India-US ties are under stress again, this time over trade and investment

NEW DELHI: India-US ties are under stress again — this time over trade and investment — according to the government. With calls in the US for designating India a priority foreign country (PFC), the worst downgrading of status by the US trade representative for inability to protect IPRs, the government is accusing US authorities of intimidating the Union health ministry over the issue of compulsory licences — which allow local firms to manufacture patented drugs - and simultaneously preventing other developing countries from acting against evergreening of drug patents.

A PFC tag can allow the US to impose unilateral sanctions against India for domestic laws which deny benefits to the US under any trade agreement. Government sources here said there seemed to be a two-fold agenda behind the "cacophony" emanating from the US. "Pressure is being created on India's health ministry to not consider drugs for compulsory licences and at the same time there is also a deliberate attempt to use India to scare away other developing countries like Indonesia and Brazil from introducing legislation to prevent evergreening of drug patents, like section 3 (d) of Indian Patents Act (IPA)," said a source.

US pharmaceutical companies like Pfizer have demanded that India amend its patents law by doing away with section 3(d) altogether. This section prevents patenting new forms of a known substance in case it does not yield higher efficiency than the earlier substance. It was under this provision that the Supreme Court upheld a decision of India's Patent Office to deny a patent to Novartis for its drug Glivec.

India has also been disturbed by the proposed visit by US international trade commission ( USITC) to probe the fallout of India's trade and investment policies on the US economy. The government has already asked its officials to not entertain the agency saying any dispute related to India's trade policies or patents regime should be addressed at WTO. While the US interlocutors have accused India of "continuous" use of compulsory licences (CL), which allows local firms to manufacture patented drugs, India has described this as a canard. The government has told the US authorities that India's controller-general of patents issued only one CL for a life-saving drug in March 2012, against a liver and kidney cancer product.

The government is trying to convince the Americans that Indian Patents Act is not an administrative matter under its jurisdiction but a quasi-legal process, with a separate and independent appellate body to adjudicate such cases. The final court of appeal in these cases is India's Supreme Court. "In fact, India's Patent Office rejected in October 2013 a CL petition (for Bristol Myer's product Desatinib, a blood cancer drug) showing that the system is capable of exercising fair decisions," said an official.

Indian officials say that despite the negative publicity over the business environment and IPR regime in India, some 1,500 pharmaceutical compounds or composition patents have been granted to nine firms between 1995 and 2012. Stung by the negative publicity, India has accused lobbyists for IPR issues in the US such as Global Intellectual Property Center (GIPC) of taking up patents only with regard to the pharmaceutical industry. It has highlighted before the Obama administration that, according to a study carried out by Ficci, losses caused by piracy in the US are estimated in the range of up to $50 million, especially in Virginia, California and Chicago city.