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Thu17Apr2014

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Corporate profits or the right to life?

The EU-India free trade agreement will wipe generic, cheap, unpatented drugs out of the market, writes Aakash Mehrotra

EU-India free trade agreement

After four years of negotiations, finally the EU-India free trade agreement seems to be on the table. The pact is going to be a big ticket for business. Giving the Indian perspective, Rajgopal Sharma from the Indian embassy in Brussels said this Free Trade Agreement (FTA) “is the most ambitious agreement that India is hoping to enter into as compared to the earlier FTAs with other countries”. The pact will help create the largest free trade zones by population -- covering 1.8 billion, or more than a quarter of the world's people. Trade between the two has grown over the past decade -- the total value of EU-India goods and services exchanged was 86 billion Euros in 2010. Though trade with India represented just 2.4% of the EU's total, the percentage has been gradually increasing. The deal is being officially looked at as a broad-based trade and investment deal.

Everything seems to look good on the business table, but this proposed agreement which seeks to liberalise trade in goods and services has caused grave fears about the way markets, especially of cheap generic drugs, will be affected. Right through the negotiations, the EU has stressed the principle of ‘reciprocity’ to avoid asymmetries in the level of commitment from the two parties involved. The logic of ‘reciprocity’ has been widely criticised, given the imbalance between the two parties involved. The problems begin from here.

Third World Network seeks a forceful articulation of the needs and rights to define the pact. The pact flirts dangerously with protectionism. Madi Sharma, a member of the European Economic and Social Committee (EESC), describes the negotiations with India as “non-transparent” and a dangerous gamble with local markets. The deal has, however, been stalemated following apprehensions over availability of cheap drugs for the developing world. Over the years, India has incarnated as the ‘local pharmacy of the world’. Stiff competition from the Indian pharmaceutical sector has helped drive drug prices down by more than 100 times.

Dr Unni Karunakara, President of Medecins Sans Frontiere’s International Council, says that 80% of the AIDS drugs used in poor African countries come from India and keep 160,000 people alive today. MSF’s global ‘Hands off our medicine’ campaign champions the cause of these generic, cheap Indian drugs. Patent issues in the trade agreement could easily block the supply of these cheap drugs. Rajiv Kafle of the Asia Pacific Network of Positive People puts it in a more economic algorithm: “The price of the same drug escalates from 2,000 to 15,000 if it gets patented.” The easiest example that can be quoted here is of the simple folic acid. While the generic form of folic acid costs Rs 2.8, the branded form costs around Rs 15. Just imagine the cost variations of generic life-saving drugs and the branded ones. And the economics involved.

The Intellectual Property Rights (IPR) agreement could wipe generic, cheap, unpatented drugs out of the market. The pact is a trade-off between huge economic benefits and the ‘Right to live’ for millions of vulnerable people across the world. Resultantly, the hulla is in the streets – ‘Life is not cosmetics that can be traded’ a protest flag reads. Medecins Sans Frontieres leads a protest –‘Don’t trade our lives’ -- to highlight the dependency of millions on generic medicines. Thousands of HIV-affected people are coming out on the streets to protest against the pact. “If there are 5,000 HIV-infected people today, the blockage on supplies can make the numbers escalate to 500,000,” Kafle adds. Campaigns like ‘Ten years of Antiretrovirals’ in Malawi will simply collapse.

The pact describes a situation in which logic and proportion seem to have fallen before profits.

The pact will force India to adopt a policy of ‘reciprocity’; this would mean reduction in import duties (by as much as 95%. In fact economists are suggesting that imports from EU could escalate by 56% while exports to the EU could rise by a mere 24%, thus creating a huge trade deficit). In a way the deal will not just affect the generic medicine market but also the SME and auto sector. For instance, in the auto sector only import duties will have to be reduced from the present 60% to around 6.5% as practised in Europe. Partly good, partly bad, but the deal will have serious implications on local industries with the flooding in of European goods.

