It can be gathered from the news over the past couple of months that all may not be so well in our once �glorious� indigenous pharmaceutical industry. Concerns have been raised about the quality of drugs manufactured in India, while revocation of patents and grant of compulsory licenses for crucial patented drugs have been condemned. For these reasons, the US Chamber of Commerce�s Global Intellectual Property Centre (GIPC) index, for the second year running, has put India at the bottom of the list of 25 countries evaluated on the basis of their intellectual property (IP) regime. Such a move has raised questions on India�s commitment towards promoting innovation and forces us to rethink the basic patent-innovation linkage.
Patents encourage innovation by assuring the innovator that there wouldn�t be free riders on his ideas and thus, he doesn�t need to keep them a secret. Going by this line of reasoning, having an effective patent system in place, say in the context of pharmaceuticals, will bring in more treatment options for an array of diseases that are on the rise. This certainly sounds good until we ask ourselves � do patents always foster innovation? There have been an increasing number of studies to indicate that while the R & D costs of US pharmaceutical firms have been on the rise, the number of new chemical entities have not grown proportionately. At the same time, the pharmaceutical patents granted every year are increasing at a tremendously fast rate. It thus appears that not all patents granted are for development of truly novel products, and instead are for minor changes in existing products such as polymorphs, combinations with other drugs, new dosage forms, isomers, etc. However, it should be noted that patent laws with a lower technical requirement do not favour local innovation, especially in developing countries. In fact, such patents, by creating an obstacle for legitimate generic competition and thereby accessibility to affordable medicine, prevent realization of the right to health as is recognized in the International Covenant on Economic, Social and Cultural Rights, as well as, by the national constitutions of several countries. But there isn�t unanimity in how people see this issue. There is also the view that incremental innovations are rather valuable as they expand the variety of drugs within a therapeutic class thereby ensuring uninterrupted supply of vital medications in case of any manufacturing bottlenecks etc., besides providing treatment options to a wide range of patient physiologies.
Quite recently, India has been criticized for its indiscriminate use of the provision of compulsory licenses and thereby, of stifling investment in innovation. Further, it has been condemned for not providing enough incentives to firms to invest in development of more sophisticated technologies, largely based on its policy to not grant patents for incremental innovations and for upholding its mandate to protect public health by granting a single compulsory license. However, they seem to be focusing on a single point in a much larger picture. In a country such as India where 86% of the private expenditure on health is out of pocket and over 80% of the population has no health insurance coverage, cost effectiveness of treatment is a major concern. Therefore, incentives should definitely be provided to firms not only to promote innovation, but to ensure that such innovations may be cost effective for the masses.
It may be time for the world to look beyond patents as the means to foster innovation and seek additional ways to balance industry interests with those of public health, while causing the least distortion possible. The idea of non-price linked mechanisms for incentivizing innovation, such as prizes and advance market commitments, is gaining some momentum. Moreover, differential pricing and tax benefits are additional channels being considered in various parts of the world. Between 2004 and 2010, the state governments of Himachal Pradesh and Uttarakhand, offered tax benefits targeted at attracting more investment in these states. This led to more firms setting up plants in these regions for manufacturing generics but did not boost innovation. It is much needed that tax exemptions are given specifically for the process of drug development, alongside ensuring a smooth process for conducting clinical trials in India. These two together will attract FDI as well as encourage domestic firms not only to invest in R & D but also to develop the so called �neglected� drugs. Currently, there is a very meager proportion of the budget allocated to health and even lesser for the development of pharmaceutical firms. This needs to be changed with policies targeted at developing the firms� capacity to innovate. The chances are that if India adopts such measures then there is little reason for the global industry to doubt its intentions. The question now is whether the new Indian government is ready to start addressing this much contentious issue afresh, and willing to take up these initiatives to prove its commitment towards encouraging innovation. The newly announced budget has, unfortunately, failed to address this issue in much detail. While investment in training of medical professionals, increased FDI in healthcare as well as greater medical tourism have been announced, there is absolutely nothing which might restore the pharmaceutical industry�s faith..