D+C Development and Cooperation (No. 6, November/December 2000,
p. 4 - 5)

Unhindered by market-dominating foreign patents, an efficient pharmaceutical industry has emerged in India, which for example offers medications against AIDS that are cheaper than original preparations from abroad. But the World Trade Organisation's new rules applicable since 1995 benefit the pharmaceutical multinationals in the industrialised nations and threaten the Indian achievements. As a result, the successful path to development taken by the Southeast Asian countries has been blocked for other states.

"Probably eight million people in India are HIV-positive," says Indian physician Dr Raman Shetty in an interview. The official estimate is much lower at 3.5 million. Of those, 800,000 are already suffering from AIDS. The first HIV-positive case in India was registered in 1987 - now the country has the highest number of cases in the world. In the red-light district of Mumbai (formerly Bombay) and along the truck route to and from the city the epidemic is spreading especially rapidly. Ignorance and poverty are its main causes. AIDS sufferers often die of tuberculosis, which is still widespread in India, because they lack resistance to it.

Prohibitive costs

HIV (human immunodeficiency virus) causes AIDS, the worst stage of the illness. There is not yet a cure for HIV/AIDS. Nevertheless, the number of people dying from HIV/AIDS in the USA and Europe is declining. And in Switzerland the AIDS mortality rate dropped markedly from a peak of 686 in 1994 to less than 100 in 1999. That is to be attributed mainly to the trailblazing medication combination (or ‘cocktail') therapy that interrupts the life-cycle of the HI virus. Disciplined taking of a combination of medications can prevent AIDS breaking out or at least delay it for years. In particular, it can prevent the transfer of AIDS from a mother to her new-born baby.

At most, only 500 out of every 100,000 HIV/AIDS sufferers in India are receiving medical treatment. Sexuality and thus AIDS are taboo. There is a general lack of hospitals and public health centres, of medical staff and equipment, and of medicines. The cost of a combination therapy against AIDS at more than US$ 250 per month is prohibitive. Also, there are no statutory health insurance schemes.

AIDS is particularly widespread among the poor, who often live from casual work. An income of US$ 50 - 75 per month must cover all essentials. In many cases, two members of a family are infected, but their savings suffice for at most one treatment. "Although men and women are affected by HIV/AIDS in equal measure, 85 per cent of our patients are men," said Dr Subhash K. Hira, Director of the AIDS Research and Control Centre (ARCON) in Mumbai. "In the Indian patriarchal culture they have priority. Children come second. The women sacrifice themselves for the others."

Some years ago, nursing costs per patient were more than US$ 500 per month, or more than twice their present level. Then in 1993 Cipla Ltd., an old-established Indian pharmaceutical company, brought out the anti-AIDS drug Zidovudin. That was followed by Stavudin, and in 1998 by Lamivudin. All are elements of the successful, virus-inhibiting combination therapy. Cipla offered the medications at greatly lower prices than other companies were asking. That in turn moved the international competition to cut their prices on the Indian market.

A 10-pack of 100-milligram Zidovudin capsules from Cipla now costs in India US$ 3.50 (150 rupees). The original product from the British company Glaxo Wellcome is marketed in India, Pakistan and Indonesia at more than double that price, and for five to six times more in the USA and Britain. Cipla says that Nevirapin, its latest anti-AIDS drug, promises to deliver an extremely reasonably priced prevention of transfer of infection from a mother to her baby.

The Indian pharmaceutical industry is a success story. The sector's some 20,000 businesses provide jobs for a total of 500,000 people. Pre- and post-production activities probably account for another 2.5 million jobs. Medication prices during the last 15 years have risen at a well below-average rate compared with general price levels. "India is a low-cost country for pharmaceuticals worldwide, while offering high-quality products," notes Nihchal H. Israni, President of the Indian Drugs Manufacturers' Association (IDMA), not without pride.

Indian pharmaceutical
industry's success

In the early 1960s, India was regarded as one of the countries with the highest pharmaceuticals prices in the world. Today, its self-sufficiency rate in drugs is more than 70 per cent - despite India's policy of economic opening pursued since 1991. India is now, in fact, a net exporter in the pharmaceutical sector.

The secret of India's success is its Patent Act of 1970. India began its independence in 1947 with the patent system of the former British colonial power. This secured the Indian market for the British industry. Most pharmaceuticals were imported, and local production accounted for less than 30 per cent of the market. The architect of the 1970 Act, S. Vedaraman, the then Director of the Indian Patent Office, summed up the basic idea: "We are not against foreign patents. We are also prepared to pay reasonable licence fees. But we cannot afford monopolies in India."

Since the Act came into force, pharmaceutical products themselves cannot be patented, but only their production processes for seven years. In addition, the law provides that if the patent holder does not allocate production licences under fair conditions the government is automatically empowered to allocate compulsory licences. India also benefited from the fact that it had a large pool of well-trained specialists who knew how to use the new opportunities.

This development did not please the multinational pharmaceutical industry. But in many industrialised nations the protection of inventions by patents was expanded only during the last 30 years. The Swiss chemicals industry in particular at the end of the 19th century fought against a Patent Act in order to be able to copy foreign medications such as aspirin. The German Reichstag (Parliament) regarded Switzerland as a ‘robber baron' state, and in France it was called the ‘Country of Forgers'. Switzerland has had patents for pharmaceuticals only since 1978.

