By Arvind Panagariya



It is said that only God and a few good men and women run India. One such man is P H Kurien.



For readers unfamiliar with his name, Kurien was India's Controller General of Patents, Designs & Trade Marks until March 12, 2012. On March 9, 2012, just three days before he left office, he issued the first-ever compulsory licence in India for the manufacture of a drug still under patent. The licence authorized Indian company Natco to manufacture drug Naxevar for which Bayer, a German multinational company, holds the patent. This was an act of major significance for India's health.



Since March 3, 2008, when it got the Indian patent, Bayer has imported Naxevar, selling its monthly dose at the whopping price of 2,80,428 or $5,420. Unsurprisingly, only 2% of Indian patients have been able to afford it.



In its application for compulsory licence to the Controller General of Patents, Natco offered to sell the monthly dose at 8,800 ($170), a mere 3% of Bayer's price. Kurien obliged the numerous patients suffering from liver and kidney cancer, by ruling in favour of Natco.



To explain why this was a heroic act, we must look at the history of drug patents in India beginning four decades ago. At the time, in what was one of her few wise economic-policy decisions, Prime Minister Indira Gandhi replaced the then existing patent law, inherited from the British, by the Patent Act of 1970. The new Act entirely eschewed product patent, limiting patents in medicines to process. Henceforth, any company able to produce a drug via a process different from those patented by existing manufacturers could sell the drug in the Indian market.



Altering the process of production by reverse engineering in pharmaceuticals is a low-cost affair. The Patent Act of 1970 allowed Indian companies to manufacture and sell drugs at a fraction of the price charged by original patent holders, overwhelmingly foreign multinationals. That, in turn, spawned a substantial, low-cost pharmaceutical industry in India.



In 1959, a United States Senate Sub-committee headed by Senator Estes Kefauver had noted that when it came to drugs, India ranked 'amongst the highest-priced nations of the world.' Thanks to the Patent Act of 1970, drug prices rapidly tumbled, turning India into possibly the lowest priced country.



As early as the 1970s, American pharmaceutical companies had realised that as leaders in drug innovation, they stood to profit if they could get other countries to adopt the same high standards of patent protection as the United States. By the early 1980s, m ost developed countries had patent protection approaching those in the US. But since the developing countries continued to maintain low protection, American pharmaceutical companies began to lobby the US government to pressure them into implementing higher standards.



The Uruguay Round (UR) of trade negotiations provided the companies their big opportunity. They not only managed to place all intellectual property rights on the negotiating agenda but eventually succeeded in pushing the wide-ranging Agreement on Trade related Aspects of Intellectual Property Rights (TRIPs) as a part of the UR Agreements establishing the World Trade Organization (WTO). The TRIPs agreement required all WTO members to provide 20-year product and process patents on new medicines.



Its vilification as an obstructionist negotiator by the western press and governments notwithstanding, India fought hard against product patents on medicines. Though it lost that battle, it did score an important victory. It got inserted in the Agreement on TRIPs, a provision whereby member countries would retain the right to issue compulsory licence to domestic firms for a patented medicine if the patent holder did not provide the medicine at an affordable price.



In 2005, when India amended the Patent Act of 1970 to become TRIPs-compliant, it built this provision into the amended Act.



Natco applied to the Controller General of Patents for compulsory licence under this provision. This was the first such application, so Kurien was on unchartered territory. Luckily, earlier he had spent three years as a scholar at the Indian Institute of Science and appreciated the value of research. In addition to inviting Natco and Bayer to present arguments and evidence at a hearing that lasted 18 hours, spread over three days, he sifted through reams of articles by scholars and institutions globally.



Based on this investigation, Kurien produced a 62-page airtight judgment in favour of Natco. Bayer has appealed but it will take a miracle to overturn the judgment. Sensing the threat to future profits of its companies, the US has turned to pre-WTO pressure tactics, placing India on its latest "Priority Watch List." But India's commerce minister Anand Sharma has reacted coolly describing the US action as "unilateral, unfortunate and unjustified."



In its defence, Bayer had argued that its high price of the drug was necessary to defray the cost of invention. This is a spurious argument. If drug companies counted on poor countries to recover the costs of their inventions, they would invest in research to treat tropical diseases such as tuberculosis and malaria. They do not.



Kurien has sent a clear signal that the provision of compulsory licence in Indian patent law have teeth and that a patent holder selling medicine at unduly high prices faces real prospect of entry of low-cost competitors. And, for that, he is a hero.



(The authoor is Professor, Columbia University)