4364206
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International Pharmaceutical Industry and Less-Developed Countries: II: Costs and AlternativesAuthor(s): Sanjaya LallReviewed work(s):Source: Economic and Political Weekly, Vol. 9, No. 48 (Nov. 30, 1974), pp. 1990-1996Published by: Economic and Political WeeklyStable URL: http://www.jstor.org/stable/4364206 .
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International Pharmaceuticalndustry
n d
Less Developed ountr ies
II-
Costs
and Alternatives
Sanjaya
Lall
The
p)h(lrm(ceutical
ijdustry
is
onie
of
the
mt1ost 'muldtinational'
mtod(ler'nt
ma;'
ufactmiin i;;clstries;
the finrs whichi doninate
it
in the
develol)ed
coIn
utiies
Cilso
operalte
in almtiost very less-develop1ed count-
try out.tside
the socialist
bloc.
The soci(ll
im.portance
of
thte
pharmaceutical
iLdaustry
s
suichi
h(at
in receut years it
has
beeui
suib-
jected
to
increasing enq(uiiiry
ald
criticism
in
several
counItries.
It
i.s
an
indication of
the
iniduistry's
ocer
that
few of
these cuiticismus
hlave
led
to
reforms
in its
baisic
srtructulre.
Part
I
of this paper,
which
aippeared
ast week, examitned the
maini
chlaracteristics of th1e nternational
pharmnaccnu'ical
nduistry,
highlighting
the
a(iomalies (hid
distortions
thatit
exist
becauise
of
the
puccdulir
structutre of
the
drugs
m(larket
li}d because of the grealtoligopJolistic
p
owter
exercied
lby
theC'eadinig
firmlS.
The
implic-ations
of
the
structure
of
the
inter-
ation7al
pharm(lceutical
i.;dustry
for
the
develop;ing
counltries,
to tciich
miiany
of
its less desirable
feature.s are tranisferredcl holesalle, aire discuissed in. Part
II
of the article puiblished below. The additional social costs imposed o,n these cotunitries by their playi:ig
host
to
the
drugt muiiiltinatitionlelisr)e described, tusinig hle Inidiani. ase
as an
examlple.
Thle
options
open
to
the
goverlnmenits of
the
developingy
couniitries to reduice the cost of obtaining drug,s
(ar-e (lso
considered.
THE pharmiaceutical
industry
in
the
less
developed
countries embodies
all
the
essential features
of the
industry
in
the West. Most
of
the
large
international
concerins operate
in
those
less
developed
couinitries (LDCs)
which
actively promo-
te import
stibstituttioin in
drml manufac-
turing
-
though, in most cases, the
maniufactturing
operationi
consists
simply
of
formultlatiing and
packaginlg imiported
chemicals.' In a feNv relatively inidtis-
trialised countries,
subch as
Inidia,
Mexi-
co, Argentinia,
Brazil,
anid the
UAR,
the
inldustr-y
has
imaniaged
-
behiand
protective
barriers
-
to
achieve consi-
derable backward
initegrationi
wvith
the
growth
of an inbdigenous finie cheiiicals
sector; in others,
however, imnport
de-
pendenaice remains
verv
heavy.
The technology of
drug
manulaetuire
is,
of
coUrse, almiost
eintirely
inmpor-ted
fromii the
developed countries, and the
sy-stem
of patentinig,
the marketing
methods, and the
levels of profitability,
are all very simnilar to, those described
in
the previous
sectionis. As in the
developed couintries,
the more
iin(lu5s-
trialised LDCs have large
nunubers
of
local
firins
which
suipply
very
small
proportions
of
total
p)harimiacetitical
sales,
in the
foreign nmultinational
firnms
possessing overwhelmingly
dominiant
positions
in
their
nmarkets.2 Given
the
profitability of their own
manufacturing
investments, the
miiultinationals
are
naturally
uinvilling
-
unless forced
to
(io
so
by
local
laws
-
to license
indi-
genous
firms
to
manufacture their pa-
tented products; and, given the exis-
tence
of
patent protection as well
as
the
enitire
paraphernalia
of
drug
mar-
keting backed
l)y
the
prestige
of
esta-
l)lished foreign l)rand and
company
names,
the
mutltinationaals
can easily
imiaintain
-
and
have
done so
till
now
-their
dominanit
positions
in
perpetui-
ty.
The
social costs of this
structure, as
inote(l for
the
developed
couniitries,
ap-
ply
even
mior
strongly
to the LDCs
-
in tlhat, there are certain special
factors in
the latter
wNhich further raise
the
burden on the host
economiiies:
(i)
Thouigh
there
is
little
original
B
and D)
done
ini LDCs
by
the
pharima-
ceuitical
miultltinationials,heyond
relative-
ly minor
a(laptive
research, their con-
trol
over
patenits
is
even
more
conmp-
lete
than
in
developeed countries.3
In
many
LDCs,
including
the
more indus-
trialised ones
(with
the
r
ather
odd
exception of
Brazil),
the
percentage
of
total
patents
(including non-pharmaceu-
tical
ones)
owvned
by
foreigners bor-
ders oni or exceeds 90 per cent;; of
the
10
per
cent
owned
by nationals,
there
is reason to
suspect that a
large
proportion
is
of
little
commercial im-
portance.5
Though figures
are not gene-
r
ally
available
on
pharmaceutical
pa-
tenits
separately,
somiec
data
for Chile
inldicate that
foreign
ownev-rship in this
industry
was the
second
highest of 10
induistrial
groupings in
1967,6 while in-
formation from
the UK,
where only
6
per
cent of
phairmaceutical
patents
filed in
the
mid-1960s were
nationally
owned as
opposedl
to 14 per
cent some
12 years previously,7 suggests that
there is
an
increasing tendency in
all
countries
with multinational
drug firms
to
have
foreign-owned
patents.
What
are
the
implications
of
this
trend for
LDCs? Do
they
have
reason
to
dislike
it
any
more
than,
say,
the
UK?
Recent
analysts
of
the
patent
sys-
tem
in
LDCs
agree
that
the
rationale
of
its
existence
there is not so
much
to
provide
an
indutcemlent to
innova-
tive
activity
-
since the
innovating
firmlls
invest in 1I anld D
primarily with
a
view
to their
maini
mlarkets
in
the
leveloped
countries-
as
to
stimulate
the infloxv
of
foreign (lirect
investnment
anid
the
transfer of
new
technology.
