[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
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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
______
U.S. GOVERNMENT PUBLISHING OFFICE
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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
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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
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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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