[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






  A TANGLE OF BARRIERS: HOW INDIA'S INDUSTRIAL POLICY IS HURTING U.S. 
                               COMPANIES

=======================================================================

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 27, 2013

                               __________

                           Serial No. 113-62


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



      Printed for the use of the Committee on Energy and Commerce
                        energycommerce.house.gov
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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
           Subcommittee on Commerce, Manufacturing, and Trade

                          LEE TERRY, Nebraska
                                 Chairman
                                     JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey              Ranking Member
  Vice Chairman                      G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee          JOHN P. SARBANES, Maryland
GREGG HARPER, Mississippi            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    JOHN D. DINGELL, Michigan
DAVE B. McKINLEY, West Virginia      BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas                  JIM MATHESON, Utah
ADAM KINZINGER, Illinois             JOHN BARROW, Georgia
GUS M. BILIRAKIS, Florida            DONNA M. CHRISTENSEN, Virgin 
BILL JOHNSON, Missouri                   Islands
BILLY LONG, Missouri                 HENRY A. WAXMAN, California, ex 
JOE BARTON, Texas                        officio
FRED UPTON, Michigan, ex officio



















  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Lee Terry, a Representative in Congress from the State of 
  Nebraska, opening statement....................................     1
    Prepared statement...........................................     2
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, prepared statement..............................     3
Hon. Leonard Lance, a Representative in Congress from the State 
  of New Jersey, opening statement...............................     5
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, prepared statement.........................     6
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    92

                               Witnesses

Linda Menghetti Dempsey, Vice President, International Economic 
  Affairs, National Association of Manufacturers.................     7
    Prepared statement...........................................     9
Mark Elliot, Executive Vice President, Global Intellectual 
  Property Center, U.S. Chamber of Commerce......................    19
    Prepared statement...........................................    21
Roy Waldron, Chief Intellectual Property Officer, Pfizer, Inc....    30
    Prepared statement...........................................    32
Robert Hoffman, Senior Vice President of Government Relations, 
  Information Technology Industry Council........................    39
    Prepared statement...........................................    41
John Smirnow, Vice President, Trade and Competitiveness, Solar 
  Energy Industry Association....................................    48
    Prepared statement...........................................    50
Rohit Malpani, Director of Policy and Advocacy, Medecins Sans 
  Frontieres--Access Campaign....................................    54
    Prepared statement...........................................    56

                           Submitted material

Letter of June 20, 2013, from the Ambassador of India to Hon. 
  Erik Paulson, submitted by Mr. Terry...........................    94
Letter of June 26, 2013, from the Telecommunications Industry 
  Association to the committee, submitted by Mr. Terry...........    96
Statement of the California Healthcare Institute, submitted by 
  Mr. McNerney...................................................    97
Statement of Public Citizen, submitted by Mr. McNerney...........    99

 
  A TANGLE OF BARRIERS: HOW INDIA'S INDUSTRIAL POLICY IS HURTING U.S. 
                               COMPANIES

                              ----------                              


                        THURSDAY, JUNE 27, 2013

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2123, Rayburn House Office Building, Hon. Lee Terry 
(chairman of the subcommittee) presiding.
    Present: Representatives Terry, Lance, Blackburn, Harper, 
Guthrie, Olson, Kinzinger, Johnson, Upton (ex officio), 
Sarbanes, McNerney, Matheson, Barrow, and Waxman (ex officio).
    Staff Present: Kirby Howard, Legislative Clerk; Nick 
Magallanes, Policy Coordinator, CMT; Andrew Powaleny, Deputy 
Press Secretary; Shannon Weinberg Taylor, Counsel, CMT; 
Michelle Ash, Minority Chief Counsel; and Will Wallace, 
Minority Professional Staff Member.

   OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. Terry. All right. If we could take our seats. 
Appreciate this. We will gavel in, and I will go ahead and 
start my opening.
    I appreciate everyone joining us for today's hearing, which 
will focus on a very timely issue of how India's trade policies 
are affecting U.S. companies and the broader impact these 
policies may have on the American economy. For a long time 
India has been considered a close trading partner and friend of 
the United States. Since the 1990s, U.S. trade in goods with 
India has flourished into a relationship with nearly $600 
billion a year. In the last decade alone, the U.S. has become 
India's second largest export market. And this relationship is 
not completely one-sided. In 2012, the U.S. exported about $20 
billion in goods to India, making it our 18th largest export 
market, a large percentage of these exports being defense 
related, which is critical to maintaining strong ties with one 
of our closest military allies in the region.
    Unfortunately, after all this progress, we are starting the 
see some significant and worrisome policies, particularly those 
related to intellectual property being adopted by the Indian 
Government over the last 2 years. These developments could pose 
a threat to the budding trade relationship.
    Guided by their national manufacturing policy, India has 
begun engaging in a growing pattern of unfair and 
discriminatory trade practices which are directly harming U.S. 
companies in a wide variety of sectors, especially 
pharmaceuticals, energy technologies and information and 
communication technologies.
    A clear example is the case of Bayer drug Nexavar. In March 
2012, India issued what is called a compulsory license for this 
product, which meant that the Indian Government was going to 
allow an Indian company to receive technology owned and 
developed by others without any of the cost of research and 
development, which averages about a billion dollars for a new 
drug to come to market.
    Bayer is not alone in its struggles with the India 
Government. Pfizer has had a patent for its breakthrough cancer 
drug Sutent revoked twice and it is currently going through 
another legal process.
    And in April 2013, Novartis, a company I am proud to say 
has a large manufacturing facility just outside of my district, 
has a patent for Gleevec, and that has been denied.
    Unfortunately, practices like these described above have 
clear consequences, less money spent on research, less money 
spent on development, and less innovation and breakthrough 
cures reaching dying patients all over the world, including 
India.
    The pharmaceutical industry is not alone when it comes to 
American innovators being significantly harmed by India's 
policies. The U.S. solar panel industry has been exporting 
hundreds of millions of dollars' worth of U.S. made solar 
panels and solar cells. However, since 2010 India, as a part of 
its national solar mission, began requiring that these products 
be sourced locally, which is contrary to the established rules 
under the original General Agreement on Tariffs and Trade and 
WTO rules.
    The Indian Government also has announced regulations 
pertaining to preferential market access for electronic goods. 
This mandate would set locally manufactured content 
requirements for procurement of several electronic goods for 
public and private sector entities. Concerns of GATT violations 
have been raised by these mandates as well.
    I am hopeful that the Secretary of State Kerry can visit or 
revisit these issues, with Vice President Biden's visit coming 
up shortly thereafter. I am further hopeful that the 
administration will continue to raise this issue with the 
Indian Government at the highest levels.
    Now, this committee is deeply concerned about the long-term 
effects these actions may have on U.S. companies, our 
manufacturers and our workers. It is my hope that throughout 
our involvement in TTIP and TPP, our representatives will work 
to ensure that no signatory to these treaties tolerate these 
type of offenses.
    And I will yield back my time and recognize the gentleman 
from California, Mr. Waxman.
    [The prepared statement of Mr. Terry follows:]

                  Prepared statement of Hon. Lee Terry

    I appreciate everyone joining us for today's hearing which 
will focus on a very timely issue: how India's trade policies 
are affecting U.S. companies and the broader impact these 
policies may have on the American economy.
    For a long time, India has been considered a close trading 
partner of the United States. Since the 1990s, U.S. trade in 
goods with India has flourished into a relationship worth 
nearly $60 billion a year. In the last decade alone, the U.S. 
has become India's second largest export market. And this 
relationship is not completely one-sided: in 2012 the U.S. 
exported about $20 billion in goods to India, making it our 
18th largest export market. A large percentage of these exports 
being defense related, which is critical to maintaining strong 
ties with one our closest military allies in the region.
    Unfortunately, after all this progress, we are starting to 
see significant and worrisome policies-particularly those 
related to intellectual property-being adopted by the Indian 
government over the past two years. These developments could 
pose a threat to a budding trade relationship.
    Guided by their National Manufacturing Policy, India has 
begun engaging in a growing pattern of unfair and 
discriminatory trade practices which are directly harming U.S. 
companies in a wide variety of sectors-especially 
pharmaceuticals, energy technologies and information and 
communications technology.
    A clear example is the case of Bayer's drug, NEXAVAR. In 
March of 2012, India issued what is called a compulsory license 
for this product-which meant that the Indian government was 
going to allow an Indian company to receive technology owned 
and developed by others without any of the costs of research 
and development--which averages over $1 billion for a new drug 
to come to market here in the U.S.
    Bayer is not alone in its struggles with the Indian 
government. Pfizer has had the patent for its breakthrough 
cancer drug, SUTENT, revoked twice, and it's currently going 
through another legal appeal. And in April 2013, Novartis, a 
company I am proud to say has a large manufacturing facility in 
Nebraska, has its patent for GLIVEC, denied.
    Unfortunately, practices like the ones described above have 
clear consequences: less money spent on research, less money 
spent on development, and less innovative and breakthrough 
cures reaching dying patients all over the world, including in 
India.
    The pharmaceutical industry is not alone when it comes to 
American innovators being significantly harmed by India's 
discriminatory trade practices.
    The U.S. solar panel industry had been exporting hundreds 
of millions of dollars worth of U.S. made solar panels and 
solar cells. However since 2010, India, as part of its 
``National Solar Mission,'' began requiring that these products 
be sourced locally, which is contrary to the established rules 
under the original General Agreement on Tariffs and Trade and 
WTO rules.
    The Indian government has also announced regulations 
pertaining to Preferential Market Access for electronic goods. 
This mandate would set ``locally manufactured'' content 
requirements for procurement of several electronic goods for 
public AND private sector entities. Concerns of GATT violations 
have been raised by these mandates as well.
    I am hopeful that Secretary Kerry's recent visit and Vice 
President Biden's upcoming visit will have an effect, and 
convey a message that resonates with the Indian government. I 
am further hopeful that the administration will continue to 
raise this issue with the Indian government at the highest 
levels, and at every opportunity during bilateral negotiations.
    This committee is deeply concerned about the long-term 
effects these actions may have on U.S. companies and workers. 
It is my hope that throughout our involvement in the TTIP and 
TPP, our representatives will work to ensure that no signatory 
to these treaties tolerate these types of offenses.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman. India, the world's 
largest democracy, is an important ally and trading partner for 
the United States. It is also a market full of potential for 
U.S. companies, boasting the second largest population, a 
strong workforce, and a rising middle class.
    U.S. companies are well positioned to take advantage of 
these opportunities if there are fair trade rules in place in 
India and the United States. Unfortunately, there are areas 
where it appears India is pursuing policies that may be 
inconsistent with its international trade obligations. These 
practices are damaging both American and Indian competitiveness 
in the world economy.
    For example, India has given preferences to its local solar 
suppliers. These actions appear to violate international trade 
agreements and the United States is challenging them at the 
World Trade Organization. India also has threatened to 
institute local preferences for hardware and software 
development, which would be of great concern.
    Likewise, India's treatment of the entertainment industry 
deserves close scrutiny. Bollywood and Hollywood are 
successfully collaborating on a range of projects, but India's 
investor restrictions lacks enforcement against piracy and the 
absence of strong anti-camcording laws undermine this 
partnership.
    The issue is more complex, however, in the area of 
pharmaceutical patents, which is an issue that has received 
special attention. The 2005 WTO Agreement on Intellectual 
Property, known as TRIPS, gives countries clear flexibility 
with respect to access to medicines. The Doha Declaration 
adopted in 2001 allows developing countries to adopt health 
safeguards by compulsory licensing when necessary to protect 
the public health.
    Without question, India is still a developing country with 
a third of its population living in extreme poverty. About 2.4 
million people are living with HIV/AIDS. Nearly 2 million each 
year develop tuberculosis. Over 30 million have diabetes, and 
cancer cases are rising. For many, the price of medicine is the 
difference between life and death.
    We need to be able to differentiate between pharmaceutical 
measures in India that genuinely advance public health and 
those that are unfair to patent holders. When India seeks to 
prevent patent abuses like evergreening that artificially delay 
generic competition, it may be acting within the authority 
granted by the Doha Declaration.
    India also plays a critical role by producing one-fifth of 
the world's generic medicines, half of which are exported. In 
the battle against HIV/AIDS, Indian generics have brought the 
cost of HIV treatment in the developing world from $10,000 to 
$335 per patient per year. Brand name drug companies may not 
like it, but the reality is that India's robust generics market 
supplies affordable essential drugs both to its citizens and to 
developing nations around the world. If India is pressured to 
make its patent laws more stringent than its obligations under 
international trade law require, this crucial supply of 
medicines could be threatened.
    In fact, the United States itself has benefited from these 
low cost generics. Our Nation purchases Indian generics through 
the PEPFAR Program for AIDS Relief and the Global Fund to Fight 
AIDS, TB, and Malaria. To date, generic procurement for PEPFAR 
alone has saved the U.S. Government $934 million while bringing 
lifesaving treatment directly to more than 5 million people.
    That is why we need to recognize that while we are 
addressing complex and important issues today, there are 
nuances, not one approach to all, and I look forward to this 
hearing and to the testimony. I want to apologize to the 
witnesses. There is another hearing that is going on at the 
same time, and I will be back and forth, but I will have a 
chance to review your testimony and hopefully get back here to 
ask you some really tough questions.
    Thank you, Mr. Chairman.
    Mr. Terry. All right. Thank you, Mr. Ranking Member.
    And at this time I recognize the vice chairman of the 
subcommittee, Mr. Lance, for 5 minutes, and then if you would 
yield to Marsha when you are finished.