These
analysts,
especially
Vaitsos,9 also
express grave
doubts
ab)ont
the
accep-
talilitv
of this
rationale,
on
the
ground
that the
patent
system
serves
primarily
to
incerease
the
m(onopoly
power
of
foreign investors
-
and
so enables
them to
restrict
technological
transfers,,
raise
import
prices,
and
indulge
in:
variotus
other
restrictive
practices.
There is little reason to doubt, orl)
the
basis of
the
exper
ience
of
develop--
ed
conintries,
that
the
patent
systemn
does
increase
the
monopoly
power
of
multinational
firms
in
this
particular
in-
dustry,
thouigh
it
Nvould
be
incorrect
to
put
the
entire
blame for
the
monopolis-
tic
practices in
LDCs
on
patents
as
dis-
tinct from
other
sources
of
market
power,
especially
marketing
practices.
It
is,
however,
impossible
to
envisage
what the
structuire
of
the
industry
would be
if
the
entire
international
patenting *system
were
scrapped;
pa-
tents may
he
only one of the supports
of
the
present
svstem,
hut it
may
he,
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the vital one to its existence.
If we accept, then, that patents are
of some value in enhancing
monopoly
in
the
pharmiiaceutical in(dtustry
-
as,
indleed, they
are initended
to be -
the
charges
which can be levelled
against
them are: (a)
that
they
allow
multi-
nationals to buy up
most of the
patents
in LDCs
aznd
not
use
the
vast
majority
of them,
thus
providing
a
captive
mar-
ket for exports for the producers in
developed countries,
while
preventing
emergence of indigenous enterprise
or
the purchase of cheaper imports;10 (b)
that
they
stifle
local
research
efforts;
and (c)
that
they
allow
foreign
sellers
of technology
to
im1pose
restrictive
con-
ditions
in
contracts, or
to
charge
exces-
sive
prices
for the technology trans-
ferred.
The most balanced
reviewv
of
these
criticisms
is
by
Penrose, 1973,
who
argues that
mainy
of these
effects
would
exist even without the patent system,
that there may be valid economic rea-
sons
for
the
non-working
of
patents,
and that a ill)re stringent official check
could couniter
most of these abuses.
However, she enids by saying that there
is
a
strong, lbut not conclusive, presump-
tion
that LDCs gain little
or
nothing,
and may even lose, from granting pa-
tents on inventions developed, publish-
ed, and
primarilv
worked
abroad.
It
The
reasoni why
the
case against
patents is not conclusive is that they
may in some indiustries and in some
circumstances
...
promote technologi-
cal
transfer
and its implantation
in
the
local
economy .12
The circumstances in
which this is particularly true are those
requiring
a lot of technological back-
ing, beyond the mere sale of patented
knowbow, and when, consequently, the
wvilling support
of
foreign firms is
valuable.
This is not, however, true of
the
pharmaceutical industry: the pro-
duction
technology is simple, the back-
ing of foreign firms is not necessary,
and the concomitant monopolistic costs
foreign control are particularly heavy.
Thus, while abolition
of
patents may
not by itself remove the existence of
foreign monopoly in drugs in particular
LDCs today, to the extent that the in-
ternational
patent system permits or en-
hances monopoly in this industry the
system does appear to have more costs
than benefits.
(ii)
These
costs, which we can attri-
bute
to
the overall structure of the in-
dustry, and not simply to patents, are
of
two
general kinds
-
financial and
social. The
financial costS
of the mul-
tinational dominance of this
industry
are particularly important for
those
LDCs which
are extremely short of
foreign currency, since they all accrue
in foreign exchange and benefit the
foreign
investors
or their home
govern-
muents.13
They arise
from
various
fac-
tors,
the most
important b)eing
the
iise
of tr.ansfer-pricing
(which
wve have not-
ed( ab)ove,
but which,
for reasons
dis-
cussed
elsewhere, -
tends to
work
particularly
against
the
welfare
of
LDCs), the
charging
of excessive
royal-
ties
even on
technology
purchases
from
within
the same
firm, and
the imposi-
tion of export restrictions. All these
have been
discussed
in recent
literature
on multinational
corporations
and
LDCs
and
need
not
be elaborated
here.
It need only
he pointed
out
that
most
of
the evidence
on transfer-pricing
has
been based
on investigations
of the
phairmaceutical
industry,
and
that the
incidence
of export-restrictive
clauses
has
been particularly
common
here.
To
return for
a moment
to
Roche,
in-
vestigations
in
Colombia
for
the
late
sixties
showed
that this
firm
was over-
charging
its subsidiary
(as a percentage
of wvorldmarket prices) by 94 per cent
for
Atelor,
by
96 per
cent
for Trima-
toprium,15
by
over
6,000
per cent
for
Diazepam, and
by
over 5,000
per
cent
for Chlordiazepoxide.'6
(iii)
The social costs
of
the present
phairmaceutical
industry
in the
LDCs
arise from
the
peculiar
configuration
of
circumstances
in
such countries,
where
extreme
poverty,
lack
of
effective
so-
cial welfare
systems,
high
incidence
of
illness, and absence
of
modern
medical
treatment
in rural
areas are combined
with the
unreasonably
high
prices
of
medicines
charged by
the
multinational
druig companies.
We have
already
not-
ed the reasons
for
the excessive
drug
prices in
the
developed
countries.
In
poor
countries
the
welfare
cost of
such
prices
is
immeasurably
greater.
Not
only
do
expensive
pharmaceuticals
put
a
great deal
of medication out
of
the
reach
of vast sections
of the
population
and
confine
proper
treatment
to
an
elite
preserve,
they also prevent
a more
rapid
spread of
medication
to
non-
urban areas
where most
of the people
live and where
illness is
rife.
These are the
special problems
which
the modern
drug
industry creates
for
LDCs
-
quite
apart
from
the ones
which were described
in
Part I.
While
the
general
structure of the
industry
is
similar
in
the
developed
and
the
less-developed
areas,
there
is one
major
difference:
The
developed
countries
produce
the technology
and will
con-
tinue to
do so, the
less-developed
ones
import
it and
may expect
to do
so in
the
future. Since
the operation
of
multinationals
ensures
that
the latter
also pay in
full for the
proliferation
of products
and for
famous internation-
al brand-names, the problem of policy
in the two
areas is quite
different.
Both
are concerned
with
minimising
the cost
of
medicines,
but for the
developed countries the pro)lem is to
iiiaiiitain
or
imiiprove
research while
cutting
out
its
present
wvasteful ele-
ments, whereas
for the LDCs the
problem is to obtain the results of
r
esearch done abroad as cheaply
as
possible.
