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November 10, 2005

E&Y find that pharmaceutical companies are cautious about investing in China and India

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We're all aware of the incredible competition to the U.S. economy posed by China and India. These countries benefit from not only low labor costs but also boast an educated workforce, which is a power combination in a global economy. Industry after industry is flocking to India and China to take advantage of their competitive advantages. And that's a good thing, both for consumers in the developed economies and for the development of international economies.

But according to a new study by Ernst & Young, pharmaceutical companies are unable to take advantage of the opportunities posed by India and China, because of concerns over lack of intellectual property rights. In other words, the pharmas are not investing in China and India at the pace of other industries.

The study is in the form of a survey of pharmaceutical company executives.

According to the survey, more than 70 percent of pharmaceutical executives said that threats to IP pose a significant business risk in China, and 62 percent said the same thing about India.

Now, we've commented before the mixed messages coming out of India on intellectual property, claiming to understand that the key to international investment is strong IP protection while at the same time advocating an overthrow of WIPO. The good news is that the new India delegation to WIPO is supposed to have a different orientation, which is good.

If India wants the kind of foreign investment in the research-based industries, as opposed to just using them for cheap labor, they are going to have to be serious about strong IP protection.

Of course, Brazil and Argentina are in an entirely different category, overtly hostile to intellectual property. Wonder if that has anything to do with the now-familiar Latin American economic suicide dance going on in those two countries?

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