Indian Investment: Has it Lost its Allure?

Gerald Clarke

In the past years businesses had been searching for alternative investment locations and the emerging markets and especially the nations of Brazil, Russia, India and China (BRIC) have attracted particular attention. However with many recent problems in these countries is it time to start asking whether the sheen has come off this particular apple?

Pfizer Professes Penalising Protectionism

In a subcommittee on Commerce, Manufacturing, and Trade (Committee on Energy and Commerce) in the US House of Representatives, a statement described India as “an outlier in the international community” in regard to intellectual property; this was made by Mark Elliott Executive Vice President, U.S. Chamber of Commerce, Global Intellectual Property Center. He listed four cases he considered illustrative of India’s attitude to IP:

  • “In March 2012, the Indian Patent Board issued its first ever compulsory license on Nexavar, a Bayer drug used for cancer treatment. While the Patent Board claimed to be acting in accordance with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, the fact that Nexavar is not manufactured locally is not a condition for issuing a compulsory license under TRIPS.
  • Pfizer has been fighting to keep its Sutent patent in force against revocation decisions of the Indian Patent Office in September 2012.
  • In November 2012, the Delhi High Court ruled against Roche in the patent infringement case for Tarceva, an innovative lung cancer drug. While the patent for the drug was valid, the Court ruled the generic did not infringe Roche’s patent.
  • Most recently, in April 2013, the Indian Supreme Court denied a patent on a Novartis cancer drug, Glivec, even though the patent is recognized and valid in 40 other countries.”

All of these, he said were “bad for investment potential, and bad for international trade”.  Roy F. Waldron, Chief Intellectual Property Counsel at Pfizer said that these policies required a “bold response” from the US Government.

India recently introduced an updated Drug Price Control Order to help them control the price and availability of ‘essential drugs’, the order also aimed to increase the amount of R&D done in India by introducing exemptions to the price ceilings for drugs which are discovered and developed in the country.

India’s Drug Technical Advisory Board also has released advice that consent to participate in clinical trials should be given on camera. This step was taken to ensure that informed consent was being given in these cases as they believe that the people being recruited may have been exploited and given little or no counselling.

Is India Interested in Investment?

Before the recent meeting of India’s Foreign Investment Promotion Board, there was a large amount of concern raised that they might have deferred on the FDI proposals which came before them. The Department of Industrial Policy and Promotion (DIPP) had raised the issue of foreign investment in the pharmaceutical industry to the Prime Minister. They feel that foreign companies buying Indian pharmaceutical firms may harm access to life-saving drugs in the long term. In the end, the board cleared 7 of the 10 FDI proposals and deferred three. This cautious attitude to pharma investment seems at odds with the fact that nearly 5% of all foreign investment in India has been into pharma.

Reedy Rupee Reduces Reinvestment

In October of last year, the Dollar to Rupee exchange rate was 51.3862 10 months later and the dollar will buy almost 20% more at a rate of 62.2125. Tapering may sound like a harmless enough word, but it has caused shocks through the global markets, US investors are pulling their money out of developing countries and reinvesting in the US. Billions of dollars of American investment has been pulled out of the Indian market in the last weeks.

Is this the beginning of a long term trend or just a momentary dip in a market that is known to be reactionary? Although the situation has now changed, the Indian pharma market was predicted for a double digit Compound Annual Growth Rate (CAGR) in the coming years. What companies must ask themselves now is; is it worth perservering with the issues in India to be a part of that growth, or should they reinvest where the problems are more predictable? Either way it is certainly an interesting time for the industry and this particular situation will be one that many will be waching closely.