We
shall
return to this
when
we, discuss policy options for
the
LDCs; let us first consider the posi-
tion of the industry in India.
PHARMACEUTICAL
INDUSr1BY
IN
INDIA
In 1970-71, the total production of
pharmaceuticals
in
India was approxi-
mately Rs 250 crores, ($
333
million
at
the cuirrent exchange rate
of Rs
7.5
=
$
1); of
this
80-90 per
cent
was
ac-
counted
for by some
100
large units,
and
about
70
per cent by the 30
largest firms.17 Approximately 2,300
smaller units supplied the remainder
of
the market. The total consumption
of pharmaceuticals
in
India
in
1966-67,
when comparable figures are available
for
other countries, was about $ 250-300
million,
while
it was $ 4,667,000 million
in the US, $ 640,000 million in Italy,
and
$ 71,200 million
in
Belgilun (the
smnallest constumer
in
the OECD). 8
There are
several
plants
in the
public
sector
in
India which produce both
hasic chemicals for use by the pharma-
ceutical
industry as well as some finish-
ed
pharmacistical
products. However,
the bulk of pharmaceutical production
still lies in the private sector, and
here foreign firms are in a dominant
position.
Of the
top
15
firms ranked
lby sales
in
1966, only 4 were wholly
Indian-owned;19
of
the
39
'medium
and
large' public limited pharmaceuti-
cal
companies (which include nearly
all
firms
of
moderate
size),
33 were
foreign
controlled
in
1968-70.20
The
33
foreign-controlled drug firms
accounted,
in
1969-70, for
93
per cent
of
the
value of
sales of the 39 medium
and
large drug companies, for 96 per
cent of their
net fixed
assets, and for
109
per
cent of
their profits-before-tax.
If these
39
large companies are
as-
suined to have provided 70-80 per
cent
of
total
pharmaceutical
demand
in
the
country,
the 33
foreign coutroll-
ed
firms supplied about
65-75
per cent
of
the
total
market.21
These
33
firms
-
exactly
10
per cent,
in
numbers, of the
330
total 'foreign
controlled
rupee companies' surveyed
by
the Reserve Bank
for 1969-70
-
accounted
for
9
per
cent
of
the
value
of net
sa]es
of the total sample, for 8
per cent of net worth and for 6 per
2ent of net fixed capital employed. An
earlier survey
of India's international
investment position
(IRBI Buslletin,
1971),
as at end of March 1968, shows that
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total
foreign
direct, investment
in
bran-
ches
and
foreign-controlled
firms
in
the
pharmaceutical sector
(Rs 38
crores)
canme to
11
per
cent
of total
such
foreign
manufacturiing investment
in
the
country.
Of
total
foreign
eq(uity
invest-
ment
in
pharmiiaceuticals,
87
per cenit
was
in
braniches
and
subsidiaries
(i
e,
50
per
cent
or
over
foreign share-
holdings),
12
per cent
in
foreign-con-
trolled minority companies, and only
1
per
cent
in
non-foreign
controll-
ed
companies.
The
high
proportion
of
foreign
co2itrol
in this
industry con-
trasts
with
manuifacturing
indtustry
generally,
where
12
per
cent of
total
foreign
e(Iqiity
capital
wvas invested
in
non-foreign
controlled
enterprises.
Though
the 33
f'oreigin
contiolled
pharmaceuitical firm
s
accouInted
for
less
than 10 per
cent
of
sales
ancd
net
worth of
the 330
foreign
controlled
firms
in
1969-70,
they
accotunted
for
nearly
18
per
cent
of
their
total
profits-
before-tax. The per-ceintages of profits-
before-tax
on
total
capital
emiiployed
came
to
15
per
ceint
for the
330
firms
and 30
per
cent
for
the
33
drug
firms;
while
those
of
profits-after-tax
on net
worth
came
to
14
per
cent
and 22
per
cent,
respectively.
These
ratios
w,vere,by
way
of
contrast,
8
per
cent and
7 per
cent,
respectively,
for
1,926
Indiani
pub-
lic
limited
companies in
the
same
pe-
riod.
Fturtherimiore,
the
39
medium
and
large
drug
firms
recordecr
profits-before-
tax
on
capital
employed
of over
20
per
cent in
every
single year
from
1965 to
1971,
when the
average
for
the
total
of
1,501 mediuim
and
large
firms
was
always
10
per
cent
or
less.
Thec
drug
industry
was
consistently
the
most
pro-
fitable
of
all 23
sectors
(including
non-
manufacturing)
covered
for
the
six-year
period, with
one
exception
in
1970-71
when
mineral
oils
achieved
somewhat
higher
profits.
The
foreign
companies
in
the
pharmaceutical
industry
were
al-
ways
more
profitable
than
the
local
ones;
in
fact, the
latter
six
firms
re-
corded
net
losses
in
1968 to
1970
when
the
former
were
earning
extremely
high
profits.
Thus,
the
foreign
drug
com-
panies in India have been
nIot
only
the
most
profitable
among
manufactur-
ing firms
in
the
country
generally
but
also
among
all
types
of
foreign
con-
btolled
enterprises,
including
those in
non-nmanufacturing
sectors.
Of
the
foreign
firnms
in
the
pharma-
ceutical
sector,
Roche
is
one
of
the
most
profital)le.
In
1968,
for
instance,
when;
the
33
foreign
controlled
drug
firms
earned
profits-before-tax
of
24
per cent
on
capital
employed,
Roche
recorded
pre-tax
profits
of over
60
per
cent
on net
capital
employed
and
about
65 per cent (Lfter tax on net worth.u
Similarly,
the
firm's
ratio
of
profits-
before-tax
(net of depreciation)
to sales
was
37
per cent
in 1968, as
compared
to
18
per cent
for the
33
foreign
com-
panies,
and
to
only
8
per
cent
for
the
total 1,501
medium and
large public
limited
companies.
The existenice
of transfer
pricing,
of
course, reduces
the
reliability
of
de-
clarede profits
as
indicators
of true
pro-
fitabilitv. India
is less
vulnerable
to
this particular practice than most other
countries
-
if
only
because the
gov-
ernment's
strentuous
efforts at
import-
sul)stitution
have
forced down
imports
to
a
relatively
low
level. The fall
in
imports
as
a
percentage
of
prodtuction
from 25 per
cent
in 1960-61 to
10
per
cent in
1963-64 for
foreign
subsi-
ciaries,
and its further reduction
to
about
8
per
cent
for
the
induistry
as
a
wbhole
by 1972,23
shows
that
the indus-
try
has
managed
to
achieve
a fair
deg-
ree of self-sufficiency.