 OPENING STATEMENT OF HON. LEONARD LANCE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Lance. Certainly, be happy to do so. Thank you, Mr. 
Chairman, and good morning to our distinguished panel. I 
welcome everyone to this important hearing on our important 
trade relationship with India. Throughout the last two decades, 
the United States developed a prosperous trade relationship 
with India that has been advantageous to both countries. 
Bilateral trade and goods with India has increased from fewer 
than $6 million in 1992 to more than $62 billion in 2012. 
Already, throughout the first 4 months of this year, we are 
trading more with India than we did in the first four months of 
2012. We have become India's second largest export market and 
India has become our 18th largest export market.
    Additionally, New Jersey's Seventh Congressional District, 
which I have the honor of representing, has many 
pharmaceutical, communications, and information technology 
companies benefit from trade with India. It is an emerging 
trade relationship that I hope can further flourish in the 
future.
    However, in the past few years, concerns have been raised 
about the future of the trade relationship. These concerns 
center on India's recent enacting of trade barriers that 
discriminate against our Nation's exporters and are 
inconsistent with India's international agreements as well as 
its lack of action on intellectual property rights protection 
and enforcement.
    In the health and telecommunications fields, these trade 
barriers adversely affect companies in the district I serve, in 
the State I serve, and in my judgment, the United States. 
Particularly troubling is India's actions as it relates to the 
United States' intellectual property laws. Last year the Indian 
Patent Office revoked the patent for Sutent, an anti-malaria 
drug manufactured by Pfizer. The Indian Government also issued 
a compulsory license on a Stage 3 liver and kidney cancer drug. 
I am concerned that the Indian Government's interest in its 
growing pharmaceutical market is clouding the decision-making 
process as it relates to intellectual property, harming United 
States companies.
    The United States must exhibit leadership in the area of 
protecting IP rights. Emerging companies that adopt the Indian 
model of intellectual property policy making also pose a risk 
to United States companies. We must make it clear to all 
trading partners that these policies set a bad precedent and 
undermine our mutually beneficial trade agreements.
    I look forward to examining ways that the United States and 
India can continue to grow strong trade and investment 
relationships while leveling the playing field for U.S. 
exporters operating in India and protecting the intellectual 
property rights of our companies here at home.
    And I am pleased to yield to the vice chair of the full 
committee, Congresswoman Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you. And I want to welcome all of 
you. This is an important hearing.
    When I was running the Tennessee Film Entertainment and 
Music Commission back in the mid-1990s, I spent a lot of time 
working on property rights and protecting U.S. innovators, and 
because of that, I really share the frustration with our job 
creators and our innovators that what is happening with foreign 
governments who are constantly trying to undermine our 
intellectual property and use it for their benefit and gain.
    When you look at India's industrial policy, trade barriers, 
the rampant piracy, the tax discrimination and what appears to 
be an absolute disregard for our intellectual property rights, 
you realize that India is a country that is not willing to play 
by the rules right now. What is worse is that they are trying 
to gloss over this, and here is an example. Last week, the 
Indian Ambassador sent a letter to any office defending their 
abusive practices that are killing jobs of millions of 
hardworking Americans. India's principal set a disappointing 
example to the rest of the world. No country that calls itself 
a friend of the U.S. would celebrate isolationism the way that 
India is doing. It is a shame that India's government has gone 
as far as they have to threaten our bilateral relationship, 
U.S. trade and foreign investment.
    Tennessee's IT, bio, pharmaceutical, chemical, ag, medical 
equipment, and other manufacturing sectors are all subject to 
India's punishing rules, taxes and regulations. It is no wonder 
we have overwhelming bipartisan agreement in Congress that 
India's government must reverse course or risk seriously 
threatening our bilateral relationship.
    I have gone over my time. I yield back.
    Mr. Terry. Thank you.
    At this time I am going to introduce our witnesses here 
today and thank all of you for being here. We will begin with 
Linda Menghetti Dempsey, who is with the National Association 
of Manufacturers, and then to Mark Elliott, Executive Vice 
President, Global Intellectual Property Center, U.S. Chamber. 
Then Roy Waldron, who is Chief Intellectual Property Officer 
with Pfizer, and then Jim Smirnow, who is Vice President in 
Trade Competitiveness at the Solar Energy Industry Association. 
Robert Hoffman, Mr. Hoffman is the Senior President of 
Government Relations for Information Technology Industry 
Council. Then Rohit Malpani, who came here from Geneva, and no, 
not Geneva, Nebraska, and he is Director of Policy and Advocacy 
for--why don't you say it.
    Mr. Malpani. Doctors Without Borders, or Medecins Sans 
Frontieres.
    Mr. Terry. All right. Well, Doctors Without Borders, if 
that was on there, would have been easy for me to pronounce. 
That is our panel, and we will start then with Linda. You are 
first.

    STATEMENTS OF LINDA MENGHETTI DEMPSEY, VICE PRESIDENT, 
    INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF 
 MANUFACTURERS; MARK ELLIOT, EXECUTIVE VICE PRESIDENT, GLOBAL 
  INTELLECTUAL PROPERTY CENTER, U.S. CHAMBER OF COMMERCE; ROY 
WALDRON, CHIEF INTELLECTUAL PROPERTY OFFICER, PFIZER INC.; JOHN 
   SMIRNOW, VICE PRESIDENT, TRADE AND COMPETITIVENESS, SOLAR 
   ENERGY INDUSTRY ASSOCIATION; ROBERT HOFFMAN, SENIOR VICE 
   PRESIDENT OF GOVERNMENT RELATIONS, INFORMATION TECHNOLOGY 
  INDUSTRY COUNCIL; AND ROHIT MALPANI, DIRECTOR OF POLICY AND 
      ADVOCACY, MEDECINS SANS FRONTIERES--ACCESS CAMPAIGN

              STATEMENT OF LINDA MENGHETTI DEMPSEY

    Ms. Dempsey. Thank you. Good morning, Chairman Terry, 
members of the subcommittee. I welcome the opportunity to be 
here today to testify on behalf of the National Association of 
Manufacturers, the NAM, the Nation's largest industrial trade 
association with 12,000 small, medium and large manufacturers 
in every sector throughout all 50 States.
    A tangle of trade barriers is an apt description of the 
significant and growing challenges that manufacturers in the 
United States are facing in India. The U.S.-India commercial 
relationship is a longstanding one. Our countries were 
cofounders of the world trading system with the creation of the 
GATT in 1948, which later became the World Trade Organization, 
which has helped the global economy expand.
    Manufacturers in the United States have long sought closer 
economic ties with India, particularly as India began opening 
its economy. Over the last decade, that relationship has grown. 
The United States is India's second largest export market, and 
we share a $60 billion relationship in manufacturing trade.
    Manufacturers in the United States have faced challenges in 
the Indian market from very high tariffs and weak intellectual 
property protection and enforcement to complex and expensive 
regulatory processes. But over the last year-and-a-half we have 
seen a much broader and more damaging industrial policy being 
implemented in India that seeks to grow its economy at the 
expense of ours, to advantage Indian manufacturers while 
undermining manufacturers here in the United States.
    For example, consistent with its national manufacturing 
policy issued in 2011, India has undertaken a number of actions 
across a range of sectors. India's preferential market access 
rules would impose local content requirements on the purchase 
of information and communications technology that could easily 
capture half of India's market.
    In the clean energy sector, India is mandating local 
content and considering expanding that rule to technologies 
that comprise the bulk of U.S. solar exports to India. India 
bans imports of remanufactured medical imaging devices and 
other equipment while allowing sales of such equipment as long 
as it is remanufactured in India. India has recently denied or 
revoked patents for nearly a dozen innovative medicines. This 
includes medicines that were either distributed in India free 
of charge or sold at a fraction of their cost. India imposes 
price caps on hundreds of medications but only on foreign 
products, not ones those that Indian researchers develop. 
Indian tax authorities are increasingly imposing discriminatory 
taxes on U.S. business. We have other critical concerns, 
including barriers to foreign direct investment, particularly 
in telecommunications as well as requirements to use local 
information infrastructure that inhibit cross-border data 
flows.
    My business colleagues will go into more detail on many of 
these concerns, but what is clear to the NAM and our 
manufacturers throughout the United States is that these 
policies really have no other purpose than to favor India's 
domestic corporations, many and strategic state favored and 
state advantaged sectors at the expense of manufacturing and 
jobs here in the United States.
    These actions are no way for a responsible stakeholder and 
rising global power to treat its second largest trading 
partner. They are counterproductive to India's own goals of 
attracting foreign investment and developing its own innovative 
economy. These actions are inconsistent with international 
norms and some of them are inconsistent with India's 
obligations under the GATT, now WTO, that India helped create 
more than 65 years ago.
    Without an immediate and purposeful response, India's 
industrial policy could spread and be applied to other products 
and sectors, and it sets an unfortunate example for other 
countries that are sure to follow. And it makes it difficult to 
see how India and the United States can move effectively 
forward on new initiatives and a stronger relationship, such as 
a bilateral investment treaty that really could have a chance 
to help forge a stronger commercial relationship.
    To demonstrate our resolve and press for real results, the 
NAM, GIPC, Solar Energy Group joined with 13 other trade 
associations last week to form the Alliance for Fair Trade With 
India, AFTI. Together we are asking the Obama administration to 
address this issue at the highest levels and to end 
discrimination against American exports.
    We seek a level playing field and a fair shake in India. We 
want India to end its discriminatory industrial policy and 
unfair trade practices and ensure those practices are not 
repeated.
    We understand Secretary of State Kerry raised these issues 
during this week's U.S.-India's strategic dialogue and we hope 
and expect the Indian Government will respond positively and 
work constructively with the manufacturing community to address 
and resolve these issues quickly.
    A strong bilateral trade and economic relationship is 
essential to achieving our strategic aims with India. To have 
that kind of partnership we all want, India must play by the 
rules. Thank you.
    Mr. Terry. Well done.
    [The prepared statement of Ms. Dempsey follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Terry. And now recognize Mr. Elliott, and you have 5 
minutes.

