Today a Subcommittee on Commerce, Manufacturing, and Trade of the House Energy and Commerce Committee held a hearing on the topic: “A Tangle of Trade Barriers: How India’s Industrial Policy is Hurting U.S. Companies.” Much of the hearing focused on intellectual property and pharmaceuticals, though other issues such as SOEs and subsides to local solar power firms were also discussed. All of the Committee Members who asked about IP – with the exception Henry Waxman – seemed to accept as a matter of fact that India’s use of compulsory licenses and restriction on patentability were a barrier to trade and a possible trade violation.
The witnesses were Linda Menghetti Dempsey from the National Association of Manufacturers, Mark Elliot from the U.S. Chamber of Commerce’s Global IP Center, Roy Waldron from Pfizer, John Smirnow from the Solar Energy Industry Association, Robert Hoffman from the information Technology Industry Council, and Rohit Malpani from Médecins Sans Frontières / Doctors Without Borders (MSF).
The committee is chaired by Fred Upton, who in the last campaign cycle received more donations from the pharmaceutical industry than any other industry (Source: Center for Responsive Politics). His opening statement highlighted his concerns over IP policies, which he called a “threat” to the budding trade relationship between the U.S. and India. He said that compulsory licenses are evidence of a “unfair and discriminatory” polices. He also warned that this may lead to less future R&D. Upton hopes that Secretary of State Kerry and Vice President Biden address IP issues in their trips to India.
Ranking Minority Member Waxman noted that the TRIPS agreement gives countries the ability to use flexibilities for access to medicines, and that the Doha Declaration – which the U.S. signed – specifically allows safeguards such as compulsory licenses. He said that India is still a developing country where 1/3 of the population lives in extreme poverty and where the price of medicine can be the difference between life and death. Therefore, Indian policies regarding IP and access to medicines can genuinely advance public health. Waxman also pointed out that the United States’ PEPFAR program relies on Indian generics to supply medicines in the developing world, so it has an interest in the continued availability of Indian generics.
The witnesses read their prepared testimony, which is available here. All of the witnesses criticized Indian IP policies as unfair, except for MSF’s Malpani. He described the need for affordable medicines in the developing world, and called India’s use of TRIPS flexibilities “legally sanctioned safeguards that prevent abusive patenting.”
Chairman Upton began the Q&A by asking each of the panelists if India is heading in a more protectionist direction than it had in the past. All of the witnesses basically answered ‘yes,’ except for Malpani, who said that India uses TRIPS exceptions to advance public health.
Rep. McNerney asked Malpani about restrictions patentability, and if this was a progressive policy adopted mainly by India. Malpani answered that other countries have had stricter patentability standards too. The United States had stricter patentability standards in the past, and it is in the public interest to limit patent protection to 20 years. He noted that a study of the U.S. market found that follow-on patents add, on average, more than six years of patent protection when they are filed on a drug.
Another representative noted that Pfizer has been operating in India for 60 years, and he asked Waldron to describe how the landscape has changed regarding their IP regime. Waldron answered that originally there was no patent protection in India, so Pfizer operated as a consumer health company, selling products like vitamins. But intellectual property protection got them to enter the market further, and now they sell medicines. It was a big step. Asked if recent actions would lead Pfizer to consider reducing its investments in India, Waldron answered that it would be too early to comment on decisions going forward. But his company’s future in India would depend on the business environment there.
Rep. Waxman noted that in 2011 Secretary of State Clinton had committed to working towards an AIDS free generation, but since then PEPFAR funding has been cut. Low costs medicines are an important part in ensuring the most widespread treatment needed to reach the goal of the end of AIDS. He asked Malpani what TRIPS provisions can play a role in ensuring affordable generics. Malpani listed restrictions to scope of patentability; compulsory licenses; early working provisions such as the U.S. Bolar Provision; and parallel imports.
Waxman asked Malpani to discuss the Nexavar compulsory license and the Indian Supreme Court decision on Glivec. Specifically, were these actions compliant with the India’s international obligations? Malpani said that in both cases India was operating within the bounds set by the TRIPS Agreement. In the Glivec case, the question is whether or not India can have a stricter standard for whether an invention meets the test for inventive step. Under TRIPS, countries can have a stricter standard than what is found in the U.S. The Indian compulsory licenses were issued on grounds that included affordability and public health and are therefore TRIPS complaint.
Waxman asked if TRIPS-Plus intellectual property rules could affect the U.S. goal for an AIDS-free generation. Malpani answered that MSF is very concerned about the current drive to raise IP standards around the world – both through trade negotiations such as the Trans Pacific Partnership and through bilateral pressures. In both areas, there is a push to encourage the granting of low quality patents.
Rep. Lance addressed the price of generics of India, which he understands to be out of reach of most patients in India. He further understands that 80% of the people in India receiving Pfizers’ medicines do so at a subsidized price. He asked Waldron why India is not satisfied with obtaining medicines from the patentee if they cannot afford generics anyway. Waldron said that it is a “misperception” that increased generic entry leads to increased access to medicine. He said that before there were product patents, only 20% of Indians had access to medicines at all. He repeated that the connection between patents and access to medicines is “somewhat tenuous at best.”
Lance asked if it would be advisable to bring a WTO complaint against India for the decision in the Novartis case. Waldron’s answer did not bring up the possibility of a WTO complaint. He discussed the role of incremental innovation in drug development. Waldron believes that Indian patent law should be more supportive of incremental innovation.
Rep. Matheson asked the witnesses if India’s IP policies were building up its own economy at the expense of American industries. Waldron answered that India is being watched by other countries, including the Philippines and Turkey. If other countries see no downside in following India’s lead, it will be hard to counteract. And countries are already beginning to follow India’s lead. Argentina has adopted patentability restrictions, and Brazil is looking into it.
Rep. Guthrie asked Dempsey what she thought it would take to get the stalled US-India Bilateral Investment Treaty negotiations to restart. Dempsey said that India would need to demonstrate that it is prepared to negotiate on a number of high level commitments regarding nontariff barriers to trade – including but not limited to intellectual property rights.
Gutherie asked the panel if India has overtaken China as the biggest IP scofflaw. Elliot said that both countries have problems, but that in China, the government has been responsive to some of the IP pressures from the U.S. government. In India, however, it seems that the country is headed in the wrong direction, and the IP baseline from which India starts is already among the lowest in the world.