With
the
planned
increase
in
production
of
chemicals
by
public sector plants, the extent of im-
port
dependence
will
probably
continue
to
fall
in the
next few
years.
This is not
to
argue,
however,
that
transfer pricing
is not
used
by foreign
firms,
nor
that
it
does not
make
a sub-
stantial
difference to the profitability
of
the firms concerned.
There is
a
shor-
tage
of 'hard' data
on
the
use
of
trans-
fer
pricing by
multinational
firms in
India,
thouigh plenty
of
impressionistic
and indirect
evidence
exists that
it is
widely
ulsed.24 Certainly,
there
are
many incducements
to
use
it
-
high
tax rates, price controls, political pres-
stures, and
so on
-
and no effective
deterrents,
suich as
the direct
checks
exercis2ed
by the
Colombian
govern-
miient,
eist. In
Roche's case,
for in-
stance,
im)orted(l
chemicals came to
19
per
cent
of the
value
of
production
in
1968;
if
90 per
cent of the value
of
imports
were
simply the transfer
of
profits
(a conservative
estimate,
on evi-
dence from the
UK and
Colombia),
the
real
profits-after-tax
of the firm
would
be
almost exactly double the declared
profits.
The figuires are
pure conjecture,
of
couirse, but there
is little reason
to
doubt
the
r
eal
dangers inherent
in the
system.
India is
a
high
drug-price
country;
even
the
Kefauver Committee
in the
US
remarked
on the level
of pharmaceuti-
cal
prices
in
India and
on its perverse
r-elationship
to
levels of
per capita
in-
come.25
The preceding
discussion
has
explained
why pharmaceuticals
are high
priced
in general, and
also why the
level of prices fixed
by the
leading
firms has
little to do with the
actual
costs of
producetion.
With the obvious
eAxceptionl
of
heavy
R and D
expendi-
ulres, all the other ulsual costs of pro-
ducing and marketing
pharmaceuticals
are
present
in
India:
there
are
heavy
promotion
expenditures
(thotugh
the
ex-
act
'cost
breakdown
is
not
available);
there
are
high
profits
and
a
prolifera-
tion
of b)randed
products;
and
there
are
vast
differences
between
brand
name
products
and generic
name
products.
Roche's
Librium
was
sold
in
1972
for
Rs
16
(per
100 tablets
of 10
mg
each)
when
generic
name equivalents
were
available from small units for prices as
low
as
Rs
1.52.26
Similarly,
public
sec-
tor
units
were
supplying
Phenobarbitone
at
1
paisa
per
tablet
and Diethy
Car-
bamazine
Citrate
at
3
paise
per
tablet
-
when brand
name foreign
equiva-
lents
were
being
sold
at
3
paise
and
8
paise,
respectively.27
Many
such
cases
have been
recorded
for
a
wide
range
of products,
with
the price
differentials
being
very large
indeed;
but
this
is
hardly
surprising,
in
viewv
of
compara-
ble
differences
observed
in
developed
countries.
The position of foreign brand name
products
is,
if
anything,
stronger
in
a
country
such
as India
than
in
develop-
ed countries.
Not
only
is there
a
long-
standing
prejudice
against
local
pro-
ducts
in
every
industry,
medical
prac-
titioners
and
consumers
have
a rigid
faith
in the quality
of
the high-priced
drugs
from foreign
companies .28
Two
special
factors
in
the
Indian
situation
must,
however,
be
noted
in this
dis-
cussion.
First,
the cost
of
internediate
chemicals
supplied
by
public
sector
plants
is
high,
relative
to intemational
prices; foreign firms
often
blame
high
retail
drug
prices
on the
high
cost
of
their
raw
rmaterials.
Second,
quality
control
by
the
authorities
is
neither
comprehensive
nor
very
efficient,
and
a
number of
cases
of
drug
adulteration
ly
small
producers
has been
recorded.
These
points
may
seem
to
support
the caseo
for
promoting
foreign
drug
firms
and
reducing
public
sector
pro-
duction.
The
first,
however,
is
not
very
convincing,
becauise
the
retail
prices
charged
by
these
firms
is
very
much
higher
than
is justified
with
reference
to raw
material
prices.
Generic
equiva-
lents
are
marketed
much
more cheaply
by
smaller
firms
which
use
the
same
chemicals
as
raw
materials.
Even
in
cases
where
the
public
sector
prices
are
over
three times
the
import
costs
-
as
with Phenobarbitone,
or
Vitamin
B
-
the
prices
of
competing
foreign
brand
name
equivalents
are
much
higher
(about
50
per
cent
and
300
per
cent,
respectively).
The
cost
of
raw
materials
is always
such
a small
pro-
portion
of
the selling
prices
in
this
in-
dustry
that
it
is in
any
case difficullt
to
accept
this
argument
at its
face
value. Of course, the public sector
should
be
made
more
efficient,
but
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even
an tnefficient
one
provides
chea-
per drugs
thant
the
multinatiotnals.29
The
second
point
is
more
serious.
The
einforcement
of
quality
control
varies
greatly
from
state
to
state
with
Bihar
and
Madhya
Pradesh
lack-
ing
drug
control
staff
altogether.30
The
dangers
of drug
adulteration
are
very
great,
and,
given
the
enormnous
profit
margins,
the
inducement
for
small
pro-
ducers to indlulge ian it are also very
great.
To
the extent
that
the
foreign
firms
eniforce
rigid
quality
control,
cer-
tainly
a
strong
plea
can
be
entered
in
their
favour;
the situation,
however,
is
not
one
w
hich
calls
for
extending
the
scope
of foreign
manuifacturers
o
mtuch
as for
enforcing
better
quality
control,
or,
as
argued
below,
for
extending
pub-
lic
sector
production.
After all,
there
ore
goocl
generic
c(1uiivalents
available
from
smiiall
pro(licers
and fromi
puublic
sector
firms,
and
at mulch
lower
prices
than
foreign
branded
products;
the
obvious solution
is
to
proanote
lowv-
priced
products,
with
adequate
(quality
safeguards.
The
Indian
government's
policy
to-
wards
the
pharm-lacetutical
n(lustry
has
been
a
comibination
of extreme
stritig-
etncy
in
somiie
respects
with
gross
leniencV
in
others.
Let uis briefly
con-
sider
the
salient
aspects
of its
policy.
