Special 301 Report: India not downgraded to Priority Foreign Country, will receive OCR though

After a long period of intense speculation on whether India would be downgraded to the Priority Foreign Country category, the USTR decided to let India stay put in the Priority Watch List (India has consistently featured on this list since 1979). Our readers may be aware that US was rather miffed with India’s laws facilitating the manufacture of generic drugs and India’s commitment to promote access to healthcare. Big Pharma and the US Government made several public statements indicating a possible downgrade which would effectively declare India as the worst IPR offender i.e. a Priority Foreign Country, which would allow the triggering of unilateral trade sanctions. However, Ukraine was the sole country listed in this category. 9 other countries are a part of the ‘Priority Watch List’ that India finds itself on (China, Russia, Pakistan, Thailand, Indonesia, Venezuela, Algeria, Chile and Argentina) and 27 countries made it to the Watch List this time. Notably, Italy and Philippines have the distinction of being the first two to have been removed from the Watch List. To read Swaraj’s post on the 2013 Report, click here. To see our other posts discussing the USTR 301 lists, click here.       

At the outset, I must mention the Report is merely a commentary on the IP regime in several countries. It carries the usual tenor of bias and promotion of US’ industry interests. The 301 program was initiated by the US in the 1980s, much before the WTO came into existence. The lack of binding international trade adjudication was the primary justification for the enactment of the 301 program initiating unilateral adjudication. The US declined to dismantle the 301 program after the WTO was set up which resulted in a trade dispute at the WTO. The WTO panel held that only the WTO Dispute Settlement Body was competent to legally authorise any US 301 sanction. The Panel also made it clear that threats to impose sanctions would amount to threatening the WTO. Since this ruling, the US has avoided explicitly announcing such threats for alleged violations. To read more on the program, click here.

This time it also drew a list of select few countries which demonstrated a positive IP trend in the past year (in accordance with US’ expectations). India did not find a place on this ‘exalted’ list.

US believes India ‘errs’, because..

The Report mostly reflects on the changes the Indian IP regime went through in 2013. It begins with highlighting the serious issue of export of counterfeit drugs. The Report adds that India had the highest tariffs on medicines and medical devices, which coupled with internal measures such as price control unduly favours domestic drug manufacturers. In the same breath, it claims that such practices can hinder the Indian government’s efforts to promote increased access to healthcare products. This statement is a little unsettling- is the US asserting that lowering trade barriers shall increase access to drugs, wheras practices such as price controls are unacceptable as they do not  promote access to drugs? Did it forget to consider that the very idea underlying Price Control was to make medicines affordable.

Further, it raised objections with the Supreme Court’s interpretation of S 3(d) in the Novartis case. As per the Report, the interpretation limited the patentability of potentially beneficial innovations.

As expected, objections with Indian compulsory licensing laws followed. The IPAB had decided that Bayer did not work the patent, thus granted a compulsory licence to Natco. It asked Bayer to explain its inability to manufacture the drug locally, not merely state it. The Report stated that the IPAB failed to identify circumstances wherein the “working requirement” would be met without indigenous manufacturing.

Further, the Report cited India as an example of a country whose IP policy may have an unintended effect of undermining national and global efforts to address serious environmental challenges. To support this it stated that the Indian National Manufacturing Policy promoted the compulsory licensing of patented technologies as a means of effectuating technology transfer with respect to green technologies. Such policy inclinations apparently discouraged investment in green technologies.

Initiation of Out-of-Cycle Review (OCR) to ‘resolve’ differences with India..

Despite not being downgraded to Priority Foreign Country status, the USTR will be conducting an OCR in the fall of 2014, after the new government comes in place. The Report describes the Out-of-Cycle Review (OCR) as a ‘tool’ to ‘encourage progress on IPR issues of concern’. In reality, an OCR is a part of a larger coercive measure entailing periodic reviews of the IP policy of a country between two sets of 301 reports. It is systemically designed to mount pressure on Governments to make them toe practices approved by the US. The Report states that the USTR will conduct OCRs of Priority Watch List country India and Watch List countries Kuwait and Paraguay.  By prescribing a special OCR for India, they are effectively trying to get at the new government that will be in place, as soon as possible

With its unilateral and imperialist approach, the Report is borderline offensive to many countries, especially countries which promote access to affordable healthcare and several organizations have called the USTR out on this before. The statement by Public Citizen on the Report:

“India’s patent system plays by the global rules and promotes public health. The Obama administration should support, rather than attack, India’s key role helping facilitate global access to lifesaving medicines.”

The Special 301 Report is a bullying tactic adopted by the US Government to pressurise India (and other countries) into becoming a better market for unaffordable drugs, undermining indigenous efforts to increase access to drugs. To add to this layer of annual scrutiny, India will be now subjected to periodic reviews courtesy the OCRs. Even worse is the high handed way in which the US conducts itself as the sole arbiter of all things “good IP” misguided by commercial interests.

I would like to thank Swaraj for his inputs on the issue.

Click here to read the Report.