Sunday, June 15, 2014

Amiya Kumar Bagchi - Sealing the Victory of the Corporate Sector

Between the end of voting and counting, the Congress-led government took a major decision to permit even more foreign investment in the critical pharmaceutical industry, and during those same days a Reserve Bank of India committee recommended the handover of public sector banks to the private sector

On 13 May 2014, just a few days before the election results were announced, the Congress-led United Progressive Alliance government – a government that was expected to lose its mandate – went ahead and approved foreign direct investment (FDI) in India’s pharmaceutical industry (BS 2014) by the US firm KKR (Kohlberg Kravis Roberts to recall its original name).
On the next day, five days before a new prime minister designate was elected, the Reserve Bank of India (RBI 2014) published the report of the Nayak Committee on the governance of banks in India, the main thrust of whose recommendations was the privatisation of public sector banks (PSBs). If the recommendations of the Nayak Committee are accepted – and there is every chance of this happening – it will seal the corporatisation of the Indian economy, a process which had commenced under the Narasimha Rao government, with Manmohan Singh as the finance minister. The style of corporatisation will also involve turning the economy inside out, in the sense that the control will vest in the grip of non-resident Indian (NRI) businessmen or non-Indian multinationals.
Pharma Industry
Let me first look at the background and implications of the decision to approve the FDI of KKR in the pharmaceutical industry. Until the replacement of the 1911 Patents Act by the Indian Patents Act of 1970 (which became effective in 1972), the Indian drugs and pharmaceuticals industry was entirely dominated by foreign monopoly companies (Chaudhuri 2005a). Essential drugs were not only very expensive because of their monopolistic pricing, they were also sometimes unavailable in the Indian market because there might be only one or two suppliers of those drugs.
The Indian Patents Act of 1970 abolished product patents. The life of a process patent was also brought down to seven years, with the provision of compulsory licensing in cases in which the supplier was unwilling to manufacture the particular product in India. India was not the only country to have adopted such policies. In many countries, including some which are now regarded as developed or industrialised, such as the economies of east Asia, many performance requirements were imposed on foreign manufacturing companies: they included the obligation to export a part of the output, limits on the equity share of foreigners, evidence of locally-based research and development, technology transfer, and employment and training of domestic workers. From 1972, Indian regulations covered most of these requirements for foreign firms in the pharmaceutical industry, barring the obligation to export or train Indians (Husain 2011). It is under that regulatory regime (the much-reviled licence-permit raj) that the Indian pharmaceutical industry prospered, reverse-engineering many products and obtaining value-added by utilising generic products, generally produced by public sector enterprises (Chaudhuri 2005a, Chapter 2; Husain 2011). Drugs also became cheaper and even the poor in India could access a large number of essential drugs.
In the 1990s, the Indian pharmaceutical companies became major exporters of drugs to developing countries, and increasingly became large exporters of drugs to developed countries, especially the US. In a series of cases, when the multinational companies refused to supply ant-retroviral drugs to South Africa, the Indian company Cipla offered to supply them at a fraction of the price charged by the multinational companies (Chaudhuri 2005a, Chapter 6; Cichocki 2009). Indian companies became big suppliers of generic and bulk drugs to developing countries, and they included medicines to fight HIV/AIDS.
India had joined the World Trade Organisation (WTO) at its inception in 1994, when the current president of India, the then commerce minister in the central government, had signed the Marrakesh agreement while Parliament remained quite ignorant of the provisions of the agreement. Under the terms of the WTO agreement, India had to introduce product patents for pharmaceutical products from 2005. It was predicted that the introduction of product patents would revert India’s patent regime to its colonial incarnation, and with a vengeance (Chaudhuri 2005a, 2005b). It would stymie the initiatives of the Indian companies to find new processes for old chemical entities, and the multinational corporations would try to protect old products by creating a chakrabyuha of minor patents to guard their monopoly.
It has been clearly established that the WTO, and especially, the TRIPs (Trade-Related Aspects of Intellectual Property Rights) provisions embodied in it, came into being as a result of a long-drawn-out campaign and conspiracy by some of the top multinational companies led by Pfizer, the largest drugs and pharmaceuticals corporation in the world (Drahos and Braithwaite 2003). By 2012, it was easy to predict that the situation of the Indian drugs and pharmaceuticals industry would revert to domination by multinational companies, as was true before 1972, but with some differences (Chaudhuri 2012; Gopakumar 2012). A summary sketch of the developments was given in Gopakumar (2012: 4):.. read more: