The pirate stage of capitalism

How India became a player in the global pharmaceutical industry.

Published July 7, 2006 12:47AM (EDT)

The New York Times reported Thursday that the Food and Drug Administration has approved the first "3-in-1" antiretroviral pill for use in an American-funded plan to battle AIDS. The pill is made by the Indian pharmaceutical company Aurobindo Pharma.

The decision testifies to the strength of India's pharmaceutical industry. And therein lies a little story about patents, medicine and globalization that demonstrates why, for a developing nation, respecting international patent law is not always the wisest long-term strategic decision, even if eventually, the time does come when it's smart to play by the big boys' rules.

At the time of India's independence in 1947, the country's patent laws were inherited from the British, and they severely hampered the ability of Indian drug companies to compete. As a consequence, prices for drugs were extremely high in a country where most people were extremely poor. India's government decided to do something about that, and in 1970 it passed a patent law that declared that India only had to respect "process patents" and not "product patents." That is, Indian companies could not copy the exact way another company made a product, but they could copy the product itself, if they devised a new method of making it.

For India's aspiring pharmaceutical entrepreneurs the change in the laws was a huge success. Indian chemists reverse engineered scores of drugs, and proceeded to manufacture and sell generic versions. International pharmaceutical companies were outraged, but prices for drugs in India plummeted, and perhaps equally important, the nation was able to build up considerable expertise, know-how and entrepreneurial experience in the business of making drugs.

Not only did India's drug makers lower prices for India's citizens, but the country also became a major exporter of generics, not least in the all-important market for drugs aimed at HIV/AIDS.

Then came the World Trade Organization. India joined in 1995, and as a consequence, was required to bring its patent laws into "harmony" with the developed world. This caused no shortage of controversy within India, which balked for years, but finally, in part due to adverse rulings by the WTO as a result of actions initiated by the U.S., India finally, in January 2005, amended its laws to respect process patents for drugs created after 1995.

Medical professionals and activists concerned with public health in the developing world were quite unhappy with this development. The worry is that prices for new drugs will start high and stay there, putting the latest treatments out of reach for poor people. That is clearly a significant concern. But international pressure wasn't the only reason India amended its patent law. Within India's domestic pharmaceutical industry, sentiment for stronger intellectual property protection was steadily growing, because Indian companies needed to play by the rules if they wanted to continue to thrive in the global marketplace, and especially if they wanted to start exporting their products to the U.S. and the European Union.

So one can argue that the 1970 Patent Law had served its purpose. It had successfully midwifed the creation of a vibrant pharmaceutical industry. To a point, India caught up with the West.

Whatever one thinks about whether strong patent laws should be applicable in the public health arena, the Indian example is a fascinating demonstration of a theory popular in the developing world that holds that it is appropriate for lesser developed countries to play fast and loose with intellectual property. When you're behind, you need help to catch up. But then, once having caught up, you can go to the next level.

Of course, if the multinational coporations headquartered in the developed world could have their way, nobody would be allowed to catch up. The poor would stay poor, and the rich would stay rich, using every tool at their disposal to make sure nothing changed.

Doesn't seem very fair, does it? The question is, in today's globalized world, whether the possibility still exists for other nations to follow India's example, and figure out how to catch up, or whether the game is now over. Looking for reasons why the current Doha "development" round of the World Trade Organization is moving at a snail's pace? How about the growing realization that step by step, previous rounds have ended up making it harder to join those in the front ranks, instead of easier.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Globalization How The World Works India Intellectual Property