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The US trade representative (USTR) has expressed concern at shortcomings in the intellectual property rights (IPR) regimes of both China and India when it comes to investment in pharmaceuticals while noting improvements put in place by both Asian countries. The USTR’s stance, in a report that analyses IPR issues in 42 countries, seems to be more even-handed than that of the foreign drug makers’ lobby in India, which has claimed that the country lagged behind China in IPR protection. In the report, the USTR said the overall level of intellectual property theft in China remains unacceptable although it was heartened by positive steps China took in 2009, including the largest software piracy prosecution in Chinese history and an increase in the number of civil IP cases in the courts. “The US is also deeply troubled by the development of policies that may unfairly disadvantage US rights holders by promoting “indigenous innovation” including through, among other things, preferential government procurement and other measures that could severely restrict market access to foreign technology and products, the USTR report said. The report also expressed concern about inadequacies in India’s IPR legal framework and enforcement. “Piracy and counterfeiting, including the counterfeiting of medicines, remains widespread, and India’s enforcement regime remains ineffective at addressing this problem,” it said. It noted, however, that India continues to make “gradual progress on efforts to improve its legislative, administrative, and enforcement infrastructure for IPR”. “India has made incremental improvements on enforcement, and its IP offices continue to pursue promising modernization efforts,” the USTR said. The report is largely based on submissions made by various US industry and trade lobbies, including the Pharmaceutical Research and Manufacturers of America (PhRMA), the world’s largest pharma lobby. Global pharma companies, including Swiss drug multinational Novartis AG and US drug maker Eli Lilly and Co., which recently set up research and development facilities in China, have claimed that the key reason for the investments was that China had a strong IPR law. Novartis global chairman Daniel Vasela, soon after announcing a $1 billion ( R s. 45.6 billion) research centre in China in 2009, said in public remarks that India doesn’t have a conducive enough IPR environment to attract investment in research and development. Such arguments were more of “hype to create pressure on India to go beyond TRIPS”, said Dilip G. Shah, secretary general of the Indian Pharmaceutical Alliance, a domestic industry lobby. TRIPs is short for trade-related intellectual property rights, an agreement that’s part of the World Trade Organization (WTO). “The reality is different, as is evident from the PhRMA’s 2010 submission to the USTR,” Shah added. PhRMA, in its submission, suggested that China’s IPR enforcement regime remains largely ineffective and non-deterrent. “In my view, without going into the details of any report, relative robustness of IPR regime of any country is one of the key factors for a research-based global pharmaceutical company to decide on FDI for the innovative products in other countries,” said Tapan Ray, director general, Organisation of Pharmaceutical Producers of India (OPPI), the industry body that represents foreign drug makers in India. FDI is short for foreign direct investment. China is currently the seventh-largest pharmaceutical market and is expected to be fifth-ranked by 2015. India is currently 14th and expected to be 10th in 2015, said Ray. “The evidence-based analysis has indicated that a strong IP protection has not really helped in bringing foreign direct investments to the developing countries, but many other factors such as market potential…have played a key role,” said Madhukar Sinha, a professor at the Centre for WTO Studies at the Indian Institute of Foreign Trade. Ray points to patent filings in which China seems to have a lead over India as an indicator of the “innovative culture” in that country. He quotes findings that 5.5% of all global pharmaceutical patent applications named one inventor or more located in India, compared with 8.4% who had an inventor based in China. “This will give an indication how China is making rapid strides in R&D areas as well,” Ray said. Shah counters the argument. Foreign drug makers take advantage of research skills possessed by Indian companies and research institutions by partnering with them instead of making investments, he said “This skill-set and partnership opportunities are not available in China,” Shah said. “So they need to make own investments there to explore the huge market.”