In the closing days of 2014, the Modi government rushed in several crucial policy changes through the ordinance route. But one policy document was left open for public comment. Called the draft National Intellectual Property Rights policy, this document is likely to interest President Barack Obama greatly since it could determine the size of profits that American pharmaceutical companies can make by selling medicines to Indians. Conversely, it could affect the healthcare costs of millions of Indians.

At the heart of the debate is the issue of how drugs are patented.

“India has a strong patent criteria,” said Gopakumar Nair, patent attorney and past president of the Indian Drug Manufacturers' Association, “while the US has a liberal one.”

A liberal patent criteria means even a minor change to the drug’s composition could allow a company to get a new patent, which in turn would ensure that for 20 years no other company can manufacture the same drug. Health activists have documented how this has enabled American pharma companies to create monopolies that have pushed up the prices of lifesaving drugs and put them out of the reach of millions of people, particularly in Asia and Africa.

India has come to occupy a central place in the debate because of the ability of its pharma companies to produce cheaper versions of the same drugs. They can do so only because the Indian has a stronger patentability criteria. Section 3D of India’s patent law requires a drug to have sufficient improvement over an existing substance in order to get the patent.

In the summer of 2013, the Supreme Court of India dismissed a plea by Swiss company Novartis to patent its cancer drug Glivec. The court observed that Novartis’ product did not have such sufficient improvements. The verdict allowed for the continued supply of the cancer drug at cheaper prices. It was a big victory for public health in India but a major setback to pharma companies in Europe and the United States.

Multi-pronged attack

Ever since the Novartis case, the United States has made a concerted attempt to pressure India into changing its intellectual property policies to protect the business interests of the American pharma industry.

In April 2014, the United States Trade Representative put India on a “priority watch list” of countries that violated patent. In response, the Indian government lashed out at the USTR, calling its observations unilateral and invalid. International health organisation Médecins Sans Frontières, or Doctors Without Borders, also criticised the USTR, saying that India’s intellectual property regime is legal and that it had a crucial role in providing global access to medicines.

In late December, the US International Trade Commission, an agency that conducts investigations into issues of bilateral trade, released a report in which it complained that India’s regulatory environment in general and IP policy in particular had stymied US exports in sectors like pharmaceuticals. It was the second such report to be released by the commission. The report was welcomed by the Pharmaceutical Research and Manufacturers of America, the industry body representing US drug companies.

In the past, criticism from the United States had stymied the possibility of India issuing compulsory licences for crucial drugs. In 2012, India’s patent controller observed that German company Bayer’s drug Nexavar for kidney and liver cancer was unaffordable and allowed the company Natco to manufacture a generic version. Although the US has taken the stand that a compulsory licence must be issued only if there is a national health emergency, the Trade-Related Aspects of Intellectual Property Rights agreement, or TRIPs agreement, allows for a compulsory licence to be issued if the patent holder’s drug is found to be inaccessible. An expert panel of India's health ministry has since recommended that a compulsory licence be issued for Bristol-Myer Squibb's anti-cancer drug Dasatinib but the Department of Industrial Policy and Promotion has been dragging its feet over its decision to award the licence.

“Thailand has used compulsory licences 8 times, not only for emergencies but for cardiovascular diseases, diabetes and HIV/AIDS. Canada and US have also used this provision several times,” said a senior health economist with the Public Health Foundation of India. “We were never allowed to exercise our right to issue a compulsory licence again due to pressure from US and European pharma companies.”

Writing up new IP laws

Against this backdrop, the forthcoming visit of President Barack Obama is likely to see more American lobbying on the issue of India’s patent regime. What might help the American cause is that a new IPR policy is being drafted. In October, the Modi government constituted a six-member think tank to draft the national IPR policy. By December, the first draft was placed in the public domain for comment.

In its present form, the draft policy does not say much besides making a case for "more innovation". It says the government will “review and update IP laws, where necessary, and remove anomalies and inconsistencies, if any.”

Patent laws affect much more than just drug manufacturing and pricing, and some analysts believe that India needs better intellectual property protection for advancing technology and agriculture and to help micro, small and medium enterprise grow. Others say the generalities in the IPR draft policy do not reveal where India’s patent regime is headed – and this could be worrying.

"The draft policy states that review of IP law would be carried out, though it does not state any reason for the proposed review, ” said KM Gopakumar, health activist with the Third World Network. “The language is neutral but the law can be amended to satisfy the US also.”

IP-driven innovation models have failed to alleviate health crises in developing countries, like antibiotic resistance and the shortage of tuberculosis medicines, says Leena Menghaney, South Asia head of MSF Access. Research in new drugs has stalled because companies don't want to invest in creating drugs they will have to sell cheap.

"Countries like India are in urgent need of innovation models that do not depend on IP," said Menghaney. "The IP-driven innovation model is not one that India has endorsed in international fora till now. The IPR think tank has reversed this most important policy stance."

During Prime Minister Modi’s visit to the US last September, the two countries had formed a high-level working joint group on intellectual property. The bilateral forum allowed the United States to place its demands on the table. Obama is likely to push them further when he meets Modi in New Delhi. But for once, it might make sense for India not to play the good host. At stake is not only the cost of healthcare for Indians but also the competitiveness of the Indian pharma industry. “India has its own economic compulsions,” Gopakumar said. “We are trying to revive industry and manufacturing, and pharma brings about $8-9 billion into this country. So you cannot just give it up.”