and various other
legal barriers, are time consuming but are
taken off the granted 20-year period. These
processes limit the actual sales period when
the drug is in the market, to around eight
years from the allocated 20.
Given the huge costs of research and
development, drug manufacturers say,
patent protection is essential for cost
recovery.

Oxfam India
Health Action International (Asia-Pacific)
People’s Health Movement
PRESS RELEASE

URGENT

g^atesHhj^Ho^ubli^Tealth^ay^ormeHJ^dviso^W^S^et^
responsible, foqfthehiiman suffering caused due to high cost of essential medicines^
Bangalore (India), 29lh July 2003: Over two billion people have no access to essential and life
saving medicines worldwide. WTO allows Multi National drug Companies to place profits above
people.

HIV/AIDS took 3.1 million lives in 2002. High costs of anti-retroviral drugs (used for the treatment
of HIV/ AIDS) are> perhaps one of the key reasons why poor people worldwide can’t buy those
medicines. WTO allows drug companies to profit from this 'mass murder’.
"WTO, together with the World Bank (WB) and International Monetary Fund (IMF) is the greatest
threat for public health,” said Dr. K Balasubramaniam, former Senior Pharmaceutical Advisor,
United Nations Conference on Trade and Development (UNCTAD), Geneva. “They (WTO, WB
and IMF) should be held responsible for the human suffering caused due to high cost of essential
medicines” said Dr. Balasubramaniam while delivering an Oxfam India Public Lecture on
‘WTO/TRIPS Agreement, the Doha Declaration and the Intellectual Property Bill 2003, Sri
Lanka’.
"Public interest groups have just challenged the SriLankan Intellectual Property Bill 2003," said Dr.
Bala, Colombo based advisor and Co-ordinator for Health Action International Asia - Pacific, a
policy and advoceicy network that works for the cause of access to essential drugs and intellectual
property rights Issues.
The Sri Lankan Bill was placed In the SriLankan Parliament on 218' May 2003. However, three
petitions have challenged the bill arguing that the bill was inconsistent with the Constitution of Sri
Lanka. The petitioners' contention was chiefly based on the position that the mitigatory features,
which were incorporated in the TRIPS Agreement, have not been included in the Bill.

“We will step up efforts to challenge the WTO in various forums,” said Dr. Ravi Narayan of the
People's Health Movement (PHM). PHM, a grass root movement spread across the globe,
reiterated their solidarity for pro-justice movements who have been calling global attention on the
anti-poor and anti-people policies of the WTO through their protests in Seattle, Prague, Davos,
Genova and recently Evian.
The Doha Declaration can be a reality only if there are political commitments from individual
countries. Developing countries like India must start taking necessary steps at the national level to
put into effect public health safeguards provided in the TRIPS Agreement and reiterated and
recognized in the Doha Declaration. "It is time to act on the Doha declaration," said Mr. G Sri
Ramappa, director of Oxfam India, an Indian development and humanitarian agency.

