BERLIN -- Nasty letters, the threat of trade sanctions, withdrawing development aid: when it comes to defending the patents of their country's pharmaceutical companies in developing nations, Western governments are not shy.

In the summer of 2007, the government of Bangladesh, for example, got letters from European Union trade commissioner Peter Mandelson and U.S. Ambassador to Thailand, Ralph Boyce, after it announced plans for a compulsory license for HIV drugs. A so-called "compulsory license" enables inexpensive imitations of medication to be made without the agreement of the original inventor in order to respond to domestic health needs.

What was the message contained in those E.U. and U.S. letters? That if the south Asian country wanted access to new medication, it would have to deal with the patent holders. Bangladesh backed down.

It is doubtful, however, that the same harsh means will be used in the aftermath of the latest compulsory license decision on the Indian subcontinent. Earlier this week, the Indian Patent Office, under the leadership of outgoing boss P.H "Bullet" Kurian, approved a request by Natco, an Indian maker of generic medication, to produce Nexavar, a cancer medication patented by Bayer AG. The decision means that Bayer would get but a meager 6% royalties on the much cheaper generic product. Not only that, but the German firm – if the decision stands – can pretty much write off the Indian market for their own, original version of the drug.

Bayer will no doubt present Indian authorities with some commensurately loud objections. But India, with its population of 1.2 billion, is significantly less easy to influence than its poor neighbor Bangladesh. There are more than 20,000 producers of generic medication in India, and they contribute more to the Indian economy and the country's health needs than do all the foreign investors in the country put together. In fact, over 70% of all generic medication worldwide is made in India. The sector also accounts for more than 80% of turnover of the $20 billion Indian pharmaceuticals market.

Keeping an eye on India

The Bayer cancer medication, Nexavar, has in fact not played much of a role in the Indian market. The patent office itself qualified Bayer's Nexavar turnover in India as "negligible." In any case, Natco competitor Cipla had already brought a Nexavar copy onto the Indian market – without license – some time ago, and is presently hoping to get legal approval after the fact, not an unusual way of proceeding in India.

Why then is Bayer so concerned about India's Nexavar decision? Because for the first time since Indian patent law was reformed in 2005, the pronouncement was paired with a compulsory license requirement. And that is a major source of worry to the brand-name makers of such drugs in general: the fear is that, after the Nexavar decision, other drugs could fall under the compulsory license clause of Indian patent law as well. Generic manufacturer Natco has also asked for a compulsory license for Selzentry, and AIDS medication made by the U.S. drug company Pfizer. Natco competitor Cipla, in the meantime, has asked for a license for Merck's AIDS medication Isentress.

"The pharmaceutical companies concerned see this way of proceeding on the part of Indian patent authorities as de facto expropriation. They're not entirely wrong," says patent expert Jens Hammer of a law firm called Grünecker, which specializes in German and European intellectual property matters.

The standoff in India has global relevance. For starters, the Nexavar decision will impact the estimated 2.5 million Indians who are HIV-positive by giving them access to a cheaper generic version of the medication. Secondly, thanks to the compulsory license, the Indian makers of the drug are looking ahead to export possibilities. In Sub-Saharan Africa, according to Oxfam, 80% of required HIV and AIDS medication is covered by Indian generic makes.

In developing countries in general, compulsory licenses are increasingly being used as a means of providing cheaper antiviral products: in the past five years, Brazil, Ecuador, and Thailand have okayed the production of various HIV drugs without seeking agreement from the inventor companies. In countries with no generics industry, such as Ghana and Eritrea, import licenses are granted for Indian products.

Punishing the patients

The pharmaceutical companies behind the original products do not shy away from drastic measures when dealing with manufacturers of generic products. An example: after Thailand issued a compulsory license for Kaletra, an AIDS medication produced by Abbot, the U.S. drug maker responded by denying Thai patients access to its other life-saving drugs.

International trade law can also be used to move against generic manufacturers: in early 2009, for example, German customs authorities at Frankfurt Airport confiscated more than 3 million pills made by an Indian generic manufacturer. The pills were on their way to the Republic of Vanuatu in the South Pacific. The reason for the action was suspicion of breach of GlaxoSmithKline's trademark rights on the part of the manufacturer.

In the future, the controversial Anti-Counterfeiting Trade Agreement (ACTA) could make export on the part of Indian manufacturers even more difficult. Pharma giant Novartis canned plans to build a new, $100-million research center in India after it lost a court case in the southern city of Chennai that it had brought against the compulsory license clause in India patent legislation.

Novartis also has something else up its sleeve. The company has taken a complaint against the reformed Indian patent laws all the way to the Indian Supreme Court. Activists at various NGOs are already warning that generic medicines for AIDS sufferers worldwide may be getting more expensive, and are calling for a boycott of Novartis. But patent lawyer Hammer believes their worries are unfounded: "So far, all court decisions in India have come down on the side of the generic manufacturers," he says.

Read the original story in German

Photo - Esme Vos