                    STATEMENT OF MARK ELLIOT

    Mr. Elliot. Thank you, Chairman Terry and distinguished 
members of the Subcommittee on Commerce, Manufacturing and 
Trade. The U.S. Chamber of Commerce appreciates your leadership 
and the opportunity to testify today on how India's industrial 
policies are hurting U.S. companies. Today I am going to focus 
my testimony on an array of IP concerns that the U.S. Business 
community has in India.
    According to the U.S. Department of Commerce, U.S. IP 
industries account for $5 trillion of the Nation's GDP, 60 
percent of exports and employ 40 million Americans. In short, 
intellectual property drives knowledge economies.
    In 2010, the then President of India declared the next 10 
years to be India's decade of innovation. Unfortunately, recent 
events in India suggest otherwise. Particular policy, 
regulatory and legal decisions have deteriorated IP rights in 
India, making India an outlier in the international community.
    Last December, the Chamber released an International IP 
Index comparing intellectual property environments across 11 
key markets. This was the first comprehensive national IP index 
and it ranked India consistently last behind Brazil, China and 
Russia in nearly every indicator. This trend is bad for India, 
it is bad for investment and it is bad for international trade.
    I would like to provide the committee with a few specific 
examples of industries' concerns. With respect to the much 
needed copyright legislation that passed India's parliament 
last year, the end result failed to achieve the objective of 
the legislation, which was to implement the WIPO Copyright 
Treaty. The recording and music industry estimate lost revenue 
to piracy of $431 million in India. India's reported rate of PC 
software piracy in 2011 was 63 percent, an estimated commercial 
value of $2.9 billion.
    India finds itself an outlier with respect to taxation when 
it comes to development centers within India. It currently 
assesses tax by allocating a share of the company's worldwide 
operating profits, despite the fact that the centers within 
India bear no financial risk and they don't own the resulting 
IP. This methodology is inconsistent with international 
practice and is not accepted by U.S. tax authorities, resulting 
in controversy and double taxation.
    India has also shown disregard for intellectual property 
rights of the biopharmaceutical industry as stated. There have 
been at least five globally recognized patents that have been 
revoked, denied or compulsory licensed within the last 12 
months.
    While some may claim that these are unrelated policy, 
regulatory and legal decisions, the fact remains that these 
attacks on the pharmaceutical patents are only happening in 
India.
    And this is not just about access to medicines, as some may 
have you believe. For example, in the case of Gleevec, Novartis 
provided the drug free of charge to 95 percent of the 16,000 
patients suffering from leukemia. The remaining 5 percent were 
heavily subsidized. It is also worth noting that the Indian 
generic now charges $2,100 annually for a generic version of 
the drug that Novartis was providing for free.
    There are currently more than 5,000 innovative drugs in 
development around the world at the moment, and the industry 
has invested $5 billion in R&D since 2000. The medical 
innovation system is clearly working, and India's recent 
behavior undermines the global IP environment that protects and 
encourages this innovation.
    For IP-intensive industries, the protection of IP rights is 
one of the most important factors companies consider when 
investing in a particular market. We have heard from a dozen 
industry and trade associations that the erosion of 
intellectual property rights in India will impact their 
members' decisions to invest there.
    There are, however, leaders in India who recognize the 
importance of investment and innovation. On May 11, the current 
President of India noted that India's innovation bottom line is 
not very encouraging, as the number of patent applications 
filed annually in leading countries like the U.S. and China are 
roughly 12 times more than that of India. He called upon the 
private sector to increase their share of spending on research 
and development to the levels prevalent in other key markets 
such as the United States, Japan, and South Korea.
    One very obvious way to increase this investment and 
innovation would be for the Indian Government to raise IP 
standards to the same levels that encourage business to invest 
in the United States, Japan, and South Korea.
    We thank the subcommittee for holding this hearing, and we 
look forward to working with you to address business concerns 
in India.
    Mr. Terry. Thank you, Mr. Elliot.
    [The prepared statement of Mr. Elliot follows:]
    
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    Mr. Terry. Now Mr. Waldron, you are recognized for 5 
minutes.

                    STATEMENT OF ROY WALDRON

    Mr. Waldron. Thank you, Chairman Terry and members of the 
subcommittee, for the opportunity to testify at today's 
hearing. My name is Ray Waldron. I am Pfizer's Chief 
Intellectual Property Counsel. In that capacity, I am 
responsible for overseeing and protecting Pfizer's IP portfolio 
worldwide.
    Pfizer was founded in 1849 in New York and we are 
headquartered in New York today. Pfizer employs more than 
90,000 individuals globally, including over 30,000 people in 
the United States.
    I would first like to express Pfizer's appreciation for 
work by this committee to promote jobs, innovation and enhanced 
patient safety through the recent reauthorization of PDUFA. 
Through major research efforts, Pfizer is developing the 
medical solutions that will matter most to the people we serve. 
Specialized efforts in biosimilars as well as orphan and 
genetic diseases also illustrate our dedication to develop and 
deliver innovative medicines and vaccines that will benefit 
patients around the world.
    Pfizer's R&D pipeline include several potential 
breakthrough medicines in Phase 3 clinical trials. These 
include treatments for breast cancer, cardiovascular disease, 
psoriasis and meningitis.
    Unfortunately, recent events in India threaten our IP and 
undermine our ability to innovate, create jobs and provide 
faster access to lifesaving medicines. My testimony today will 
highlight Pfizer's serious concerns about these events, their 
impact on the U.S. and the industry and their potential 
spillover effect into other markets.
    IP-intensive industries directly and indirectly support 40 
million U.S. Jobs, drive over 60 percent of exports, and pay on 
average 40 percent higher than other industries that do not 
rely on IP.
    PhRMA member companies invest over $54 billion annually in 
R&D. The path to a successful breakthrough cure is an arduous 
one. On average, it takes more than $1 billion and around 10 to 
15 years of research to develop a new medicine. Our R&D 
ultimately becomes the IP that allows us to create new 
medicines. Effective IP laws and predictable transparent 
enforcement of these laws are essential.
    For the biopharmaceutical industry, IP protection enables 
us to continue to invest in new research and development for 
medicines. Pfizer's future growth and the jobs that come with 
that growth will depend on our ability to engage on a level 
playing field in all global markets.
    India is one such market. Pfizer has been operating in 
India for over 60 years. We have R&D and manufacturing 
facilities in Mumbai, Thane and Goa. We are a leading company 
in India in terms of innovation and employee satisfaction. 
Despite our commitment to India, over the past year we have 
seen a rapid deterioration of the innovative environment in the 
country. India has undermined patent rights for at least nine 
innovative medicines, including one of ours.
    A recent history of compulsory licensing, discriminatory 
interpretation of the patent law, and refusal to enforce 
patents strongly indicate that India is an outlier in 
recognizing IP rights. These nine innovative medicines have 
received patent protection in countries throughout the world. 
This recent history not only recreates significant uncertainty 
in the market but also undermines our ability to invest and 
compete fairly in India.
    Pfizer's recent experience in India demonstrates a flagrant 
disregard of patent rights. In the last year, Pfizer has 
struggled to defend its patent for the compound sunitinib, the 
active ingredient in Sutent against efforts to revoke it. The 
patent has now been revoked twice under questionable legal 
theories and is currently back in force pending new proceedings 
before the Indian Patent Office, which is an administrative 
body under the Ministry of Commerce and Trade.
    Each of the earlier revocations was reversed when Pfizer 
showed that its rights to a fair hearing and due process had 
been denied. During the back and forth of the revocation 
proceedings, one generic manufacturer launched its product in 
the Indian market, and as a result, the market is now flooded 
with 2 years' worth of supply from this manufacturer.
    In order for there to be effective patent protection, the 
system of IP enforcement ought to include mechanisms to recall 
infringing goods from that market. I would also like to note 
that to ensure Sutent is available to patients who need it, 
Pfizer developed a patient access program in India which 
provides 80 percent of the patients taking Sutent with a 
complete or partial subsidy.
    Pfizer exists to invent and manufacture high quality 
medicines to improve the health and well-being of patients 
around the world. To achieve this goal, effective, predictable 
and enforceable IP protections are essential. India's actions 
to undermine the incentives needed to make investment to 
develop new medicines and a hostile environment to IP will have 
a devastating impact on R&D investment in both the U.S. and 
India and cause significant harm to U.S. jobs and economic 
growth.
    India's protectionist and discriminatory policies, which 
exploit U.S. IP to benefit their own industry requires an 
equally bold response. It is important that we view these 
actions for what they are, industrialist policies to benefit 
the competitiveness of India's own domestic industry.
    We appreciate the focus you have provided on this issue 
today and look forward to working with members of this 
committee and other stakeholders to identify and implement 
solutions that will benefit innovators and patients in the 
U.S., India and worldwide. Thank you very much.
    Mr. Terry. Thank you, Mr. Waldron.
    [The prepared statement of Mr. Waldron follows:]
    
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    Mr. Terry. And now Mr. Hoffman, you are recognized for 5 
minutes.

                  STATEMENT OF ROBERT HOFFMAN

    Mr. Hoffman. Thank you, Mr. Chairman, and thank you to the 
members of this subcommittee, Vice Chairman Lance. We 
appreciate the opportunity to appear today. I am Robert 
Hoffman, Senior Vice President for the Information Technology 
Industry Council, ITI. ITI represents 52 of the most dynamic 
innovative companies in hardware, software, and services. We 
obviously, given the strong presence of IT in India, consider 
the bilateral relationship between U.S. and India to be an 
extremely important one for our industry.
    For the overall economy in the United States, there is no 
question that the bilateral economic ties have been relatively 
recent in development. It certainly can be said that the big 
reason why that is the case is because for at least the first 
44 years of Republic of India's existence, Cold War politics 
and a socialist largely closed economy really made the 
development of commercial ties very difficult. All of that 
changed in the 1990s, when in response to economic and monetary 
crisis, the government of India took steps to gradually open 
its economy. It also coincided, by coincidence, with the 
information technology boom of the 1990s and the development of 
the information and communications technology industry in 
India.
    There is no question that the combination of market opening 
reforms and letting the IT industry in India operate in an open 
fashion, utilizing market incentives and taking advantage of 
investments in education and an entrepreneurial and innovative 
team of people in the IT industry, it has had some 
extraordinary significant effects in India. It has literally 
helped move hundreds of millions of people off of extreme 
poverty. It has also helped it triple the annual GDP growth 
rate in India all within two decades.
    If liberalization is allowed to continue and market-based 
incentives are allowed to move forward and innovators and 
entrepreneurs in India are allowed to flourish, some have 
estimated that India's middle class can number well over 500 
million people. Put that in prospective, when the U.S. 
population is 300 million people.
    This is all very exciting, and from our perspective, as 
India considers options to develop a manufacturing base, our 
recommendations are pretty simple. You have seen market-based 
innovation work in the IT sector. You have seen what your 
innovators and entrepreneurs can do in India. Turn them loose. 
We are Exhibit A that it can work.
    Unfortunately, and this leads to my second point, and as 
many of my colleagues here on the panel have already 
demonstrated, India appears to be moving in the opposite 
direction and is preparing to throw its economy in reverse and 
undermine the gains that we have seen in the last two decades. 
Let me provide a couple of examples.
    Frankly, I have been to India several times and I have to 
tell you that one of the frustrating aspects of visiting with 
government officials is that the economic success stories of 
the last two decades haven't been fully grasped within the 
bureaucracy in India. We see it in the random and oftentimes 
troubling enforcement measures taken by tax and customs 
officials. Another example is the fact that India is sitting 
right now on the sidelines while we are negotiating expansion 
of the Information Technology Agreement.
    The ITA, which was agreed to in the mid-1990s, was 
extremely helpful to India as it pursued its objectives in IT. 
An expanded ITA would actually help their efforts to advance 
their manufacturing initiatives. So we are very surprised to 
see them on the sidelines.
    Last but not least, we are very troubled by their recent 
efforts to impose what amounts to a forced manufacturing policy 
on electronics products in India. The fact of the matter is, 
right now, if you want to sell to the government of India, you 
have got to manufacture electronics products within the 
Republic of India, and there are some serious concerns that is 
this policy is going to be expanded to the private sector and 
all you have to do is look at the Economic Times of India's 
front page story today that talks about how it plans to expand 
this policy with telecom operators, and if it is allowed to 
continue, they will expand this forced manufacturing 
requirement, you know, all the way into other sectors, 
including financial services and energy.
    So, we are obviously very concerned. We are trying to 
encourage the government of India, working with people like 
the--organizations like the U.S. Chamber of Commerce and NAM 
and other institutions worldwide, to get India on the right 
track, toward more economic liberalization utilizing market-
based incentives. We have to be very careful that if they go 
down the road of forced manufacturing, it could have a 
contagion effect and encourage other countries to do the same 
thing.
    The fact is, if you look at countries like China and 
Brazil, forced localization is a pretty addictive drug, and 
frankly, what we really need here is a little policy 
intervention. We consider India a valued friend, collaborator, 
and competitor, but the fact of the matter is friends don't let 
friends get addicted to forced localization.
    So, thank you, Mr. Chairman, and we appreciate again the 
opportunity to appear here today.
    Mr. Terry. Doesn't necessarily fit on a bumper sticker, 
but----
    Mr. Hoffman. No. Give me a couple of days, though.
    Mr. Terry. All right. Thank you, Mr. Hoffman.
    [The prepared statement of Mr. Hoffman follows:]
    