(i)
Pr-ices:
In
1970,
the
govern-
ni nt
issued
a
Drug
Price
Control
Order,
Ibased
on recommilendations
of
a
Tariff
Commission
study,
to
determine
the
prices
of
18
basic dcrugs
and
their
69 formulations.3'
A
formula,
giving
a
15
per
cent pre-tax return on net
capital
employed
for
manufatcturers,
and
aniother
15
per
cent
for
formulators,
xvas
used.
The
implementation
of
the
Order
eventuially
led
to
a
reduction
in
the
prices of
the
controlled
drugs,
thouigh
we
(1o
not
possess
iniformation
on
the
exact
maganittude
of
savings
achieved.
These
18
druigs
accotunted,
however,
for
only
9
per
cent
of the
total
value of
drrugs
marketed
in
India;
the
Order
had
the
perverse
effect
of
in-
ducing
an
increase
in
the
orerCall
drug
price
inclex,
of
12
points
in
1970-71
the highest annual increase recorrled
since
1960.32
The pace
of
increase
in
drtug
prices
quickenede,
in
fact,
after
1966,
when
the
Tariff
Commission
in-
vestigation-
of
prices
was
instituted.
Whatever
the
merits
or
faults
of
the
Order
within
its
context
of
18
drugs,
therefore,
it certainly
did
not
provide
a
means
of
checking
overall
pharma-
ceuitical
prices
in
the
cotuntry.
(ii)
Patent.s:
We
have
already
noted
the
Indian government's
early
objec-
tions
to
the
effects
of the
patent
sys-
teml.
After
a
great
dleal
of
prolonged
dlebate, a Patents Bill wvas passed
in
197{0,
reducing
the
period
of
patent
proteclion
from
16 to
7
years,
ruling
out
product
patents
and providing
for
com-
pulsory
licensing
after
3
years
for
a
royalty
not exceeding 5
per
cent
of the
value
of production.33
These
measures
put India
among
the
countries
with
the
strictest
of
patenting
provisions,
though
clearly
not
in the
class
of
Italy
which
allows
no drug
patents
at
all.
(iii)
Public
Sector
Production:
While the government is, in line with
its
general
industrial policy,
continuing
to
expand public
sector
production
of
rlrugs and
related
chemnicals
(in various
plants
of
Hinddustan
Antibiotics
and
Indian
Drugs
a-ad
Pharmaceuticals),
far
more cotuld
have
been
achieved
by
now
had
the
private
sector
not
interfered
in
the early
stages
of
the
negotiations
wN7ith the
Soviet bloc
for technical
assis-
tance.
Kidron cites
this
as
one
of
the
in-
stainces
of
political
pressture
wvielded
by
the foreigni
investors
in
collaboration
xwith
their
Indian
couLnterparts.
In
this
case, a Ruissian offer
was
rejected
in
fa-
vour
of
more expensive
private
deals.34
The
main
present
'problem'
is one
of
high-
costs
of
production;
it is
hardly
relevant
to
our present
cliscussion
to
go
into
its
solutions,
thotugh
th-re
seems
to
be
no
special
reason
why,
in
this
indutistry,
it
shotuld
rnot
be
resolved
with
tiie
-
since
economies
of
scale
or
production
technology
are not
parti-
cularly important
or
sophisticated.
To
repeat
an earlier
point,
eceni an ineffi-
cienit
public sector
nmarkets drugs
at
loe
or
prices
th(an an
efficienit
private
for
eigni
sector.
(iv)
Transfer
Prices:
The
govern-
ment
has not formtulated
an
effective
policy
to
deal
with
this
aspect
of the
drtug
companies'
operations,
despite
many
indications
that
foreign
firms
in
this and
other
sectors
use arbitrary
pricing
to
remit profits
abroad.
The
growving
canalisationi of imiports
through
the
State
Tradinig
Corporation
may
have alleviated
the risks,
along
with
the
reduction
in
the
degree
of
import
dependence,
but a
substantial
amount
of
foreign
exchange
is
still spent
on
imports
bought directly
by
the private
companies. Given the inhereint arbitrari-
ness
in
pricing
in
the
international
pharmaceutical
indlustry,
the neglect
(even
in
calculating costs
for
the
18
price
controlled
drtugs)
is u-nforttunate.
(c)
Marketinig:
As
xv
th most
other
cotuntries,
the
marketing
of drugs
is left
entirely
to
the devices
of the
private
mantufactturers,
and
so it
involves
all the
wsNastages
lready
noted.
This aspect
of
the
indtustry
is so
fundainental
to its
present
structurle
and
fulnctioning,
that
it is
dlifficullt
tol
envisage
reforms
wvhich
leave
it out
of consideration.
Yet
the
government has showvn little awvareness
of the issues
involved
even in
its
bra-
vest
attempts
to
cut
pharmaceuticai
prices.
Not
only
has
it not
considered
the
setting
ulp
of a nationalised
drug
marketing
system,
it has
even
failed
to
implement
measures
to sell drugs
by
generic
rather
than brand
names
(which
other
cotuntries,
like Pakistan,
have
done).
In
all the-se
respects
-
as also
in
quiality
control
and
removal
of
export
restrictive clauses
$
- there are gaps
aind
defects
in official
policy.
However,
piecemieCal
meastures
to
remedy
one
as-
pect
or another
of the
drug
industry
will nlot
result
in
the elimination
of
social
wvaste
and
the lowering
of drug
prices.
Only
a comprehensive
approach
can
resolve the
basic anomalies
in
the
induistry.
Let
us
now
consider
the poli-
cies
open
to
the less (leveloped
coun-
tries,
and
especially
to
the Indian
gov-
ernment,
to
achieve
a
practical
solution.
POLICY
OPTrINS
Fo
R LDCs
Let
tis r-state
the
fundamental
problem:
the
LDCs want the
benefit
of
haviang
the
best drugs available
to
modern
me(licine;
they
want
to
import
or
produce
themii
at
the
lowest
possible
cost, using
the results
of
research
which is generally
condlucted
in
deve-
loped
countries;36
they
want
to
bring
them to
consumers
with
the
lowest
possible
expeniditure
on
marketing,
and,
at
the
same
time,
provide
adequate
and
honest
in ormation
on new
prepa-
rations
and
their
prices
to
prescribing
(loctors;
andl
they
-want to
eliminate
monopolistic
elements
in
pricing
of
brand
name
produicts
and every possi-
bility of drug
adutilteration.
Hlow is
all this
hest
achieved?
One
solution
-
perhaps
the best
from
a
global
point
of
view
-
vould
be
a
thorough
reform
of
the pharmaceutical
in(lustry
in
the
developed
capitalist
coutntries,
alonig
the
lines mentioned
at
the end of
Part
I.
