WTO Under Scrutiny

Bharat Jhunjhunwala writes

The World Drug market is poised for a basic makeover. Till a decade ago large numbers of new drugs were being invented. Multinational drug companies were having them patented which gave them monopoly rights over their manufacture and sale. The picture has changed dramatically in recent times. New drugs are not being invented at the same pace as earlier; while earlier inventions are going off-patents after the mandatory 20- year-period is coming to an end. The problem is made worse for the MNCs by a spate of court rulings across the world which have led to the loosening of the patent regime.

For example, Novartis was selling Glivec-a drug for the cure of leukemia-at Rs 1,20,000 per month for a patient. Indian drug companies were selling the same for Rs 8,000 per month. Novartis had filed an application for grant of patent for Glivec so that the Indian companies could be prevented from selling their low cost drugs. This reached the Supreme Court which a month ago decided against Novartis. This will provide immense relief to a large number of patients.

The Supreme Court has, however, not placed any restrictions on the patenting of new drugs. For example, Novartis would be free to patent and sell the drug at an exorbitant price if it were to invent a drug for the treatment of cancer or TB. The matter under consideration of the Supreme Court was limited. Glivec was admittedly invented in the nineties. Novartis had obtained patent rights for the drug in about 40 countries including China and Russia. Glivec could not be patented in India at that time because India had a process patent regime. The pre-WTO patent law in the country allowed only patenting of a particular process. The patent holder alone could manufacture a product using the patented process. However, another company was free to manufacture the same product by an alternate process. It seems Novartis chose not to secure a process patent for Glivec in India because that would entail disclosing its process details and make it easier for Indian drug companies to modify the same and manufacture Glivec by an alternate process. In the result Glivec was not patented in India.

Novartis tried to overcome this problem by making minor modification in the drug and seeking a fresh patent as if it was a new invention. Novartis claimed that the process of delivery was a new. The Supreme Court has rejected this plea. It has held that it was necessary to show that the drug had better treatment quality in order for a patent to be granted. Mere better delivery mechanism would not suffice for grant of a patent.

Similar moves to loosen the patents regime are afoot in other countries. The Canadian Supreme Court denied patent to drug company Pfizer for Viagra on similar considerations. A Committee set up by the Government of Australia has suggested revisiting the patent laws to prevent patenting of old drugs with minor modifications. The European Union and Canada are also thinking along similar lines.

There are two main components of the WTO. First component is of free trade. Every member country is obliged not to impose import taxes in excess of a specified level. This provision is especially beneficial for the developing countries. Cost of production of goods produced in the developing countries is less due to low wages. These low-priced goods and services are being exported to the developed countries. Industries and services in the developed countries are being wiped out leading to chronic unemployment, low tax realization and increasing fiscal deficits. In truth WTO has contributed mightily to the ongoing recession in the developed countries by making available cheap goods from the developing countries and killing their productive economies. The beginnings of this reaction can be seen in the introduction of a Bill in the US Congress seeking tightening of rules for the grant of H1B visas. President Obama repeatedly harps on keeping jobs at home. Indirectly this is criticism of the WTO which has led to the transfer of these jobs abroad.

The second component of the WTO is that of patents. This is almost wholly in favour of the developed countries. The thinking of the developed countries at the time of signing of the WTO Treaty was that new inventions will continue to happen and they would reap huge benefits by selling the new patented goods at high prices to the developing countries. It was thought that gains to the developed countries from patents would be much more than the loss due to transfer of low-paying blue collar jobs to the developing countries. But the developed countries are not reaping the expected benefits from the patent laws because there is a hiatus in new inventions. No major invention has been made after the internet in the nineties. The 3G and 4G platforms too are not providing many benefits because developing countries are fast copying these inventions. In this background the Supreme Court judgment is like putting one more nail in the coffin of WTO. Non-grant of patents due to minor modifications will tilt the scales against the WTO in the developed countries. Free trade was already harming them. New patents were few and far in between. Now modifications will also be out of reach.

Frontier
Vol. 45, No. 52, Jul 7- 13, 2013

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