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    Mr. Terry. Mr. Smirnow, you are now recognized for 5 
minutes.

                   STATEMENT OF JOHN SMIRNOW

    Mr. Smirnow. Mr. Chairman, and members of the committee, 
thank you for the opportunity to appear before you today. The 
Solar Energy Industry Association, or SEIA, represents over 
1,000 solar businesses operating within the United States, 
including leading U.S. solar manufacturers and exporters. 
Today, solar employs over 120,000 Americans and more than 5,600 
companies, most of which are small businesses. Solar is also 
one of the fastest growing industries in American.
    My testimony today will focus on India's growing use of an 
industrial policy which discriminates against U.S. Solar 
exports, thereby providing an unfair competitive advantage to 
India's domestic solar manufacturers.
    With some of the best solar resources in the world and the 
cost of solar continuing to decline, India's solar sector is 
poised for explosive growth, providing an important export 
opportunity for U.S. solar manufacturers. Indeed, over the past 
few years, as the chairman indicated in his opening statement, 
U.S. solar panel manufacturers have contracted to supply 
hundreds of millions of dollars of solar exports to India.
    Importantly, most of these exports are comprised of U.S. 
solar panels based on thin film technology. A company called 
First Solar, headquartered in Arizona with manufacturing 
operations in Ohio is the leading global producer and innovator 
of this technology, and this is indeed a leading, cutting edge 
U.S. technology.
    At the same time, however, India's solar policies have 
increasingly turned inward. In 2010, India adopted a local 
content requirement as part of the country's National Solar 
Mission. While we fully support India's desire to promote solar 
manufacturing both as an economic development tool and a 
solution to climate change, India's government support measures 
must be consistent with India's international trade 
obligations. India's solar local content requirement, however, 
is a direct violation of these obligations.
    One of the arguments we hear in support of the local 
content measure is that it is necessary to nurture the growth 
of a young industry, particularly in an environment of intense 
global competition. But while local content requirements may 
provide some protection for domestic manufacturers, they also 
stifle innovation, limit a country's access to next-generation 
technologies and increased costs, not to mention the fact that 
local content requirements are explicitly prohibited by global 
trading rules.
    Returning to the specifics of India's solar industrial 
policy. The national solar mission is divided into three 
phases. Under the first tranche of Phase I, India required that 
eligible products--projects based on crystalline silicon 
technology, that is the other half of the solar panel industry, 
versus thin film, and that is where the U.S. has a 
technological advantage, in this first phase, India required 
that one-half meet a local content requirement for cells, and 
solar cells are the heart of a solar panel for this technology.
    So while U.S. companies could sell cells into India--or 
they could sell modules but they weren't able to sell cells, 
U.S. origin panels were thus barred from competing.
    For the second tranche of Phase I, India broadened this 
local content requirement to mandate that National Solar 
Mission products use only crystalline silicon cells and panels 
manufactured in India, a significant lost opportunity for U.S. 
exports. Looking forward, we are concerned that India will 
expand its local content requirement yet again to cover thin 
film technology, effectively targeting hundreds of millions of 
dollars of U.S. exports. Our only hope is that the U.S. 
Government's recent decision to initiate a WTO case against 
India will eventually cause India to reverse course.
    The U.S.-India dispute follows on the heels of a recent WTO 
finding that Ontario, Canada's local content requirement for 
solar goods, substantially similar to India's, violated 
Canada's WTO obligations. In response, Canada has indicated 
that the solar program will be brought into compliance with the 
WTO decision, which we presume means that Canada will remove 
the local content provision. India should follow Canada's lead 
today and remove the local content provision from its National 
Solar Mission.
    As important context, the U.S. Government first tried to 
establish a collaborative dialogue with India regarding the 
local content requirement but was rebuffed. The U.S. case was 
therefore a last ditch effort to get India to the table.
    I want to make clear that we support the overall objectives 
of India's National Solar Mission and its focus on growing a 
solar manufacturing base. We just don't support the 
discriminatory aspects of it.
    That concludes my remarks. I will be happy to answer any 
questions. Thank you.
    Mr. Terry. Thank you very much.
    [The prepared statement of Mr. Smirnow follows:]
    
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    Mr. Terry. And now the gentleman, Mr. Malpani, you are now 
recognized for 5 minutes.

                   STATEMENT OF ROHIT MALPANI

    Mr. Malpani. Thank you, Mr. Chairman, and good morning. My 
name is Rohit Malpani, and I am the Director of Policy and 
Analysis of Doctors Without Borders.
    Mr. Terry. Is your mic on?
    Mr. Malpani. Yes, it is. Doctors Without Borders and 
Medecins Sans Frontieres. MSF is an international medical 
humanitarian organization which provides impartial medical 
assistance to those affected by armed conflict, epidemics, 
exclusions from healthcare or natural disasters. Today, MSF 
carries out this work in more the 70 countries worldwide while 
raising awareness on neglected crises and advocating for 
improved medical tools and protocols.
    As a medical treatment provider, MSF is able to speak about 
the relationship between intellectual property rules and access 
to medicines and about the role India has played in enabling 
millions access to lifesaving medicines.
    In 2001, MSF faced what seemed like insurmountable barriers 
in meeting critical health needs in saving the lives of our 
patients. In particular, we faced an astronomical $10,000 per 
person per year price tag for lifesaving HIV medicines which 
barred treatment for millions and prevented us from being able 
to reach more than a very limited number of patients.
    But is a solution was found in India. The country, free 
from having to grant patents on medicines until 2005, was able 
to manufacture low-cost quality generic medicines for a 
fraction of the existing price. Literally overnight the cost to 
treat someone with HIV fell by over 96 percent to $360 per 
patient per year. Generic competition has seen the cost fall 
even further. As a result, more than 9 million people worldwide 
now receive treatment for HIV, many of those from PEPFAR-funded 
programs.
    India's role in this treatment scale-up has been and 
continues to be a critical one. As the pharmacy to the 
developing world and the biggest source of quality generic 
medicines, governments and donors such as the United States 
rely heavily on Indian generic medicines. Ninety-eight percent 
of the medicines used in American taxpayer funded treatment 
programs rely on low-cost generic medicines manufactured in 
India.
    Today India is a full member of the World Trade 
Organization providing patent protection for medicines. Between 
2005 and 2008, India granted over 2,000 patents for medicines 
and continues to grant patents today. These patents delay 
generic competition, which keeps costs high and places enormous 
burden on treatment providers such as MSF, Ministries of Health 
in low-income countries and donor governments, including the 
United States.
    While India does reward genuine innovation with 20-year 
patents, it manages to strike a balance between providing 
intellectual property protection and having the flexibility to 
protect public health. This balance is possible as both the 
TRIPS agreement and the Doha Declaration on TRIPS and public 
health enshrines the right of WTO members to implement 
safeguards and flexibilities. One safeguard under TRIPS is the 
right of governments to define strict patentability criteria. 
Governments have the right to define scope of patentability in 
a way that addresses the needs of their own citizens as long as 
they abide by international agreements.
    The United States recently contributed to its own 
definition when the Supreme Court reaffirmed strict 
patentability criteria for gene patents. India has adopted a 
standard of pharmaceutical patenting that is stricter than in 
the United States or the European Union, which is in line with 
international trade rules. In rejecting one patent application 
by Novartis on assault of an already known substance, the 
Indian Supreme Court was legally validating the choice by the 
Indian Government that patents should only be granted when 
those products represent a genuine advance over older versions 
of medicines.
    By contrast, the United States has decided to approve 
secondary patents for very obvious modifications of existing 
medicines which often delays generic competition and keeps 
prices high. This is a practice commonly called evergreening by 
which the drug industry extends their monopoly on drugs beyond 
the originalpatent's 20 years. Allowing companies to extend 
patent protection and keep prices high is expensive for U.S. 
consumers and the U.S. Government.
    A second legally recognized safeguard to overcome barriers 
of affordable access is the right to issue compulsory licenses. 
The United States Government used compulsory licenses for 
medicines in the past and stated that it would look to them in 
the future, if necessary. In India, a compulsory license was 
granted in the interest of public health when the country was 
faced with a price tag for a cancer drug which kept it out of 
reach of 98 percent of those eligible for treatment. Granting a 
compulsory license reduced the price by 97 percent while 
recognizing the innovation behind the drug through the payment 
of a 7 percent royalty.
    The U.S. Government continues to make adjustments to its 
patent system to achieve a better balance between rewarding 
innovation and providing for public health needs. It should 
allow other governments like India to do the same. The measures 
taken by the Indian Government do not undermine innovation but 
rather curtail excesses of the patent system and ensure that 
companies focus their energies on scientific and not legal 
innovation.
    Governments around the world and U.S. assistance programs 
are straining under high costs for new medicines. In times of 
economic austerity, we should remember that high medicine 
prices are an issue of life and death for millions of people. 
Ensuring that balanced innovation systems make those medicines 
available to those who need the most is imperative.
    Thank you again for the opportunity the provide testimony 
on this important topic.
    Mr. Terry. Thank you, Mr. Malpani. I appreciate your 
testimony.
    [The prepared statement of Mr. Malpani follows:]
    
