First they come for the MNCs… – Ravi Shanker Kapoor

The glee with which most domestic pharmaceutical companies have greeted the Supreme Court decision dismissing Novartis AG’s appeal for patent protection of its anti-cancer drug, Glivec, is misplaced. For the forces and mindsets that are at work will not stop by humbling a multinational corporation (MNC). The unholy alliance between activists and intellectuals will be emboldened by the apex court verdict; it will intensify its efforts to torment Indian Pharma.

Anti-business crusaders come talking nice things—food for all, education for all and, in the instant case, affordable healthcare. Their promises have meretricious charms; they claim that they fight against hunger, strive for schooling, and place patients before profits (it is another matter that the promises are observed in the breach). But the ulterior motive is invariably the same—marginalization, if not complete abolition, of the private sector in every area, be it food distribution, education or medicine. It is socialism through the backdoor.

The self-appointed champions of the poor have already influenced the government to tighten its control over the pharmaceutical sector. The upcoming drug pricing policy reportedly prohibits companies to discontinue the production of essential drugs on the grounds of non-viability. Now, they would have to issue a public notice about discontinuance and inform the government about it six months in advance. Worse still, the government would be within its rights if it orders the manufacturer to continue production for another year. All, of course, in the name of the favorite tool of statists: public interest. Needless to say, such micromanagement in any sector inevitably results in rent-seeking, for Inspector Raj is the fraternal twin of Mr. Public Interest.

This is certainly not good news for the Indian pharmaceutical industry which shows a lot of promise. According to the draft Twelfth Five Year Plan (2012-17), the sector “is one of the high performing knowledge-based segments of the domestic manufacturing sector… Indian pharmaceutical Industry has entered an era in which it has to play a pivotal role in providing generic medicines to the world and also become a global hub for R&D activities.”

According to the Planning Commission, some of the key objectives under the Twelfth Plan are: sector growing to $60 billion (CAGR of 18 per cent) and having a 5 per cent share of the global pharmaceutical industry; by 2020, the sector at $100 billion; exports at Rs 130,000 crore by the end of the Twelfth Five Year Plan; employment of 2.464 million people by 2022; and internationally competitive domestic R&D. All this is not dreaming by armchair planners; it is in the realm of the possible. Independent experts have corroborated the plan panel’s bullishness. PricewaterhouseCoopers has estimated sales worth $74 billion by 2020. ICRA and Moody’s also maintain a favorable outlook.

But all these projections presuppose the existence of a few prerequisites. First, MNCs should continue to invest in India. According to Economic Survey 2012-13, pharmaceuticals was one of the sectors that attracted maximum foreign direct investment. Novartis has already made it clear. Speaking to a newspaper, Novartis India Vice-Chairman & Managing Director Ranjit Shahani said that “all R&D investments in any case have moved to China with seven global companies having invested billions of dollars after the patent law was promulgated in India. These are Novartis, Roche, Sanofi, Pfizer, GSK, Astra Zeneca and Eli Lilly. Not a single investment came to India— that speaks loudly about the innovation ecosystem we have here.”

The cavalier response to such reality check is: we are a big market, so no global major can ignore us. The fact, however, is that India was also a big market when it made its tryst with socialism but for over four decades, big investors largely ignored us. Cavalier insolence will do us no good.

Second, over half of domestic medicines are exported, the US being the biggest market for Indian generics. “The issue boils down to a protectionist interpretation of India’s patent law,” wrote Roger Bate of the influential think-tank American Enterprise Institute. Protectionism is often fought with protectionism; President Obama has shown proclivity for protectionism in the past (remember the Bangalore-Buffalo remark?). Goaded by the US Big Pharma, his administration can make things difficult for our drug makers.

In the debates that followed the SC verdict, few talked about the dead hand of the past—or, to be precise, the Left hand of the past. People seem to have forgotten that Section 3D was the result of campaign by communist parties when they were supporting the United Progressive Alliance. Section 3D was one of the landmines that the Reds planted in the economy. Pinks, in alliance with some business houses, helped activate one of them to trip. Novartis became the victim.

Frailty of the patents regime in India, which was weakened by the Left-inspired amendment, has become evident with the Novartis ruling. The problem is not with the understanding of the judges, for they have to interpret the law; the problem is with the law itself. It is sad that Indian drug companies, instead of canvassing for patent protection, have found it prudent to align with business-hating activists and intellectuals. The activist-intellectual nexus has beaten Novartis today; they will beat, or try to beat, Indian Pharma tomorrow. First they came for the MNCs…

As for affordable healthcare, there are many other ways of promoting it without undermining innovation. Novartis claims that more 90 per cent of Glivec users get it free; nobody has disputed this claim. Corporations do spend money in philanthropic activities, notwithstanding their portrayal as profiteering vampires by professional revolutionaries. But philanthropy cannot be imposed on them—certainly not by asking them to compromise on basics. And innovation is a basic prerequisite in the pharmaceutical sector.

The activist-intellectual nexus will never acknowledge this fact, but Indian drug makers cannot ignore it. Further, there is something Indian drug makers, and industrialists in other sectors, should learn from the famous poetic statement by Martin Niemöller. A German clergyman who initially supported Hitler, Niemöller later became an opponent of Nazi rule. His statement embodies the insouciance of good people to the rise of evil: “First they came for the communists/and I didn’t speak out because I wasn’t a communist…/Then they came for the Jews/and I didn’t speak out because I wasn’t a Jew./Then they came for the Catholics,/and I didn’t speak out because I wasn’t a Catholic./Then they came for me, and there was no one left to speak for me.”

First they came for the MNCs…

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