Nerve Endings Firing Away

Liberalization can be unpopular, as we found out recently as the Lok Sabha (Lower House) in the Indian Parliament passed a bill banning domestic firms from manufacturing low-cost generic drugs of patented drugs. It is the end of protectionist policies in the Indian pharmaceutical industry, as the government makes this move partly to “meet its commitment to the WTO rules and further drug research and development or attract foreign partners”. India however loses out on being the source of cheap generic drugs and is accused of selling out to the powers to-be. But then such is the cost of globalization, suffer the short term consequences and await the long-term benefits. Drug R&D is no doubt, an expensive venture and hikes up the drug prices astronomically but adhering to patent laws is important if we are to establish ourselves as a global power.

The current patent law, which has allowed drug makers to copy patented drugs as long as they use a different manufacturing process, has protected its beneficiaries for long and now it is time to get real. The world doesn’t appreciate blatant copying although it may benefit your citizens in the short term by offering relatively cheap alternatives. No one is going to invest in your country if they are afraid of getting ripped off. It is slightly late for the argument – “they looted us in the past, and now it is our turn” only smacks of childlike tantrums. Drug companies can technically pass on their R&D cost to the consumers, thus raising the drug prices but it won’t work if there are more choices for the consumer. Simple economics! Information asymmetry apart, it won’t take long for the consumer to wise up. Of course, it also needs an enlightened citizenry to make a real democracy. You didn’t expect to be spoon-fed by the government forever, did you? And we have outsourcing, don’t we? Surprisingly the Left played along this time but BJP didn’t but they are just being the quintessential opposition party.

But like Arun “Quizman” Simha points out, all is not well with the government’s intentions; instead of relying on market-correcting mechanisms for determining drug prices. Kamal Nath, the Commerce Minister made a suspicious-sounding statement, “All safeguards have been put in the regime and the government will have enormous powers to deal with any unusual price rise,” Now, we don’t want to have artificial means for price mechanisms for a move clearly meant for the free-market. You can’t have your cake and eat it too. Let us get it straight, drug prices are going to rise. If the government is really concerned about the availability of drugs to the most needy, let them buy the drugs from the market and subsidize it to the needy Medicaid style which has its own problems. Don’t expect the drug industry to innovate under price controls. We will simply have a useless law promoting negative aspects of liberalization without getting any aforesaid benefits. Globalization doesn’t just mean that you get all the Coke you can guzzle and all the CNN you can watch, but it also means you get anything you want as long as you can pay for it, not because you deserve it. Like it or not, it is really very simple.

But then again, we cannot totally abandon our “public-service focus” and abandon aids patients who rely on cheap drugs from India. I assume the government has something in store beyond fixing price mechanisms but they haven’t elaborated much on it yet. Hopefully they will although I don’t see how it can be done easily.

More at NY Times . Boing Boing says, “US [is] sabotaging efforts to create humanitarian copyright and patent policies”