    
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    Mr. Terry. And for the record, unanimous consent to submit 
a letter from the Ambassador of India in response to several 
Members objecting to the patent and trademark issues. Hearing 
none, we will submit that for the record. And also a letter 
from Advancing Global Technologies, TIA, to me and Jan 
Schakowsky, our letter from Grant Siefert.
    Any objections? None heard. So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Terry. And you have another one. All right. A little 
business before we have questions.
    Mr. McNerney. I have two documents to submit for the 
record.
    Mr. Terry. All right. Go ahead.
    Mr. McNerney. Mr. Chairman, I have two documents to submit 
for the record, one from the California Healthcare Institute, 
and this one, I think, is submitted to the House committee on 
the Tangle of Trade Barriers: How India's Industrial Policy is 
Hurting U.S. Companies.
    Mr. Terry. With no objection heard, so ordered.
    Mr. McNerney. OK. The second one is by the Public Citizen, 
``India's Patent System Plays By WTO Rules and Supports Global 
Health.'' I would like to submit this for the record.
    Mr. Terry. Hearing no objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Terry. All right. Now the fun. Question, and no pun 
intended. Well, actually it is. I am going to ask a fairly 
generic question to the panel, but obviously with the practices 
of India in the last couple of years and compulsory licensing 
practices and seeming court orders to usurp patents or deny a 
patent, this seems to be an economic development policy issued 
by the state.
    Now, how political do you think these protectionist 
measures are? Is India continuing to head in even a deeper 
protectionist direction or does the government simply flow with 
the trade winds, so to speak. And if you can keep it within 
about 45 seconds per answer, I want to go straight down the 
panel, and we will start with you, Ms. Dempsey.
    Ms. Dempsey. Thank you, Mr. Chairman. From our perspective, 
what we are seeing in India today is a reversal, of course, 
from the liberalization they were inching along in, and it is a 
broad policy across a bunch of different sectors. Intellectual 
property is a key piece of it. Localization is another piece. 
But it is a move to shut their economy, to try to grow their 
economy at the expense of ours in the United States and other 
foreign countries.
    Mr. Elliot. I would agree with Linda's statement. I would 
add, I think that there are mixed signals that often come out 
of the political hierarchy there. The President has made some 
very positive statements, but clearly the direction of the 
company is going in another direction. So, it is a situation 
where quite often the rhetoric is very different to what is 
happening in the real world, and the real world seems to 
suggest that India is heading in a very wrong direction.
    Mr. Waldron. I would say, for the pharmaceutical sector, 
that there most definitely is a protectionist bent towards 
protecting their own industries. In fact, when the patent law 
was implemented in 2005, there were explicit statements about 
protecting and designing a law to protect local interests and 
the ability for those companies to maintain their export 
markets. So there definitely is a concerted policy, and even 
looking at the Supreme Court decision on the Gleevec decision, 
it is clearly within there that the protection of export 
markets is intended.
    Mr. Hoffman. To your initial point, Mr. Chairman, you can't 
escape the political dynamic that is currently going on in 
India. You have a country that is within one year of elections 
at the national level and elections that are considered to be 
very tight. That said, I agree with my fellow panelists that 
the trend is more in the direction of protectionism, while 
there is certainly a bit of discussion of sorts that is going 
on internally with the Indian Government. I think what raises 
the level of concern is that currently heading the government 
was the architect of the opening of the government of India, 
the Prime Minister saying when he ran the Finance Ministry in 
1991, essentially, you know, opened the doors not just for the 
overall economy but for the IT industry. So when you have 
someone of that stature who has a free market background, yet 
various departments and agencies are pursuing protectionist 
measures that give a lot of us here cause for concern.
    Mr. Terry. OK.
    Mr. Smirnow. I think India, first and foremost, sees the 
role long-term----
    Mr. Terry. The microphone.
    Mr. Smirnow. I think India sees, as a lot of countries do, 
the long-term opportunity of solar energy, particularly as a 
job creator, and so that really is their focus.
    The current global environment for solar, we have massive 
overcapacity, and so it is difficult for young companies and a 
young industry, which is India is trying to grow to compete in 
that environment of intense global competition. So that really, 
I think, is the motivator for them to utilize the local content 
requirement to protect this young industry, but it is the wrong 
mechanism and there are a variety of other solutions they could 
turn to that would be WTO consistent.
    Mr. Terry. All right. Mr. Malpani.
    Mr. Malpani. We know that the TRIPS agreement, under which 
these rules are formulated, specifically create exceptions for 
public health and public interest, and we think that is the 
reason why India is using their rights and flexibilities.
    We heard a statistic that there is a 500-million person 
market in India today for various technologies. There is 
another 500 million people in India without clean water and 
electricity today as well as millions of other people in the 
developing world.
    The other thing to remember is the concept of separation of 
powers, which is so sacred in the United States. These 
decisions at the Patent Office and at the Indian Supreme Court 
are done by the judiciary, not by the executive or legislative 
branch, and I think India maintains that same separation of 
powers as United States has with its patent decisions.
    Mr. Terry. Well, that concludes my time. And I recognize 
the gentleman from California, Mr. McNerney, for his 5 minutes 
of questions.
    Mr. McNerney. Thank you, Mr. Chairman. This is a very 
important hearing. As we know, the United States, we take a lot 
of pride in our intellectual properties and our innovation. And 
we want to see that take place in India within a framework that 
benefits both countries. And we don't seem to be hearing that 
that is what is going on there. So I appreciate the testimony 
that we have heard this morning.
    But I would like to sort of make one point first. Mr. 
Malpani, I was going to ask you to explain evergreening, but 
you did a pretty good job in your testimony. I just want to ask 
is that one instance of a progressive policy adopted by India 
which is putting it ahead of many of the other countries. Is 
that one example then?
    Mr. Malpani. India's policy on evergreening is one actually 
that has also been adopted by other countries, sometimes in 
parallel to India and sometimes afterwards. This is a 
flexibility that is fully recognized under the TRIPS 
agreements. Actually, the United States itself had a more 
strict patentability standard in the past, which has been 
loosened up over the last few decades, and which has led to 
this profusion of secondary patents that delay generic 
competition far beyond 20 years. This, in our opinion, has been 
done specifically both to protect the public interest, to 
ensure that the patent term does not exceed 20 years except for 
genuine innovation, and it is also we think to encourage real 
innovation instead of simply trying to encourage legal 
innovation on behalf of drug companies.
    There is a study in the United States which shows that 
secondary patenting and evergreening leads to an additional 6 
years of patent protection for medicines in this country, which 
thereby creates higher costs for consumers and for the health 
care system.
    Mr. McNerney. Thank you. Mr. Smirnow, I am a very big 
proponent of clean energy technology. Let me ask are there 
Indian trade rules that target the United States specifically?
    Mr. Smirnow. The local content provision that I am 
concerned about does not target the United States specifically. 
It is any import into India of the technology at issue. Though 
India has initiated an anti-dumping duty case that includes the 
United States. That case is in the preliminary stage. It 
targets the United States, China, Taiwan, and Malaysia. So that 
would be one example where there are some activities that are 
targeting the United States.
    Mr. McNerney. Can we work collaboratively with them to help 
resolve those barriers, or is that something that they are 
pretty firm in right now?
    Mr. Smirnow. Yes, I hope so. And I think there is an 
opportunity and a responsibility of industry to build some 
bridges with India in the renewable space. Over the past couple 
years, SEIA has been working with the leading solar trade 
associations in Europe and Asia to find ways to collaborate. We 
haven't yet built those bridges with India, and we need to. And 
I think I commit today to reach out to the Indian solar 
industry and start building those bridges. I also think there 
is an opportunity to inject trade into some of these 
collaborative efforts that the State Department, Department of 
Energy are engaged in right now.
    Mr. McNerney. Thank you. Mr. Hoffman, it is good to see you 
here in the committee. What specific recommendations would you 
have for India so that it can build its electronic and 
telecommunication equipment production capabilities without 
resorting to these localization practices?
    Mr. Hoffman. Well, first and foremost, do what works. Rely 
on the market-based incentives that have created an 
extraordinary IT industry all over India. That is first. 
Second, it should have joined the ITA expansion talks. They are 
at the end stages. They could still potentially join and sign 
the ITA expansion. That was extraordinarily helpful to provide 
the IT industry in India with duty-free treatment of products 
that enabled them to build the infrastructure that they needed 
to succeed. As a number of my panelists know, manufacturing is 
very IT-enabled these days. So you can use those same building 
blocks in ITA expansion. And so we are hopeful that perhaps 
they will ultimately join with the expanded ITA.
    Mr. McNerney. It sounds like there are steps that they are 
aware of that will help them actually improve their economy 
without resorting to these localization practices.
    Mr. Hoffman. And I do want to make one concluding point, 
Congressman. Right now, I mean you saw--I waved it around, but 
you saw the article in the Economic Times of India, I can 
certainly provide it to the staff to distribute to the members 
of the subcommittee, but they are on the cusp of taking their 
forced electronics manufacturing policy into the private 
sector. And we would strongly urge them to basically, you know, 
stand pat. We believe to go further forward would be very 
disruptive to their own economy, to our own, and to other 
governments and industries around the world. So they literally 
have their toes on the line. We know that there are discussions 
going on internally within the government not just in terms of 
where to put it through with the private sector, but there is 
also talk about applying it to software. So we hope that they 
will keep those toes on the line and not proceed forward.
    Thank you.
    Mr. McNerney. Thank you.
    Mr. Terry. Thank you. The gentleman's time has expired. And 
the chair recognizes the full committee chair, Mr. Upton, for 5 
minutes or as long as he wants.
    Mr. Upton. Five minutes will be good. Thank you, Mr. 
Chairman. I appreciate everyone's testimony this morning. I 
just want to say when I first learned of this issue just a few 
short weeks ago, from Pfizer, the largest employer in my 
district, it has been amazing how many other companies walking 
to vote, doing a variety of different things that we do, a 
number of different companies have come up and shared with me 
their exact same story about trouble with India. And Mr. 
Waldron, I also want to thank you for your kind words in regard 
to the committee's work on enacting PDUFA last year. Every 
member of this committee, Republican and Democrat, was a strong 
supporter. And we were able to carry that ball down the field 
and get it through the Senate and to the President.
    The question that I have, Pfizer, you have been there some 
60 years now in India, Mr. Waldron. What is different now? What 
is happening that is different now from the landscape prior to 
the creation of their IP regime? Can you walk us through some 
of the things that have happened?
    Mr. Waldron. Yes. In the early days we were primarily a 
consumer health company in India. Our biggest products were 
vitamins and cough syrups. With the change in the law, it was 
expected there would be the support mechanism of IP to help us 
introduce innovative medicines into the market there.
    Mr. Upton. And that lured you in more, right? I mean that 
lured more investment into India?
    Mr. Waldron. Yes. To launch a new drug into a market is a 
costly adventure. And you do have to provide medical education. 
It is an advance for a market like India to receive almost 
immediately the benefits of a new innovative medicine from the 
innovator. So this is of great value and importance to patients 
in India. And I couldn't stress more that having that support 
mechanism in place does allow us to do what we do best.
    Mr. Upton. Now, in your testimony, and I was late coming to 
the hearing for a variety of other important reasons, but you 
indicated that since early 2012 India's policies and actions 
have undermined patent rights for at least nine innovative 
medicines. Many of these medicines have received patent 
protection in most countries across the world, suggesting that 
India is an outlier in recognizing and enforcing patent rights. 
This is not only creating significant uncertainty in the 
market, but it also undermines our ability to compete fairly in 
India and our willingness to invest there.
    Are you actually considering reductions in investment in 
India? What is the landscape that you are looking at in the 
future as it relates to that?
