THOUGH India is one of the largest exporters of generic drugs to the US, ties between the two nations are often tetchy over issues relating to protection of patents and intellectual property rights and the quality of drugs that are manufactured in India.

A major crisis is currently brewing between the two countries over the issue, with the bipartisan US International Trade Commission (USITC) launching an investigation – backed by both the US Senate finance committee and the House of Representatives’ ways and means committee – on ‘Trade, investment and industrial policies in India: effects on the US economy.’

And later this month, the US Trade Representative (USTR) will also start hearings as a prelude to its ‘Special 301 report,’ reviewing IPR rules and practices by America’s trade partners. Trade bodies, activists and other organisations both from the US and India have begun lobbying for or against the Indian pharmaceutical industry.

The US Chamber of Commerce, for instance, has demanded that the USTR classify India as a ‘Priority Foreign Country,’ which is a label generally given to the worst intellectual property offenders and which could result in trade sanctions.

“We highlight India as a country with particular challenges with respect to intellectual property protections,” the global intellectual property center of the chamber told the bipartisan commission. “Because India has not shown a record of engagement on these issues and the environment has deteriorated significantly since last year, we are now recommending that India be designated a Priority Foreign Country.”

Last year, India annoyed the international pharmaceutical industry and several western governments when it denied patents to cancer drugs Glivec (by Novartis) and Nexavar (Bayer) and allowed domestic producers to churn out generic versions of these expensive drugs. Even the Indian Supreme Court dismissed the plea by Novartis for patent protection of its blood cancer drug. The Indian Patent Office also gave a compulsory licence allowing a domestic firm to make Nexavar, Bayer’s advanced kidney cancer drug by paying a revised royalty of seven per cent.

Organisations that are testifying against India include the Alliance for Fair Trade with India, the National Association of Manufacturers, the International Intellectual Property Alliance, Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organisation.

But non-profits including Public Citizen and Doctors without Borders, besides a few academics are backing India. “Recently, some pharmaceutical industry groups have criticised India’s patent rules and practices,” Peter Mayburdak of Public Citizen, told the commission. “But India’s practice complies with the WTO’s agreement on trade-related intellectual property rights.”

Representatives from the Confederation of Indian Industry, the Indian Pharmaceutical Alliance (IPA), the US-India Business Council and others are defending India’s IPR and patent regime at the hearings.

According to the submission by the IPA, after India implemented the TRIPS agreement in 2005, over 1,500 patents have been granted to nine leading international pharma firms, for products and compositions and for manufacturing processes. “When the innovator pharmaceutical industry talks of ‘denial’ of patents, it is not talking of patents for medicinal products in general, but actually of second or third patents for the same product,” it said.

LAST week, Margaret Hamburg, the commissioner of the US Food and Drug Administration (FDA) interacted with Indian ministers and officials of various drugs-related bodies as she embarked on a 10-day visit of the country. India has 320, FDA-approved pharmaceutical manufacturing facilities, the largest outside of the US, and nearly a score of administration’s officials including inspectors are posted in the country.

Leading Indian drug-makers, including Ranbaxy Laboratories and Wockhardt Ltd, have been facing problems with the FDA over quality issues. Last month, the FDA imposed a ban on export of drugs from Ranbaxy’s facility in Punjab. This was the fourth such facility of the leading Indian drug-maker – which was acquired by Japan’s Daiichi Sankyo in 2008 – to face regulatory action by the FDA. Almost 40 per cent of the revenues of India’s largest pharma firm are from the US.

Last year, Ranbaxy agreed to pay a fine of $500 million after pleading guilty to charges relating to the manufacture of adulterated drugs at two of its plants in north India. The FDA has also accused Ranbaxy of having fudged test results at its facilities in the past.

Several concerns were raised by both India and the US during the meetings Hamburg had with her counterparts. “We have agreed to create an institutional framework to sensitise and educate the domestic pharmaceutical industry with regards to the certification, registration and the processes which the Indian pharmaceutical industry as a whole needs to get involved in,” remarked Anand Sharma, the Indian commerce minister. India also red-flagged the ‘disproportionate penalties’ imposed by the FDA.

The two sides agreed to conduct joint audits and inspections of pharmaceutical facilities in India. The high penalties and the stringent rules imposed by the FDA are seen as artificial barriers erected by America to check growing exports of generic drugs from India.

The US accounts for more than a quarter of India’s annual pharmaceutical exports of nearly $15 billion. Almost 40 per cent of the generic drugs that are sold in the US are now sourced from India. US President Barack Obama’s ambitious healthcare law will boost the export of Indian generic drugs, with analysts estimating an annual growth of 25 to 30 per cent over the next few years.

Obamacare, which will bring more than 30 million Americans into the new healthcare system, will boost demand for generic drugs, as insurance companies will look at cost savings.

Hamburg also signed an agreement with Ghulam Nabi Azad, the Indian health minister, relating to collaboration in the areas of compliance with accepted good manufacturing, clinical or laboratory practices.

While Hamburg emphasised on the need for a common set of standards to ensure “quality, safe and efficacious drugs,” Azad noted that affordable drugs were not necessarily cheap and spurious.

Besides soaring demand for generic drugs in the US, the Indian pharmaceutical industry is also eagerly looking forward to the fact that nearly $100 billion worth of drugs will be going off patent over the next three years around the world. While the country is known as ‘the pharmacy to the developing world,’ it could soon emerge as the pharmacy to even the US.