If
the
undertaking
of
pharmaceutical
research,
production
and marketing
were socialised,
and
the
prodcucts
(finished
or
intermediate),
made
available
to
the
LDCs at
prices
ap-
proximating
the
real
costs
of produc-
tion, most of the undesirable elements
in the
present
international
structure
of
the
industry
would disappear.
The
LDCs
would
still
be faced
with
the
problems
of
internally
processing
and
marketing
the
drugs,
but
any
sensible
listribution
system
wzould
he
able
to
deliver
the goods
at
prices
far below
present
ones.
I0owever,
this
is not
a policy
which
is
open
to
the
LDCs.
Despite
the
oc-
casional
outbursts
of
protest,
the
pharmlaceultical
ind(ustry
is likely
to
continue
unrlisturb
ed
in
its
present
form in developedl countries; if the
Ll)Cs
wsant
to
lowser
their
costs,
they
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will have
to do
so on their
own,
with-
in
the
given
structure
of
the
industry
in
the
West.
The
policies wNhich a
particular
LDC
can
adopt
are
determnined, of
course,
ly
its
own
in(lustrial
capacity and
the
abilities
of
its
domestic
entrepreneurs
and administrators.
Th-ere
are
crucial
differences on
the
produiction
side
bet-
ween
those
countries
xvhich
possess
developed chemical industries and can
therefore
produce
most
pharmaceuti-
cals
entirely
on
their
own,
and
those
which
have to
import
the
finished
drugs
or the
intermediates
in
an
almost
finished
form.
On
the distribu-ition
side,
similarly,
there
are crucial
differences
between countries
wN.hich
re
capable
of
managing
an
informatioan
and market-
ing
system
on
a
nationalised basis
(with
no
help
from
the
international
drug
fli-ms)
aznd
those
which
are not.
Countries
wN7hich ave
simple
proces-
sinig
facilities l)ut
possess neither
developed
chemical
inidustries
nor
an
administration
capable
of
handling
sophisticated
information
and
marketing
systems
can
choose
betwveen
the
follow-
ing
alternative
'packages'
-
in
ascend-
ing
order of
desirability:
First, an
industry
dominated
as
at
present,
by
muiltinationals,
which
per-
forms all
the
requisite
functions but
at
very
high
cost,
and
against
whose
brand
names
and
patents
local
enter-
prises
have
little
chance to
compete.
Second,
similar
to
the
first,
but with
patenits
eliminated, in
wNhich
case
local
enterprises can
legally
copy the
multina-
tionals' products but may still find
it
impossible
to
compete
against
their
brand
names.
Third, the
next
stage,
the
stubstitu-
tion
of
generic
for
brand
names,
wvhich
may
still be
ineffective
because
the
mul-
tinationals
can,
as they
do
now
in
Pakistan,
continue
to
persuade
doctors
that
their
procllicts
are
superior,
and
so
still
create
a
monopolistic
privilege
by
inducing
constumers
to
buy
drugs
made
by
particular
companies.
Fourth, the
elimination
of
foreign
enterprise
altogether,
with
local
manu-
facturers buying intermeidiate products
from the
lowest-priced
world
sources
from
small
firms
selling
under
gene-
ric
names in
developed
countries,
or
from
producers
which
copy
nexv
tech-
nology
cheaply
(Italy).
or
from
the
So-
cialist
bloc37
-
which
may
save a
great
deal
of
the
foreign
exchange
cost
of
multinational
profits, but
may
not
prevent
the
social
wastage
inherent
in
private
marketing of
drugs.
Thuls,
a
nationally-owvned,
but
private,
dlrug
processing
indutstry
wvould
be
able
to take
advantage
of price
differenltials
and non-patent-observing producers in
world
marketos,
ut
it
wouldl
continue
o
be dependent
on imports
and it
would
not resolve the
basic
contradictions
in-
volved in the
private selling
of medi-
cines. Thus, local
firms
would
probab-
ly end up
using
tactics of
advertising
and promotion
similar
to
those
used by
large firms in the
developed countries
-
and this would occur even if
brand
names were banned, as long
as
the
manufacturer's name were identifiable
- thus raising the final price to the
consumers.
The
social
costs
would
re-
main internal,
rather
than
flowing
abroad
in
the
form
of foreign
profits,
but
the most important
aim of reforim
would still not be
achieved. Further-
more, the dangers
of
inadequate quality
control
may
be
higher
if local
firms are
less stringent
than
foreign ones,
and if
the government
is
incapable
of
imple-
menting proper
controls.
The ultimate
advantages
of
reform
may be
substan-
tial, however,
if this
particular
risk
is
averted,
and
if
the local
oligopolists
are
able to sell at prices
lower than
the
present ones.
The
options open
to
LDCs,
such as
India,
which have
sophisticated public
sector
production units,
advanced
che-
mical
industries and relatively
well-
developed
administrations
are
much
broader.
To continue
from the
fourth
'package',
therefore:
Fifth,
a more
or less
complete
self-
reliance in the
production
of
inter-
mediate chemicals, in either the public
or
private sectors, copying technology
from
abroad
whenever
necessary wvith-
out
paying royalties,
and
completely
locally owned production of pharma-
ceuticals
(again
without
eliminating
private marketing costs), with strict
quality
control
measuiresby the govern-
ment.
Sixth, continued reliance on private
pharmaceutical
production but with a
national
purchasing service which deter-
mines individual
drug prices on a fair
basis,
markets
drugs purely by generic
names, and
provides doctors with the
requiisite
inforrnation on
druig
uses and
innovations.
Seventh,
a
complete socialisation of
drug production as well as marketing,
thus minimising
the extent of private
profit and, if
so
desired,
ruinning
the
induistry
as
a
non-profit making public
uitility.
It is
obvious that this seventh
package can, if it is practicable, provide
medicines
at
the lowest possible cost
1)oth to
the
couintry
and to the consu-
mer.
That it is in principle practicable,
is
illustrated by the Egyptian example
(and by the
nmore
imited one of
India); international patents can
be
dlisallowNed,
as
inl
Italy;
an)d
socialised
dlistrib)utionanl
be
inltroduced,
as in the
.Socialist countries. Whether the actual
co)sts ~vill
reach
the
o)ptimullm
evel
envisaged
or not will
depend
on
whe-
ther public
sector
units
can be
run
efficiently,
whether
quality
control
can
be
enforced,
whether a
govermment
distribution
and
information
system
operates
smoothly,
and,
of
course,
whether
the political
situation
of
the
country
will
compell
such
a
radical
change.