    Mr. Waldron. I think it is too early to comment on what 
decisions may or may not be made going forward. I think it is 
going to be a matter of whether one can continue to do and 
introduce those products without a support mechanism to do it. 
I think we have to see, and time will tell, whether the 
environment becomes so hostile that you just have to retreat.
    Mr. Upton. Now, the argument on the other side from the 
Indian Government, they have repeatedly stated that they have a 
complete ecosystem supporting a well settled, stable, robust 
intellectual property regime. Specifically, they go on to say 
that multinational companies like Pfizer have been granted many 
patents in India. How do you respond to that claim?
    Mr. Waldron. Well, the Patent Office has been very active 
since the adoption of the patent law in 2005 in issuing 
patents. But it is really important to note that the issuance 
of a patent is only significant if a right actually attaches to 
that piece of paper. What we complain of at this point is that 
notwithstanding the existence of these documents that are 
issued from the administrative agency, when you try to enforce 
or try to give them meaning they sort of fail in the breach. A 
lot of the filings that happen in India, or at least worldwide, 
are very early stage scientific things. So a lot of the things 
that you see pending or have been allowed are probably things 
that are in the phase one, phase two stage, and have not yet 
reached the commercial stage, but I would say enforcement in 
the breach is where it really matters when you are talking 
about IP rights.
    Mr. Upton. Have you had any help from the administration in 
terms of the Trade Rep or any of the Federal agencies here in 
terms of complaints that have gone forward?
    Mr. Waldron. We have been speaking with USTR and the 
administration, and we are very hopeful that this issue has 
been raised during Secretary Kerry's visit to India, and 
hopefully that this dialogue will continue. This is very 
important that these issues be raised in bilateral discussions 
with India so that they understand that we really are serious 
about this. So I expect going forward that we will at least 
have this. And I have seen to date that the issue has gotten 
some traction.
    Mr. Upton. Well, hopefully this hearing will elevate the 
cause as well.
    I yield back. Thank you.
    Mr. Terry. Thank you. And now the chair recognizes the full 
committee ranking member, Mr. Waxman.
    Mr. Waxman. Thank you, Mr. Chairman. In November 2011, 
Secretary of State Hillary Clinton said that if we make smart 
investments based on sound science and a shared global 
responsibility we can save millions of lives and achieve a goal 
once considered unthinkable, an AIDS-free generation. We have 
made remarkable progress toward that goal. The United States, 
through its PEPFAR program, has helped hundreds of thousands of 
people each year avoid contracting HIV, and now provides direct 
support for the antiretroviral treatment of more than 5 million 
people with HIV. That is three times the number that were 
supported as recently as 2008. But there is still a long way to 
go.
    In India, the focus of today's hearing, there are more than 
2 million people infected with HIV. Worldwide, there are 2.5 
million new HIV infections a year. And in this difficult 
spending environment, even the budget for PEPFAR was recently 
cut. In these circumstances, if we are to achieve our goals, 
low cost medicines must play an essential role.
    Mr. Malpani, what are the provisions of the TRIPS agreement 
that permit countries certain flexibilities on intellectual 
property rights, and what purpose do they serve? And how are 
these reinforced in the Doha Declaration?
    Mr. Malpani. Thank you for the question. Just to reiterate 
that treatment is prevention for HIV today. It leads basically 
to 100 percent reduction in the transmission of the virus. And 
for the first time in history, we have a chance at defeating 
HIV. The TRIPS agreement and the flexibilities included in the 
TRIPS agreement can play an important role in ensuring 
affordable generic medicines. As I mentioned in my testimony, 
the scope of patentability clause in the TRIPS agreement allows 
countries and governments to define what is patentable or not 
so they can prevent evergreening and long terms of monopoly 
protection. There is also provisions around compulsory 
licensing which allow governments to exercise patents to allow 
the importation or production of generic medicines to bring 
down costs and to protect public health. There are also other 
provisions in the TRIPS agreement that allow the early working 
of drug patents to allow generics to enter the market when a 
patent expires. This is used in the United States, as well as 
parallel importation of medicines, which is not in the United 
States, but which is used across much of the developed and 
developing world.
    Mr. Waxman. The United States was among more than 140 
countries to agree to the Doha Declaration, which clarified the 
circumstances under which countries may issue a compulsory 
license on a patent.
    Can you talk specifically about India's compulsory license 
on the Bayer drug Nexavar and the Supreme Court decision 
regarding the patentability standards for the Novartis drug 
Gleevec? And in your opinion is India acting within its 
obligations under the TRIPS agreement?
    Mr. Malpani. Yes. We do believe that in both situations the 
government has acted within the scope of the TRIPS agreement. 
With respect to the decision with Novartis, the issue at hand 
is whether or not the measure that India has used to strike 
down the patent on imatimib mesylate is under the TRIPS 
agreement. And we believe it does. It is part of the three-part 
test under the TRIPS agreement for defining what is inventive. 
It is not an additional provision under the three-part test of 
the TRIPS agreement. It specifies what is an inventive medicine 
under TRIPS.
    Similarly with respect to compulsory licensing, we believe 
that India used compulsory licensing under public health 
grounds to ensure an affordable price for the medicine. And in 
the order issued by the Indian Patent Appeals Board, it 
specifically mentioned that public health and affordability of 
the medicine was grounds for the compulsory license.
    Mr. Waxman. As I mentioned at the beginning of my 
questioning, the U.S. has set a goal for an AIDS-free 
generation. Can you talk about the possibility of countries 
expanding the scope of patentability for certain drugs or 
establishing TRIPS-plus patent standards and how that could 
affect our ability to reach our goal?
    Mr. Malpani. We are enormously concerned with many measures 
that occur right now, especially the United States, for 
instance, which is negotiating the Trans-Pacific Partnership, 
which is seeking to go constrain the ability of governments to 
both oppose patents through an oppositional process, as well as 
broadening the definition of scope of patentability so that the 
patent system ends up importing many of the frivolous patents 
that are often granted in the United States and the European 
Union. We also see a lot of bilateral pressure upon governments 
not to impose a strict standard of patentability to ensure that 
only high value patents that actually reward true innovation 
are being granted. So it is not only in the bilateral 
relationships, it is also through free trade agreements and 
through other measures which is leading to a broadening of the 
scope of patentability and leading to longer patent terms.
    Mr. Waxman. Most PEPFAR recipients currently receive first 
line antiretrovirals, which are typically generic drugs, and 
off patent, but after taking these drugs for some time, many 
patients develop drug resistance, requiring second line 
antiretrovirals, which cost the U.S. Government 135 percent 
more because many are brand name and on patent.
    You mentioned in your testimony about Abbott's application 
for a secondary patent for an important second line 
antiretroviral drug. Can you comment generally about how 
secondary patents on some of these brand name drugs could 
affect PEPFAR's ability to deliver affordable antiretrovirals 
to individuals who develop drug resistance in first line drugs?
    Mr. Malpani. Yes. We are facing what is known as a 
treatment time bomb today. All AIDS patients must switch to new 
second and third line medicines to continue treatments. And 
because these medicines are under patent, including in India 
and other countries, the costs are skyrocketing for our 
patients also. For one key third line drug produced by Merck, 
we have to pay $1,800 per patient, more than 10 times the cost 
of first line medicines.
    Mr. Waxman. Thank you, Mr. Chairman.
    Mr. Terry. Thank you, Mr. Waxman. And now recognize for 5 
minutes the vice chair of the subcommittee, Mr. Lance.
    Mr. Lance. Thank you, Mr. Chairman. And I apologize to the 
panel for being in and out this morning. There are several 
hearings this morning of this full committee. And I want to 
assure every member of the panel that I think this is an 
incredibly important issue.
    Mr. Waldron, Dr. Waldron, Counselor Waldron, many titles, 
you have testified that 80 percent of the users of your drug 
Sutent receive a complete or partial subsidy. It is my 
understanding that one of the arguments of the Indian 
Government in ordering a compulsory license is that drugs are 
needed for public health because the drugs are otherwise out of 
reach for Indian patients. Isn't it true, however, that Indian-
made generics are priced out of range for most of the 
population? And so therefore how is it in the interests of 
public health to manufacture a drug that is cost prohibitive 
when 80 percent of the Indian drug consumers are already 
receiving a drug from the patent holder either free or at a 
steep discount?
    Mr. Waldron. Yes. Thank you. Thank you, Vice Chairman, for 
that question. It is one of the misperceptions that increased 
generic entry means more access to medicines. And that is part 
of the problem that is facing us in this debate. From 1972 to 
2005, there were no patents protecting innovative compounds in 
India, yet only 20 percent of the population in India had 
access to medicines. Eighty percent did not. Even now that 
figure is better than in the period--I think it is about 30 
percent now have access to medicines, versus an earlier period 
where there were no patent protections. So the connection 
between patent protection and access to medicine is somewhat 
tenuous at best. We really have to look at mechanisms that do 
increase access to medicines. I mean we agree with the ultimate 
objectives of MSF----
    Mr. Lance. Of course. As do we all.
    Mr. Waldron [continuing]. And PEPFAR. And these are 
objectives that we all want to work towards. But I think the 
difference is in the mechanisms to get there. Compulsory 
licensing and abrogating the IP system really doesn't seem to 
be--have a linear relationship between that and increased 
access to medicines. Or at least that hasn't been shown 
anywhere in which this has been exercised.
    Mr. Lance. Thank you. I would be interested in your opinion 
regarding the Supreme Court's decision, the Indian Supreme 
Court decision, in the Novartis Gleevec case. As I understand 
your testimony, you believe that it is inconsistent with the 
Indian obligations under the WTO agreement on Trade-Related 
Aspects of Intellectual Property Rights, TRIPS. Could you 
explain the position of Pfizer regarding that issue? And I 
understand there may be a disagreement on the panel. I would be 
interested in your position.
    Mr. Waldron. Yes. When you speak about drug development, I 
mean you have the development of an active pharmaceutical 
ingredient and then you have subsequent innovation that occurs 
after the identification of that active ingredient. Sometimes 
the active ingredient is not bioavailable. You give it to a 
patient, it goes right through their system. You want that 
incremental innovation that occurs after that to make sure that 
you are getting optimal exposure to the patient of the drug. 
That is called pharmaceutical sciences. It has been practiced 
by pharmacists for centuries, compounding and making drugs that 
actually take that active ingredient and make it available to 
patients. That is innovation. Pharmaceutical sciences is a 
branch of science which pretty much literally has been written 
out of the Indian patent law and proscribed from patentability. 
And that is really something that should be part of the law, to 
encourage the kind of innovation that you want and makes those 
drugs better available to patients.
    Mr. Lance. From my perspective you have hit right on the 
key, and I appreciate your testimony in that regard.
    India has been praised for improving access to medicines in 
parts of the developing world. It is my understanding that 
India raises more money taxing medicines than it actually 
spends on medicines for its own people. Mr. Waldron or perhaps 
others on the panel--I start with Mr. Waldron--can you describe 
some of the access programs that your industry has implemented 
to help Indian patients regarding innovative medicines?
    Mr. Waldron. I think one of my fellow panelists described 
the Novartis access program.
    Mr. Lance. Yes.
    Mr. Waldron. I have described our access program. But most 
all of the industry has implemented an access program in one 
form or another to make these drugs available to patients. The 
problem in India is that there is no counter-facing public 
health system in which to interact with. There is no government 
payer. So a lot of this has to be done at the private level or 
at direct interactions with clinics. So it is a very difficult 
dynamic than what we see in the United States, where we have a 
government payer versus another situation. So most of the 
industry has tried to do its best in these circumstances, but 
when you are not dealing with a system that treats all of the 
patients, the access to medicines issue become becomes an 
access to health care issue, which is a completely different 
thing.
    Mr. Lance. Thank you. My time has expired. Thank you very 
much.
    Mr. Terry. The gentleman's time has expired. The chair 
recognizes the gentleman from Utah.
    Mr. Matheson. Thank you, Mr. Chairman. I appreciate the 
panel participating today.
    Mr. Waldron, from listening to today's testimony, it 
appears India is using its intellectual property law to build 
