India refuses to take its medicine; patience of MNCs apparently not unlimited

Delhi scores own goal

Novartis declares it will take its highly sought R&D dollars elsewhere after Indian court rejects patent application on cancer drug. This is unusual because most MNCs, after getting slapped around by Indian courts, government officials, or NGOs, meekly ask forgiveness and walk away with their MNC tails between their legs. Not Novartis CEO Vasella who responded with the verbal equivalent of a nuetron bomb:

This [ruling] is not an invitation to invest in Indian research and development, which we would have done. We will invest more in countries where we have protection. It’s not a punishment, it’s just a question of the culture for investment. Do you buy a house if you know people will break in and sleep in your bedroom?

Novartis' country head, Ranjit Shahani, was equally blunt in an interview in Live Mint:

The impression given is that we are not open for business, as a country. We are losing out on investment. It is not just about China (getting the R&D investments), look at Singapore as well. The operating environment and speed at which the decisions are taken, is obviously significantly ahead (there). Between 2005 and 2007, five companies have invested in China and at least, one or two of them should have come to India. These are Johnson & Johnson, Roche, Astrazeneca, GlaxoSmithKline and my own company, Novartis Ag. Each company would have spent a few 100 million dollars, though I don’t know the exact figures. In the last 24 months, we have made an initial investment of $ 200 million in China for R&D. At the Novartis’ Institute for Tropical Diseases in Singapore, we spent about $400 million. For sure, India could have been home to some of these investments. Moreover, the Singapore institute works on treatments of dengue, malaria and tuberculosis, all of which should have rightfully come to India. We lost that out.

In response to the comment that perhaps India cannot protect drug IP because of the need to lower prices, he pointed out that

We have the lowest price medicines in India. Yet, because of poor health infrastructure, people do not have access to medicines. There is a need to focus time, money and energy on building health infrastructure. In fact, only 35% people have access to medicines in India. Even in Africa, which is called the ‘dark continent,’ 47% of the population has access to medicines.

What is the implication of this? Simple: the long term risk that India fails to attract sufficient investment has grown. Score another one for Beijing.