But to return to the impact on the pharma industry. In 2008, of 100 countries requiring anti-retroviral drugs, 96 purchased the drugs from India. If the prices of the drugs rise, the lives of millions will hang in the balance. The priority of global public health should not be in conflict with balance sheets – it should upstage it. Back home it is also a question of a sector with escalating growth rates. The pharma sector has grown from a meagre US$ 0.3 billion in 1980 to US$ 21 billion in 2010, and this growth is mainly due to generic drugs and ever-increasing exports. Pharmaceutical exports from India grew by 15% to $10.3 billion for 2010-2011. Composition-wise, generics accounted for 58% of the exports.

The EU-India pact is to be based on two basic issues. First a change in ‘data exclusivity’, the result of which will be a delay in registration of generic medicine. The market for generic drugs had been under control, India being a member of the WTO. The Indian Patent Act under Section 84 contains a ‘law on Compulsory Licensing’ which can be enforced under certain conditions, such as when a patented drug is available in insufficient quantity or when the price is out of the reach of common people. But if the data exclusivity law protects such data, then the grant of Compulsory Licensing will be of no use to generic companies. The data exclusivity law will act as a barrier to marketing approval of generic versions of patented drugs. This will defeat the whole philosophy of Compulsory Licensing. The second issue is stricter enforcement and expansion of IPR to let the innovator reap the benefit of its energy and resources spent on R&D. The data exclusivity regime will prohibit any Indian company from using the formulae for making any patented medicine for a period of five to nine years. This will push up the market prices of that medicine.

The reasonably priced generic drugs which India has been exporting to many developing and poor countries may face production and trade difficulties following the Anti-Counterfeit Trade Agreement (ACTA), the World Customs Organisation’s Standards to be Employed by Customs for Uniform Rights Enforcement (SECURE), and the World Health Organisation’s (WHO) International Medical Products Anti-Counterfeiting Task Force (IMPACT) that are an inseparable part of the bilateral free trade pact. All these international treaties have drawn consistent criticism from developing countries for being formulated in secrecy and without their involvement. India had long ago called the definition of counterfeit drugs as defined by ACTA dubious. But this didn’t cut any ice within the country. Officials were tight-lipped when questioned. Even Union Minister of Industry and Commerce Anand Sharma when questioned by MP Maneka Gandhi replied, “Final positions have not emerged and therefore no agreement has been reached in any sector including IPRs.”

In 2010, the Berkeley Declaration also called on developing countries to approach the issues of IPR and anti-counterfeiting with caution.

In the past shipments of Indian generic medicines have been seized by the European authorities on charges of counterfeiting and patent infringement. Owing to the resistance by Doctors Without Borders/Medecins Sans Frontieres, the issue was catapulted to world attention. India also filed a case against the EU in the World Trade Organisation (WTO) dispute settlement court regarding these repeated seizures, on patent infringement grounds, of generic drugs transiting through the Netherlands. Such seizures are illegal under TRIPs.

IPR issues have always been a bone of contention between developing and developed countries; but the biggest irony is that TRIPS allows patented drugs classified as ‘essential’ or crucial to health to be manufactured in developing countries. 

If India accepts the IPR changes, it would mean stricter trade and production rules, thus delaying the registration and marketing of generic medicines, and extending the duration of a patent, reducing competition and sending the prices of medicines soaring.

There are sections within India that favour the changes. The Satwant Reddy Committee, an inter-ministerial committee headed by the secretary of the ministry of chemicals and fertilisers, proposed that multinational pharmaceutical companies be allowed the sole use of their expensive data for a period that extends anything from three to five years. But should we genuflect before global concerns and corporate profits, jettisoning human rights?

The pact comes at a time when global grants for fighting the AIDS pandemic are drying up and the world is looking more at generic drugs as a remedy. India’s exemption from IP regulations has helped it drive the prices of the drugs down from $10,000 per patient to $80.

The IPR issues get messier as one gets deeper into them. And the government is yet to articulate its medium- to long-term strategies on it, let alone sharing the concrete plans and contents. The history of FTAs has been very hazy. The contents of the ASEAN FTA were not even fully shared with the chief ministers leave aside the citizens when it was signed. Transparency is the hallmark of good governance, and accountability has to be made a basic tenet of democracy, trade and international negotiations.

 (Aakash Mehrotra is Research Manager at Sambodhi Research and Communications)

Infochange News & Features, October 2012