up their domestic industries at the expense of U.S. innovators.
    Can you elaborate on how these types of policies threaten 
to harm your specific industry if left unchallenged?
    Mr. Waldron. What is happening in India is being looked at 
very carefully by other countries. It is a portions and pieces 
of what has been implemented in the Indian patent law has been 
adopted by Argentina, the Philippines, it is being looked at in 
Turkey. In fact, in some of the more developed countries they 
are actually looking at--more actively at anti-IP-type 
measures. This is very distressing for the point that it is the 
boom that has given the benefits to our economies. So we have 
to be very careful about counteracting anti-IP sort of 
contagion and spillover from India. And I think unless we are 
willing to look at the crucible of the activity that is 
happening in India and sort of draw a line and say this is 
unacceptable at some point, it is going to be seen as 
permissible by the Brazils and the South Africas and other 
countries to sort of take it upon themselves to implement 
measures, particularly if there is no downside to doing it. The 
biggest downside is the long term downside that it affects the 
innovative economy. It would be very shortsighted if we really 
were not to sort of take a stand at this point and protect the 
innovative environment which is protected by intellectual 
property.
    Mr. Matheson. And you may not be able to answer this 
question, but to the extent that you see potential spillover 
into other countries to adopt these same policies, do you have 
a sense of how soon that could be presenting itself to us where 
we are having a hearing again, that Chairman Terry is going to 
call a hearing and talk about instead of India it will be 
another country? Where is this happening so quickly?
    Mr. Waldron. I think we are seeing it in real time. As I 
mentioned, Argentina has adopted patentability restrictions or 
guidelines that affect it. The Philippines have as well. The 
Brazilians are looking very carefully at different mechanisms. 
So we are seeing sort of a very concerted international effort 
on this. And I think it is really time that we sort of make a 
stand on the value of IP. And that is what we should do as a 
country because we are innovators, we export innovation. And 
that is really so critical to our economy.
    Mr. Matheson. I appreciate that. Mr. Hoffman, in your 
testimony you suggest that resolving issues like India's 
preferential market access initiative through the World Trade 
Organization would not be ideal for industry entrepreneurs. Is 
that a fair characterization, first of all?
    Mr. Hoffman. It is certainly not ideal, largely because----
    Mr. Matheson. Can you just expand on why you don't think 
that is the right way to go in your opinion?
    Mr. Hoffman. Well, it is more of a when all else fails kind 
of a recommendation. And the simple reason why is that it takes 
years to resolve. And in our industry, 2 or 3 years are three 
iPhones and 20 versions of Angry Birds. I mean innovation just 
keeps moving along. And so we hope, again this is one of those 
situations where when you have a mutually advantageous 
situation where both countries are innovating like they are 
doing, listening to Mr. Waldron, Dr. Waldron, Counselor 
Waldron, I have to--hearing what he is saying in terms that we 
are an innovation economy, you want to export innovation. India 
has progressively moved up the value chain when it comes to 
information technology. And they are exporting more and more. 
Why would you risk that? By not only locking yourselves out, 
but the contagion effect that Mr. Waldron just talked about 
certainly applies in our case as well. So we hope that given, 
again, the mutual understanding that we both have about the 
benefits of innovation entrepreneurialism we can resolve this 
short of giving--handing this over to the trade lawyers in 
Geneva.
    Mr. Matheson. With that, Mr. Chairman, I just suggest that 
this potential of this spreading to other countries just 
highlights the importance of this hearing even more. And with 
that, I will yield back.
    Mr. Terry. Good point. The chair now recognizes Mr. 
Guthrie.
    Mr. Guthrie. Thank you, Mr. Chairman. I appreciate that. I 
appreciate everybody being here. Ms. Dempsey, reading through 
your testimony, we have all talked about the range of problems 
with India. You reference in your testimony the bilateral 
investment treaty and negotiations that are on hold now because 
of India's recent actions. What would you like to see happen 
now that could get these negotiations started again? What would 
you like to see?
    Ms. Dempsey. Sure thing. We at the NAM have been strong 
supporters of bilateral investment treaties as ways to grow 
reciprocal investment, investment that comes into the United 
States that benefits manufacturing and other economic activity 
here, and also broadens our relationship with those other 
countries. If India were prepared to agree to, to negotiate the 
type of high level BIT provisions that were recently reviewed 
by this administration and put out in April of 2012 that 
include market access provisions, basic provisions from our own 
Constitution, things like takings and due process and 
nondiscrimination, including provisions I think that would get 
at many of the property rights and forced localization issues 
that we are seeing, as well as high level enforcement 
mechanisms, then we would see that the Indian Government is 
serious about moving forward and growing the U.S.-Indian 
relationship. As I understand it at the moment, the Indians, we 
started these negotiations back in 2008. The U.S. took some 
time to review its model under this administration. And now the 
Indians have said, well, we are reviewing our model, a model 
that was already relatively weak compared to the United States 
system. If India is not ready to negotiate this type of high 
level treaty, there are a lot of other countries in the world 
and Africa and parts of Asia that would be very interested in 
negotiating this. We have these types of treaty arrangements or 
through our trade agreements with about 60 other countries. And 
they really are a win-win for both sides.
    Mr. Guthrie. Thanks. And Mr. Hoffman said in your 
testimony, I believe, and I quote, ``That India's policies that 
are certain to reverse its past successes as an emerging 
economic power.'' And is that what you are leading to? I mean 
is it just foreign direct investment you think they will lose, 
or what is the nature of that? Or add to that quote, I guess.
    Mr. Hoffman. Well, we are already seeing it. We are already 
seeing a significant decline in foreign direct investment. I 
think there is a genuine concern about the direction where the 
country is going. But meanwhile, you can't just view India in a 
vacuum. You have to understand that a lot of other countries in 
the region are following the same playbook that India used in 
the 1990s, and they are developing an educated workforce. They 
are actually encouraging companies that have invested in India 
to expand in those countries, and they are essentially trying 
to adopt the global innovation supply chain that India 
developed. You take a restrictionist approach, you are 
essentially turning your back on the very things that you 
helped to create, and literally handing it to your competitors 
in the region.
    Mr. Guthrie. This is open to the panel. Has India replaced 
China as the country presenting the most challenging 
environment to intellectual property? India has replaced China 
or are they both very serious? I know that came from your 
testimony, Mr. Elliot. Thanks.
    Mr. Elliot. I will take a stab at that. Look, due to the 
size and scope of China's market, I.P. theft will continue to 
be a huge problem. We will continue to need to work with China 
and the Chinese Government for some time. That said, there are 
a number of examples where the Chinese Government appears to 
have been responsive to issues raised with them. And in some 
areas, they are certainly moving in the right direction.
    Two points to be made about India I think are that firstly, 
there has been a steep decline with respect to the I.P. 
environment there over the last 18 months. So they are clearly 
heading in the wrong direction. The second point I would make, 
in referencing back to the international index that was 
released last year, the baseline is already low. They are 
already the lowest in the world when it comes to their I.P. 
environment. So the bar is low, and they are already heading 
further down. And that is the concern with respect to India.
    Mr. Guthrie. Thanks. Our Founding Fathers put in the 
Constitution a robust patent. That is an enumerated power of 
Congress. Because I think what we have done in the last 226 
years since our Constitution has been adopted has been 
phenomenal. And I think it is because we have had protection of 
intellectual property. And now that we are global, and you can 
invent it here and create it here and it happens and you lose 
it overseas, that is a problem with investment. And granted, 
there are issues with costs and trying to make sure that we get 
products to people that need them at the right price at the 
right time, which we need to focus on.
    But thank you, and I yield back.
    Mr. Terry. The gentleman's time has expired. The chair now 
recognizes Mr. Olson of Texas.
    Mr. Olson. I thank the chair, and welcome to our witnesses. 
The topic of this hearing is very important to me. My district, 
Texas 22, is the most ethnically diverse district in America. 
And the Indo-American part of that diversity is the fastest 
growing part. If the Indo-American community in Texas 22 grows 
like it did between the census of 2000 and 2010, in the 2020 
census they will be the majority minority in Texas 22. They 
will be larger than the African American population, larger 
than the Hispanic American population, larger than the Anglo 
American population. They will be the largest. And Texas 22 is 
the only one in 435 congressional districts that has that 
blessing. But robust trade with India that complies with 
international standards is more important than ethnic diversity 
in my district of Texas. It is important for our national 
security. Looking at a map of the world, like I did last night, 
the U.S. is facing threats to our security from both sides of 
the ocean, Pacific side, the Atlantic side. If you could 
magically take a flight out of Reagan National and head due 
east, after you cross the Atlantic you would hit Morocco, then 
Algeria, Tunisia, Libya, Egypt, Saudi Arabia, Jordan, Lebanon, 
Syria, Iraq, Iran, Pakistan, Afghanistan, Bangladesh, Nepal, 
China, Thailand, and Myanmar. Now you are over the Pacific 
heading home. There are not a whole lot of friends on that 
route. In fact, most of those countries are dominated by 
radical Muslim governments that want to hurt America. There are 
two democracies on that flight path, Israel on the eastern 
Mediterranean Sea and India in the heart of Asia with a 
dominant position on the Indian Ocean. I have seen firsthand 
that dominant position because I deployed for 6 months to an 
island called Diego Garcia in 1994 in the dead center of the 
Indian Ocean. And while India is the world's largest democracy, 
she is still young at 66 years old, and going through some 
serious growing pains associated with individual freedoms and 
free market economies. When our country was 66, we were having 
some big problems that manifested themselves in a Civil War 20 
years later. Our trade relationship with India has grown 
dramatically in the last 2 decades. American businesses need 
that huge market. And India needs us. And like all of you all, 
my blood boils when I hear that India is revoking and denying 
patents and granting compulsory licenses for cancer treatments, 
or adopting local content requirements, or the recent Chamber 
of Commerce study that ranked India's IP environment behind 
China and Russia. China? China can't spell IP if you spot them 
the I. As a nation, we stand with India like my dad did when I 
was growing up and I made his blood boil. He put his arm around 
me and showed me or pulled me where he would go to make sure 
with his fingers resting firmly on my shoulder just to inflict 
some pain if I diverted from the course we needed to go down. 
That is what we should do with the Indian Government. A real 
high level question here, and sorry for the time, but most of 
the discussions on trade policy with India occur in the 
executive branch. We talked about the Secretary of State going 
there, the Vice President, the Secretary of Energy went there 
recently. Is there a role for Congress? And most importantly, 
what can I do with my district to help get some grass roots? 
Because we have people in my district who have great strength, 
great pull. What can I do to help make sure we get India on the 
right path again?
    All the way across the board. Start with you, Ms. Dempsey.
    Ms. Dempsey. Thank you. I think you see the issue very 
clearly. We need to, we must have a strategic relationship with 
India, but we have got to do it as equals, and they have got to 
play by the rules. I think there is a definite role for 
Congress. You know, over 250 Members of the House and Senate 
have written to our President or Secretary Kerry in the last 
few weeks identifying these concerns, all talking about the 
need to get our relationship on the right track. You know, 
there are ways to grow manufacturing in India. We at the NAM 
have a lot of ideas about growing manufacturing. That is what 
we focus on here in the United States. India can take a page. I 
think sharing those desires, but also talking to the Indian 
Government officials, the embassy, others that come through and 
talking about this is what makes an economy strong and this is 
how our two economies can best work together.
    Mr. Terry. Thank you. And the gentleman's time----
    Mr. Olson. The question is directed to Mr. Waldron, Mr. 
Elliot, Mr. Hoffman, Mr. Smirnow, and Mr. Malpani. Thank you. 
Same question.
    Mr. Terry. All right. When we are finished here there will 
be a statement about written questions to you. And I think we 
know one of the first questions that will be submitted to the 
rest of the panel now.
    At this time the gentleman from Mississippi is recognized.
    Mr. Harper. Thank you, Mr. Chairman. And thank each of you 
