The burgeoning Indian economy, which once appeared to be a potential key U.S. trade partner for decades to come, now has become a battleground over everything from brand-name drugs to big-budget Hollywood movies.
India’s handling of intellectual property rights and patents has raised the ire of lawmakers on Capitol Hill, governors from across the nation, business leaders and pharmaceutical giants — and if that path continues, analysts say, the economic relationship between the two nations may come to a grinding halt.
“A wide swath of U.S. businesses have been targeted by these [Indian] policies. It really seems to be a basic industrial policy of the Indian government right now to build up its own domestic industries, whether it be pharmaceuticals or the technology area or elsewhere. Hopefully, President Obama will be raising these issues and we can reach a solution here,” said Jay Taylor, vice president of international affairs at Pharmaceutical Research and Manufacturers of America (PhRMA).
India has revoked, or denied in one form or another, multiple U.S. drug patents, which lets Indian companies produce cheaper, generic versions for sale in the South Asian nation. While many of these brand-name drugs would be too expensive to sell in big numbers in a developing country such as India, pharmaceutical companies and U.S. officials say they never could have been developed without American investment and research.
The U.S.-Indian trade rift, bubbling for years, has reached the surface in recent months. It is expected to be a top topic when Mr. Obama meets with Indian Prime Minister Manmohan Singh on Friday in Washington.
This summer, more than 200 members of Congress wrote to Mr. Obama urging him to raise the issue “at the highest levels of the Indian government.”
This week, governors from 14 states — including Maryland Gov. Martin O’Malley, a Democrat, and Ohio Gov. John Kasich, a Republican — wrote a similar letter blasting India’s economic approach.
“Given India’s role as an economic leader among emerging countries, there is concern that India’s policies may have a spillover effect to other countries,” the governors said.
Those policies, analysts say, affect a wide range of sectors of the U.S. economy.
India has taken steps to allow only domestically manufactured products in the energy and technology sectors. The nation is one of the worst offenders when it comes to bootlegged copies of American films, analysts say, and has blocked imports of many other foreign products.
But the pharmaceutical industry perhaps has been hit the hardest.
More than a half-dozen drugs have had their patents revoked in favor of Indian production or have had “compulsory licenses” issued against them. Such licenses allow Indian companies to produce generic versions of the drug, even though it still is — or, in theory, should be — protected by patents.
In March 2012, the Indian government issued a compulsory license to a national firm to make cheaper versions of the drug Nexavar, co-produced and co-marketed by Onyx Pharmaceuticals Inc. of the U.S. and German giant Bayer Corp. The drug is used to treat kidney disease.
In April, an Indian court issued a ruling that denied a patent for the drug Glivec, used to treat leukemia and other illnesses. The product is manufactured and patented by U.S. firm Novartis AG.
According to PhRMA, the Indian court cited a rule requiring that the drug be proved to have “enhanced efficacy,” meaning it showed invention with health benefits not seen in previous drugs. Even though the drug is patented in 40 other countries, India has refused to patent it.
PhRMA argues that India’s actions, if unchecked, eventually may result in U.S. companies not doing business there. A major drug company’s intellectual property, Mr. Taylor said, must be honored and protected in foreign countries.
“It’s a huge cost to the [drug] companies — over $1 billion per product due to all the failures in the process — and it’s intellectual property rights that protect the product,” he said. “If India is allowed to get away with these activities, are other, larger trading partners going to seek to emulate India’s behavior?”
Top U.S. officials — including Vice President Joseph R. Biden — have raised concerns in recent months, but little has changed.
Since the summer, the American business community has turned up the heat on India and is putting even more pressure on the Obama administration to deal with the problem.
“This concern has been accelerating as we’ve seen more discriminatory and unfair actions by the Indian government that really are designed to help a few Indian companies at the expense of everyone else,” Linda Dempsey, vice president of international economic affairs with the National Association of Manufacturers, said in a conference call with reporters Thursday.
Ms. Dempsey co-chairman of the Alliance for Fair Trade with India, formed in June. Mark Elliot, executive vice president of international economic affairs at the U.S. Chamber of Commerce’s Global Intellectual Property Center, serves as the other co-chairman.
“We have asked the president to raise these concerns, to ask India to level the playing field and treat our manufacturers and businesses fairly,” Ms. Dempsey said. “We’re really counting on the president to make these points and come up with a solution where India returns to policies of [trade] reform.”
India’s approach, while lucrative for some of its big businesses, may end up doing more harm than good to its people and its overall economy. It’s already becoming clear that foreign investment is beginning to dry up.
In 2011 and 2012, $35.1 billion of “foreign direct investment” flowed into India; by 2013, that number dropped dramatically to $22.4 billion, according to India’s Department of Industrial Policy and Promotion.
Furthermore, PhRMA points out that the generic form of Nexavar is sold for $178 per month, making it far too expensive for the vast majority of the Indian population.
“It’s bad for India,” Mr. Elliot said.