For further media enquiries, please call:
+91-80-363 2964/363 3274

& Mobile:+91 (0) 98450 91319

^Patents WIL Fatieifts to
get priority in new draft
The Supreme Court in up to the Regional Consul­
one of its most powerful tation on the "WTO/TRIPS
acts of judicial activism Agreement and Access to
and involvement for the Medicines - Appropriate
well-being of the people, Policy Changes" hosted by
recently struck down virtu­ the Ministry' of Health and
ally all clauses relating to organized by Health Ac­
pharmaceutical patents in tion International Asia Pa­
the proposed Intellectual cific (HAIAP) and the
Property Bill.
Third World Network in
Before sending the rul­ collaboration with the
ing to the President and the World Health OrganizaSpeaker Chief Justice Sar- tion. The Colombo Con­ The Bill was challenged in the Ministry of Health, (Advisor/Coordinator
ath N. Silva reminded the sultation in April was at­ the Supreme Court by Ministry of Commerce and Health Action Internation­
government it was elected tended by participants three petitioners on the Consumer Affairs, Re­ al Asia Pacific).
in trust to protect the rights from eighteen countries in grounds that the Bill viola­ search Institutes, Profes­
10.15 -10.45 am
of the people and not the the Asia Pacific region, in­ ted fundamental rights. sional Associations, Non Evolution • of National
patent rights of global cluding senior officials The Supreme Court accep­ Governmental organiza­ Laws on Patents in Sri
companies.
from Health and Trade ted the petitioners claim tions (NGO's) and Pharma­ Lanka
Acting fast on the^'Su- Ministries, representatives and ruled that.certain pro­ ceutical Manufactures' As­
-Dr. D.M.Karunanme
preme Court ruling, the from health-related NGOs visions in the Bill violated sociations.
(Director of Lntellecsal
Health Ministry in consul­ and social movements, in­ fundamental rights. '
A limited number of Property, National Intellec­
tation with the Trade Min­ ternational experts and re­ . The violations*were rela­ seats will be available for tual Property Office ofSri
istry and the people’s rights source persons. One of the- ted to the section in the interested members of the Lanka)
group Health Action Inter­ recommendations of that Bill dealing with patents public.
10.45-11.15am
national has arranged a consultation was that de­ including the absence of
The agenda for today's Tea
seminar and panel discus­ veloping countries should effective provisions for seminar is as follows:
11.15-11.45 am.
sion today to draft a new enact national legislation parallel importing and
830 a.m.
Regis- . Quality, Safety and EffcaBill giving priority to the on patents with TRIPS compulsory licensing.
nation
cy ofDrugs in the Marks:
rights and well-being of consistent provisions for
9.00 -930 a.m. Wel­
The Bill needs to be re­
-Prof. Tuly de Sahra
the people.
compulsory licensing and vised and amended in ac­ come Address
(Immediate Past Presinrnr
The seminar to be held at parallel imports»'This will cordance with the judg­ .-Dr. HLA.PJCahandliyan- and Patron, Pharmarrarithe BMICH Committee enable these countries to ment of the Supreme ga (Director General, . cal Society of Sri Lankal
room E, will be addressed have regular access to af- Court. The seminar will Health Services)
11.45-12.15 am

Government
Ms. Gothami Indikadahena, (Deputy Director of
Commerce)
1.00-230 pm. Lunch
230 - 4.00 pm. Panel
Discussion - The TRIPS
Agreement, Intellectual
Property Bill and Public
Health"
(Moderator
: . Dr.
ICBalasubramaniam)'
Panelists
•' ■
Ms. Sharmila Anthony
(Attorney at law, Centre
for Policy Alternatives) -• Prof. Tuly de Silva
(Immediate Past President
and Patron, Pharmaceuti­
cal Society of Sri Lanka) v
Mr.
D.AJP.Domingo
(Assistant
Director,
Customs)
Mr. Ben Eliyathamby
PC (Member Intellectual
Property
Advisory
Commission)
.
Ms. Gothami Indikadahena (Deputy Director, of
Commerce)
- Dr. HAuP.Kahandaliyanage (Director General,
Health Service)
Dr. D.M.Karunarante

merce officials, patients.. Today's seminar hits been cy options and TRIPS con­
rights activists and law­ convened to examine, sistent provisions on com­
identify . and propose pulsory licensing, parallel
yers.
The national seminar fo­ TRIPs consistent provi­ importing and government
cussing. -on the TRIPS sions that can be included use.
Agreement, the Intellectual in the Sri'Lankan Intellec­ - The agenda lists the re­
. Property BiBTafid Public tual Property Bill.
source persons wbo will
Health will take peace from
The-earlier Intellectual present papers and sit on
830 am - 530 pan.
Property Bill was presen­ the panel. There will be
This seminar is a follow ted in Parliament recently. about 75 participants from

Property, National Intellec­
tual Property Office of Sri
Lanka)
Mr. Saleem Marsoof
(Additional Solicitor General Attorney General's
Department)
4.00 - 430 pm. Tea
430 - 5.00 pm. Closing
Ceremony

Dr. Koththamalli

(Acting Director General
of Commerce, Department
ofCom merce)
-Dr. Joel Fernando
(Member of Governing
Council, Health Action In­
ternational Asia Pacific).
930-9.45 a.m. Objec­
tive ofthe Seminar
-Dr. JCBalasubramaniam

IT nn If Fitz orihmnfiriri Jpor* IHza mind

patents on prices ofand ac­
cess to medicines.
-Dr. K.Balasubramamnn
(Advisor / Coordination
Health Action Internarimal Asia Pacific)
12.15-1.00 pm
TRIPS consistent previ­
sion to safeguard the piolic health objective ofme

nnri QTAiirif
Media
RF_ST_1_SUDHA.pdf

Position: 3267 (2 views)