India should take US pharma complaints seriously

The worry is that India's cavalier approach to intellectual property may catch on in other parts of the developing world

US drug giants are once again pushing for stronger patent protection in India. Their arguments may be transparently self-serving - but there are still good reasons for India to take note.

Recent rulings by India's Supreme Court have allowed generic drug makers to make and sell versions of branded drugs invented by the likes of Pfizer, Novartis and Bayer , even though they remain under patent in other countries.

For now, those decisions are in India's interest. Only 25 per cent of the country's 1.2 billion people have health insurance and there is little public healthcare.

Generic drugs are cheaper and make medication more affordable. Moreover, domestic pharmaceutical companies are less dependent than Western rivals on developing new medications.

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Big pharma companies are understandably alarmed. They have set their sights on a lucrative future in India.

The country spent $14.3 billion on pharmaceuticals in 2011 according to IMS Health, and Reuters reports that the market is growing as quickly as 14 per cent a year.

Contagion is another threat: the worry is that India's cavalier approach to intellectual property may catch on in other parts of the developing world, the industry's main source of growth.

Argentina and the Philippines have taken steps to restrict patents, while Thailand and Brazil already use compulsory licensing.

Pharma companies are reluctant to reduce prices in developing countries for fear of encouraging a grey market in drugs. Doing so could also make it harder to charge higher prices in other markets.

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All this comes as the industry is under pressure to fund more research and development to invent the next generation of drugs.

The product pipeline is drying up - researcher EvaluatePharma estimates that drugs with combined annual sales of $225 billion will see patents expire between 2011 and 2016.

India's recent rulings could also backfire.

If their concerns are not addressed, companies could choose to skip the country the next time a new drug is brought to market.

In the long run, greater protection of intellectual property would also benefit the domestic industry. India's top spenders on R&D invested 35.1 per cent more in 2012 than in the previous year, according to a recent EU survey. Half of these were pharma companies.

India's health needs are undeniably critical, but compromising patent protection is not the cure.

The author is a Reuters Breakingviews columnist. The opinions expressed are her own