In the
particular
case
of
India,
while
there is bound to be considerable
political
opposition
to
a
complete
public take-over
of
the
pharmaceutical
industry,
matters
have
changed
greatly
from
the
fifties,
when
the
private
sector could
actually
hinder
determin-
ed
moves
in
this direction.
The
pro-
blem of
quality
control
is,
if
anything,
worse
under
the
present
system
of
thousands of
small
producers
than
it
would
be
with a
few
large
public
sector
units; the
elimination of the
small
units
would
by itself
rule out
many
of
the
present abuses.
The
pro-
vision of regular and up-to-date infor-
mation on
drugs to
doctors
should
not
prove
very
difficult,
especially
if
the
government
uses
the
results
of
clinical
te.sts
and
official
checks
done
in the
developed
countries.
Since
the techno-
logy of
drug
production is
basically
not very
complex,
the
copying
of
foreign
products
should be
fairly
straightforward.In
the few
cases
where
there are
lags
or
difficulties,
the
drugs
could
always
be
imported
from
cheap
sources
abroad. The
only
remaining
question
concerns
efficiency.
However,
as long as one accepts that there is no
intinswic
reason
why
public
sector units
shouild
be
less
productive
than
private
ones,
experitnce
and
effort should
re-
solve
it with
time.
We
conclude,
therefore, that
in
the
long-run, the
best
way
to deal
with
the
various
complex
problems of
the
present
int.-ernational
pharmaceutical
industry,
as
it
operates
in
the
LDCs,
is
to
move towards
a
socially-owned
indigenous
pharmaceutical
industry;
which
copies
foreign
technology,
bans
brand
names,
and
markets
the
products
through official agencies. Given the
social
importance
of this
industry, and
the
human
costs
involved in
the
pre-
sent
high-price
structure,
it is
vital
that
the
reform
be
undertaken as
a
matter
of urgency.
Prevarication
can
only
serve
to
worsen
the
dependence
on
mnultinational irms
and
increase the
social costs
of such
operation.
Notes
1
See,
Wortzel,
1971, for
a
brief
des-
cription of
the
pharmaceutical
in-
dustry
in
LDCs.
2 The market shares of multinational
pharmaceutical
firms
in
the
late
sixties
were
as
follows
in
some
1994
7/23/2019 4364206
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selected
LDCs;
Brazil,
78
per
cent,
Argentina, 65
per
cent,
Peru, 95
per
cent,
Venezuela, 90
per
cent,
the
Philippines
and
Central
Ame-
rica, over
80
per
cent.
See
Wort-
zel, 1971,
and
Vaitsos,
1973.
See
below
for
details
on
India.
3 On
the
effects of
patents
in
LDCs
see
Penrose,
1973,
Vaitsos,
1973,
and
UN, 1964.
4
UN,
1964,
pp
94-5.
5
Vaitsos,
1973.
6 Vaitsos, 1973, p 75. The foreign
ownership
of
pharmiaceutical
pa-
tents wvas 98.4
per
cent
as com-
pared
to
94.5
per
cent
for
all
in-
du.stry.
7
Cooper,
1967,
p
40.
8
This
is
probably
even
more
true
of
the
phannaceutical
industry,
in
which
all
the
LDCs
together ac-
count
only for
about 16
per cent
of
total
non-Soviet
Bloc
pharmaceu-
tical
consumption.
See
Wortzel,
1971, p
40.
9
Vaitsos,
1973.
See
also the
views
of
the
Indian
Government
as
ex-
pressed
to
the
UN,
in
UN,
1964,
p 57.
10 Vaitsos, 1973, estimates that 98-99
per
cent of
patents
taken out
by
foreigners
in
Colombia
and
Peru
were
unexploited
in
1970,
the
bulk
of
them in
the
pharmaceuti-
cal
industry.
The
Indian
Govern-
ment,
quoted in
UN,
1964,
levels
the same
charge,
though
the
exact
propartion of
unexploited
patents
is
not
mentioned.
11
Penrose, loc
cit,
p 783.
12
Ibid,
p 784.
13
Here
we
are
considering
costs
above
the 'normal'
ones
of exces-
sive
profits,
which
also
results
in
foreign
exchange
drains,
and
high
marketing
expenses,
which
are
generally in local currency unless
the
advertising
firms
are
also
foreign oxvned.
14
See
Lall, 1973.
15
These
two
figures
are
derived
from
details
of
public
prosecutions of
pharmaceutical
firms
published
by
a
Bogota
newspaper
(El
Tiempo,
1971); the
annual
savings
achieved
by
reducing
the
prices
of
these
two
chemicals
came
to
US $
384.6
thousand.
16
The last
two
are
from
Vaitsos,
1973, Table
7; where
Diazepam
is
mentione(l
as
'substance
of
Va-
lium'.
These
two
figures
are
the
highest
recorded
for
overpricing in
this table, but are not very startl-
ing
wNhen
compared
with
the
4,000
per
cent
and
4,500
per
cent
over-
pricing
respectively
found
by the
British
Monopolies
Commission's
in-
vestigation
of
Roche
(p
38).
17
Agarwal, et
al,
1962,
and
Ministry
of
Foreign
Trade,
1972.
A
dif-
ferent
estimate
for
1966
puts
the
share of
the
largest
25
firms
at
74
per
cent
of
the
total
market,
anrd
claims
that
this has
not
chang-
ed
much
till
now.
(Mote
and
Pathak,
1972).
18
OECD,
1969,
Tab)le
2.
19
Mote
and
Pathak,
1972.
20
RBI
Bulletines,
1972
and
1973.
The
definition
of
'foreign
conltrolled'
us-
ed by the Reserve Bank
of India
includles
firms
wvith
40
per
cent
or
more
foreign equity
and other
firms which are foreign
managed
and have 25
per cent of their
equity
held abroad. As
these firms
cover only public
limited com-
panies,
wholly owned branches
of
foreign
firms are not included;
these account
for 12 per cent of
total foreign
direct investment in
the pharmaceutical industry
(RB1
Bulletin, 1971).
21 This
range may be slightly higher
if branches of foreign firms are in-
cluded, bringing it to 70-80 per
cent.
22
From
Roche's annual accounts.
The
firm has now been
in operation in
India
for over
25
years
with a
foreign
shareholding of
89
per
cent
in
1968.
23 See RBI, 1968, and Ministry
of
Foreign
Trade, 1972. This
may be
compared
with
an, average
of 31
per
cent
for a
sample of
20
phar-
maceutical firms
in Colombia. (Lall
and
Mayhew, 1973).