for being here. This is certainly a very important issue. I 
know that we have talked about a number of different industries 
and areas that are of great concern with us. And of course for 
my State and my district we have things ranging from steel 
manufacturing to poultry producers. And I know that India has 
denied access for decades to their markets to U.S. poultry 
producers. I know WTO is looking at that now. We are hopeful 
that this will be resolved. And there is no reason that we 
can't have a robust trading partner on a fair and level playing 
field with India if they so desire. And we hope that they will. 
But if I could ask you, Ms. Dempsey and Mr. Elliot, as we look 
at particularly at subsidies, I know that the Indian Government 
heavily subsidizes a number of its domestic industries, 
including its steel industry. The government provides benefits 
to its domestic steel producers through a number of programs, 
including a variety of export incentives and controls over raw 
material prices. For example, the Reserve Bank of India 
provides preferential short term pre-shipment export financing, 
or packing credits, to exporters through commercial banks.
    How can the United States Government address the market 
distorting effects of these subsidies and ensure that they do 
not have detrimental effects on U.S. manufacturers in the U.S. 
and global marketplaces?
    Ms. Dempsey. Thank you, Congressman. You have identified a 
number of serious issues. In addition to the direct subsidies 
that you are talking about there are also export tax 
restrictions on iron ore and derivatives that make the price of 
certain raw materials unfairly low in India's market. They have 
I think it is the fifth largest steel producing country in the 
world right now. How does the U.S. Government engage? I mean on 
one hand U.S. businesses have already employed our trade remedy 
rules, the anti-dumping and countervailing duty, which does get 
at the subsidies. We would like to see Congress better ensure 
enforcement of those rules. And there is the Enforce Act that 
we are hoping to get included in the Customs reauthorization 
bill in another committee. But that would be one way. You know, 
the U.S. Government is in a lot of dialogue at the OECD and in 
other areas on steel trade more generally, trying to eliminate 
subsidies. You know, over the years we have seen massive 
overproduction. It really has caused a change in our industry 
here. And so I think those are the types of initiatives and the 
dialogue that we all want to see to help India understand there 
are ways to grow your economy. It is very much in the United 
States' benefit for India to grow its economy. But there are 
ways to do that that work and there are ways that are 
destructive to our relationship. And we think that there are 
good ways that the Commerce Department, the office of USTR, as 
well as other agencies can help with the Indian Government if 
they want to listen.
    Mr. Harper. Thank you, Ms. Dempsey. Mr. Elliot, anything 
you can add to that on your opinion how we can best address 
what India is doing particularly as it applies to the steel 
subsidies?
    Mr. Elliott. Thank you, Congressman. I am afraid that trade 
subsidies is not my strength or area of expertise, but I am 
more than happy to get an answer back to you with respect to 
the U.S. Chamber's position on this. But I couldn't imagine it 
is a terribly different position than that of the NAM. But I 
will certainly provide it to you.
    Mr. Harper. Thank you very much. And I know we are on 
limited time. But I want to say also in talking about the WTO, 
I know that India is currently pursuing a dispute settlement 
case against the United States at WTO challenging the U.S. 
application of countervailing duties to imports of Indian hot 
rolled steel. India's challenge is in part due to the U.S. 
Department of Commerce's findings that subsidized iron ore was 
supplied to Indian steel producers by a state-owned company. 
This case dates all the way back to the year 2000, I believe, 
and challenges not just the specific CVD cases on hot rolled 
steel, but also the U.S. trade laws and regulations on which 
the case was based.
    Are we doing everything possible to protect our trade 
remedy system, which operates according to WTO principles from 
such unwanted attacks? And what additional steps can the United 
States Government take to strengthen our trade remedy laws? I 
know we are almost out of time, but Ms. Dempsey, take a stab at 
that.
    Ms. Dempsey. Thank you. On the issue of the case, I think 
that the office of USTR, the Department of Commerce that helps 
USTR with these cases is very strong, and clearly defends U.S. 
trade remedy laws in this case. And I do think that they are 
doing all that they can in that context. We could improve, as I 
said, the enforcement of our trade remedy laws. We have too 
many cases where companies bring cases, and then they win them, 
they spend a lot of money, many of them small and medium-sized 
companies, and then there is transshipment around that and 
there is no way, it takes the Customs department years to even 
determine whether there is a problem.
    Mr. Harper. Thank you. My time has expired, and I yield 
back.
    Mr. Terry. The gentleman from Ohio is recognized for 5 
minutes.
    Mr. Johnson. Thank you, Mr. Chairman. And I appreciate the 
panel members being here. This is indeed an important hearing 
for my district. Manufacturing is a big issue in eastern and 
southeastern Ohio, particularly the steel industry. Lots of 
concerns about some of the things that we have talked about 
today.
    According to the Organization for Economic Cooperation and 
Development, state-owned enterprises, or SOEs, in India count 
for 20 percent of the value of the stock market and are 
pervasive in mining and energy, steel, logistics, and other 
sectors critical to manufacturing and raw materials. For 
example, the Indian Government owns at least 80 percent of the 
steel authority of India, a company called SAIL, the country's 
largest steel producer. What steps can we take to ensure that 
Indian state-owned enterprises act in accordance with 
commercial principles and compete fairly with privately-owned 
companies worldwide?
    Ms. Dempsey. That one is coming back to me. You raise a 
very important point. In negotiations the United States has 
right now with the Trans-Pacific Partnership, the issue of 
ensuring that state-owned enterprises act in commercial 
considerations is a very important offensive request of 
industry and the U.S. Government. India is far from 
participating in that type of high level discussion or 
negotiation. What I think, there is a few areas where I think 
we can do more. Some of it comes back to I think all the basic 
issues and the industrial policies that my business colleagues 
and I have identified here. Helping the Indian Government 
understand that a market-driven economy, an economy that is 
based on respect for private property, including intellectual 
property, and where fair competition isn't a bad thing, but is 
a good thing, those type of competition principles, that type 
of market opening is going to help India move towards a better 
result. I know there are discussions in the OECD, of which 
India is not a part, on these issues of state-owned 
enterprises. I don't think we have got a solution yet for how 
to deal with the SOE issue in these emerging markets. But we 
are happy to work with you on that.
    Mr. Johnson. I certainly hope we continue to work on it, 
because it is problematic.
    Also, India imposes export restraints on a number of 
essential manufacturing raw materials, including a 20 percent 
duty on steel scrap exports and a 30 percent duty on iron ore 
exports. Such export restraints artificially decrease prices 
for Indian manufacturers, while limiting supply and increasing 
prices for U.S. manufacturers. What measures should we take to 
encourage India to remove these market-distorting trade 
barriers?
    Ms. Dempsey. This is a tough issue. You know, the U.S. 
Constitution, our forefathers long understood this issue more 
clearly. We ban, for instance in the United States we can't 
impose export taxes constitutionally. It doesn't make sense. 
Unfortunately, the World Trade Organization rules, while they 
prohibit quantitative restraints on exports, they don't yet 
prohibit the taxation of exports like we are seeing in India, 
which has exactly the type of anti-competitive effects that you 
have cited. We would like to be able to get back to the World 
Trade Organization. We would like to have global talks about 
this. In the meantime, I think we need to help the Indian 
Government help their industry understand that this is a short-
term problem that is going to have long-term effects on the 
global competitiveness of its industry.
    Mr. Johnson. OK. One final question while I have still got 
a minute left. India also imposes barriers to imports into its 
domestic markets. For example, in September 2012 India's 
Ministry of Steel began requiring the application of mandatory 
standard certifications for a number of steel products. Because 
of these new requirements, all exporters of steel products to 
India must register with the Indian bureau and pay a 1 percent 
tariff for inspections.
    What steps should we be prepared to take to ensure that 
those barriers, the import barriers do not negatively impact 
U.S. exporters to India? Is that in the same category with all 
the rest of these?
    Ms. Dempsey. That is exactly in the same category. We have 
heard those concerns in our membership, but we have also heard 
concerns of customs in India in a whole host of other 
industries. This has to be part of the solution because part of 
what India is doing is making it harder for us to get our 
imports in through a variety of different areas.
    Mr. Johnson. Well, having worked in the private sector 
before coming here to represent the people that I do, the 
company that I worked for had relationships with India, and 
certainly viewed India as an emerging market. Hopefully, 
through our negotiations with India we can help them understand 
that if they want American companies to consider India an 
emerging market they better start playing fairly in the game.
    Ms. Dempsey. Exactly right.
    Mr. Johnson. Thank you all. I yield back, Mr. Chairman.
    Mr. Terry. Thank you. And that concludes the questions. I 
remind members that they have 10 days in which to submit 
written questions to our panel. And to our panel, if you do 
receive written questions, we would appreciate, we would really 
like a timely response. And that would be a couple weeks, not 
several months or years.
    And I want to thank all of you. Your testimony was great. 
The answers to questions gave us lots of things to think about 
in regard to the issue with trade, patents with India. So thank 
you for your time.
    This concludes our hearing, and we are adjourned.
    [Whereupon, at 11:50 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    This is a timely hearing on a topic of great importance to 
both U.S. companies and the public at large. We have a strong 
and growing trade relationship with India, as well as an 
important strategic alliance on the world stage. A key U.S. 
advantage in our trade with India is our strength in innovation 
and the resulting intellectual property--from high-tech, to 
green-tech, to medical technology. India is an important 
investment partner for a number of U.S. companies in these 
fields, but unfortunately, these companies like Pfizer in 
southwest Michigan are facing a serious threat to their 
intellectual property, thus jeopardizing the trade relationship 
we have with India in those industries.
    India has not been a battleground in the effort to protect 
intellectual property in recent years, but with recent 
developments, that soon may change. While the use of compulsory 
licenses is permitted under international trade agreements, 
their use should be reserved for serious situations such as an 
epidemic, making critically needed drugs available en masse in 
relatively short periods of time. India issued its first 
compulsory license last year and is considering issuing three 
more under the guise of making expensive cancer drugs available 
for the ``urgent needs of public health'' and for failure to 
manufacture the pharmaceuticals in India.
    Both reasons suffer fatal flaws: the domestic manufacturing 
requirement is a clear violation of India's WTO national 
treatment obligations, and Indian companies are selling their 
generic versions at a cost that remains out of reach for most 
of India's population. Instead, only a few privileged citizens 
can afford these generic versions of patent-protected, U.S.-
researched and developed pharmaceuticals, delivering all of the 
profit but none of the R&D pain to India's generic 
pharmaceutical manufacturers. I say ``pain'' because it is an 
expensive, lengthy, and arduous process to develop a drug and 
see it through the FDA's rigorous approval process. The cost of 
developing most drugs exceeds $1 billion today and with the 
reality that only 1-in-10,000 compounds are ever approved by 
the FDA, the odds are not favorable. Without the short-lived 
monopoly promised by a patent, there is little chance for 
private companies to recoup their investment, which means there 
is little incentive to engage in life-saving research.
    The danger in India's recent practices isn't limited to 
pharmaceuticals. India now faces a WTO dispute in the green-
tech field regarding mandatory domestic content requirements 
for solar cells and solar modules. U.S. companies in the high-
tech industry see what happened to the solar industry and 
what's happening in the pharmaceutical industry and rationally 
fear it could happen to them. IP-intensive industries 
contribute over $5 trillion to our economy and support a total 
of 40 million American jobs. These incursions on their 
intellectual property rights hurt their bottom line and thus 
their ability to contribute to our economy and job market--
something we cannot take for granted, especially in this 
fragile economic time.
    I'm deeply disturbed by the turn of events in India's 
intellectual property system. I am interested in what our 
witnesses have to say about the impact of these practices on 
U.S. companies, their employees, their R&D efforts, and the 
outlook for our trade relationship with this strategically. I 
yield back.

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