The interests are clear. Exporters of technology benefit from patent protection because it safeguards them from cheap competition. Technology importers - thus most of the developing countries - need access to technological innovations that is as free and favourably priced as possible. Therefore they do not want patent protection that erects monopolistic barriers. The successful economic development in Japan, Korea and Taiwan also flourished because it was not impeded by patent obstacles.

Recolonisation

Nevertheless, protection of product patents is asserting itself everywhere, also against the interests of the developing countries. The vehicle for the industrialised nations' crusade for global patent protection is the World Trade Organisation. Part of the WTO's set of agreements, on Trade-Related Intellectual Property Rights (TRIPS), lays down worldwide standards for patent protection. No country that is oriented on a market economy and wishes to integrate in the global economy can avoid WTO membership. That means all must swallow the TRIPS medicine. "WTO/TRIPS stands for recolonisation of the economically weak countries," says Dr Hira, of ARCON. "Patent law is an obstacle in the fight against the AIDS epidemic. The economic game rules are partly to blame when people still die from it."

India became a WTO member in 1995 and must implement the new TRIPS rules in the pharmaceutical sector by January 1, 2005. The India government has already taken the first step with a decree on patents in 1999. The Supreme Court, however, disputes the law's conformity with the Constitution. American pharmaceuticals companies still describe India as a "centre of commercial piracy" that costs them US$ 500 million per year. Mr Israni, of the IDMA, takes a gloomy view of the future if the Indian government does not take effective counter-measures. "The Indian companies will be pushed out of the market, and multinational suppliers will dominate it with much higher prices. Jobs will be lost, and India's balance of trade will show a deficit in the medications sector. In short, we are threatened with the conditions that prevailed before our Patent Act of 1970." He appeals to the Indian government to exhaust the opportunities that still exist in the TRIPS rules for WTO member countries to design their compliance on a national basis. In particular, he wants the government to provide for effective compulsory licences.

Export obstacles

Sales of anti-AIDS medications in India now total about US$ 1 million per year. Cipla has market share of about 80 per cent, although that is only a small proportion of the company's total annual sales of US$ 150 million. It is not surprising that Cipla is very keen to export its medications. More than 95 per cent of all HIV-infected people - about 38 million worldwide - live in developing countries. No fewer than 16,000 new victims are added each day, totalling six million per year. For other affected countries, the ability to buy high-grade replication products from India at favourable prices can be attractive.

National and international patent rules, however, stand in the way of free trade. For a patent covers not only the right to monopoly in manufacturing a product, but also in its importation. That is why Glaxo Wellcome can prevent its competition importing cheap Zidovudin. Brazil, for example, had no patents on medications until recently. The country's new Patent Act of October 6, 1999 now provides for the allocation of compulsory licences. Upon this basis, Brazil plans to buy abroad this year raw material for anti-AIDS drugs to the value of US$ 300 million.

US interventions

Two-thirds of all HIV/AIDS sufferers, that is, about 25 million people, live in Africa South of the Sahara. AIDS has already replaced war and malaria as the main cause of premature death in Black Africa. The World Health Organisation estimates that average life expectancy in southern Africa will drop in the next decade by 17 years to 43, instead of rising to 64 as expected earlier. AIDS in Africa is thus more than a health problem; it signals a real social and development crisis.

South Africa has recognised that all possible countermeasures must be taken, and has launched a ‘Partnership Against AIDS Programme'. Besides preventive measures, the government also aims to enable the import of favourably-priced anti-AIDS medications and stimulate production of them in South Africa. A new Health Act therefore provides for the government having the power to allocate compulsory licences for the production of vital medicines. A joint venture between Cipla and a local company, named Cipla-Medpro, has already approached the South African government in a bid to win approval for importing the Indian company's products. Jerome Smith, Chairman of Cipla-Medpro, wrote: "We are able to bring the latest medications to South Africa, but patents prevent it." Indeed, Cipla-Medpro already supplies Zidovudin, Stavudin and Lamivudin for export to countries whose laws allow the import of replication products.

The American pharmaceuticals industry did not like this project. The USA intervened against the new South African Patent Act several times in 1999, threatening the government with severe trade sanctions. Washington earlier took similar action against other countries such as Indonesia and Thailand. US Vice President and presidential candidate Al Gore was in the front line of its campaign. American AIDS groups thereupon attacked him directly at election campaign rallies. Their banners read: "Gore's Greed Kills". When the US news media finally were reporting less about Gore's campaign than about the conflict over Aids with South Africa, Washington stopped its interventions and threats against Pretoria. Will the Indian-South African company Cipla-Medpro soon be able to supply AIDS patients in South Africa with favourably-priced medications?

World Bank support

Most of India's scarce funds for combating AIDS have to date gone into prevention. Bolstering women's self-confidence is a central concern. There was hardly any money left for nursing AIDS patients. But in October last year the World Bank granted India a loan of US$ 198 million to finance AIDS prevention and patient care during the period 1999 to 2004. Of that sum, 15 per cent is reserved for nursing. The World Bank's budgeting in this case was calculated on the prices of Cipla medications. But an initial order went to the company's international competition.

Of the global medications market with total sales of US$ 350 billion, India's share of US$ 3 billion accounts for slightly less than 1 per cent. One billion Indians spend as much in one year on pharmaceuticals as do seven million Swiss. "What we in India consume in medications costs less than the booked net profit of the Swiss chemical giant Novartis," says IDMA's Israni. "Why can't the North grant the South the same liberal independence in protection of inventions that Switzerland in particular has claimed for itself over decades and used for its benefit?"