24 See,
for instance, Kidron,
1965,
Agarwal,
et al, 1972, and
Govern-
ment
of India, 1971.
25 See Kidron, 1965, p 251.
26
Agarwal, loc cit,
Table
3. Roche's
price
was
slightly
lower
than
the
equivalent
in
the
UK (about
Rs
18),
but
is
much
higher
than
the
price recommended
by the Mono-
polies
Commission,
and now en-
forced
by
the
British
government.
27
Ibid,
Table
1.
Both these
products
were introduoed
over
25
years
ago,
so
they
are
in
no way
an
embo-
diment
of
heavy
recent research
expenditures.
28
Ibid, p 2,290.
Doctors
also men-
tion
that high priced
treatment
is
considered more effective,
and
is
sometimes treated as a status sym-
bol by
rich
patients.
29 This has
also
been noted for Egypt
in an unpublished
study by Han-
doutssa,
mentioned
in
a footnote
on
p 777
of
Penrose, 1973.
:30 Agarwal, et al,
1972.
31 For
details,
see Mote and
Pathak,
1972.
32
Agarwval,
1972.
33 Sea
Gupta,
1970.
34
Kidron, 1965, pp
163-5.
35
RBI,
1968, notes
the
heavy
inci-
de:ce
of
restrictive
clauses
in
tech-
nical
agreements
of
foreiga
subsi-
diaries
in
this
industry, p
38.
Des-
pite
official
efforts,
restrictive
clauses are still present in many
agreements.
36
While
the
following
discussion
does
not
go
into
the role
of local
R and
D
in
LDCs, clearly indigenous
re-
search is not excluded;
there
is
no
reason why local efforts should
not
complement
research
done abroad,
th
;ugh
it is unrealistic to envisage
comnplete self-sufficiency
in
this
field. For
reasons explained above,
there
should be
no
detrimental
effect
on
the amounit
of
R
and
D
done
in
developed coutirics
if less-
developed ones
do not buy patents
from the innovating
firms; this is
as.sumed
throughout.
37 Total dependence on the Socialist
bloc may, of course,
lead to mono-
polistic
pricing
on
the part
of
the
suppliers.
The
role
of continuously
'shopping
around'
is
vital.
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November
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14.
Semi-Feudalism,
Usury
Capital,
Etcetera
Ashok
Rudra
IT
is
a
pity
that such
a
discerning
and
carefuil
observer
as Pradhan
Harishankar
Prasad shouldi make such careless sweep-
in g
statemnenits
as
he does in
his
article
on
the
role
of
usury
capital
in
Ecoionoic
and Political
Weekly,
Special
Numher,
1974.
By
Prasad's
owvn
state-
ment his
observations
are
based
on
his
intimate
contact
with
some
of the
rurial
areas
of
Bihar , and
by his
ownv
judgment his
data-base
is too
small
for
any
generalisation
for
the
countrv
as
a
whole .
This,
however,
does
uot
d-ter him
from
mnaking the
statement
that the
aforesaid
semi-feudal
model
(but
for
variations in
details)
is,
by and
large, valid for most parts of the rural
India . The
few
correlation
co-efficients
he
calculates
for this
purpose
are
thoroughly
inacle(utiate
to
support
such
a
strong
proposition.
If
Prasad
has
got
intimate
knowvledge
of
some
parts
of
Bihar,
the
present
writer
has
also
acquired,
during
the
last five years
or
so,
some
direct
first
hand
knoxvledlge of
conditions
prevailing
in
WN'est
Bengal
agriculture.
In
particuilar,
during
the
last
onie
year
he
has
been
carrying
out
aIn
enquiry
in
the
different
(listricts
of
WXest
Ben(gal in
to
precisely
the
type
of
(question in
which
Prasad
is
interested
anld
the
information
so
gathered
will
be
5021
r
eleased.
While
we
have
no
model
for
WNest
Bengal
agricuilture
as
a w
hole,
let
alone
for
conditions
in
most
par-ts
of
the
country ,
we
can
only
point
outt
that
many
of
the
con-
(litions
described
by
Prasacl
does
not
seem
to
hold
true
for
most
parts
of
West
Bengal.
Let
us
quote
in
exten-so
from
Prasad
such
characterisations
as
do
not
seem
to
hold
for
West
Bengal
in the
same
way
as
Prasad
finds
them
to
hold
for
Bihar.
Speaking
of
the
big
landoxvning
class
Prasad
writes:
.
it is this class which shuns rapid deve-
lopment
because
it
is
likely
to
improve
the
economic
condition of
the
semi-
prol-tariat
-who
can thereby
free
itself
fromii bondage . Speaking of consump-
tioIn
loanis
taken by
the
semi-
proletariat'
from
the
big
landowTiers,
he
wvrites
The
stipulatedl
rates
of in-
terest
on
these
loans
are
very
high.
Ofteni
as
high
as
100 per
cent
per
aninumi
Usury,
according
to
him.
creates an
indissoluble bond
between
senmi-proletariat
and
his
overlord .
N
K
Chandra,
writing
in
the
same
issuie
of
this
journial,
gives an
identical
characterisation
of
semi-feudalism ,
thouigh he
is
much
less
sweeping and
very
much
more
cauitiotus
in
assertiang
that suich semi-feuidalism prevails in
the
whole
country,
though
he
tends
to
think
so. In
his
xvords,
two
characteris-
tics
of
semi-feudalismii
are
perpetual
indel)tedness
of
the
small
tenants
and
its
preventing of
capital
investments
in
agrictulture,
for
such
investments
wouldl
increase
prodtuction
and
if
the
tenant's
share
remainiedl
conistant
the
tenanit
might
get
out
of
his
debts .
In
the
course
of
our
investigations
in
the
different
districts
of
West
Bengal
we
have
failed
to
enicounter
the
land
owvning
class
that
finds
it
more
in
its
economic an(l social-power interest to
resort to
uistury
rather
than
to
capital
investments.
In
many
parts
of
West
Bengal
we
have
encounitered
laandowners
w
ho
are
very
much
engaged in
capital
investments
in
the
form
of
irrigation.
fer-tilisers
and
high-yielding
variety
seeds,
and
wvhere
this
tenadency
is
pre-
sent, it
is
fouind
to
be
equally
shared
by
landowners
who
give
their
land
otit
on
lease
to
sharecroppers
and
those
who
cutltivate
it
themselves
with
the
help of
hired
labour.
In
the
former
case,
it
has
become
almost a
universal
practice
in
West
Bengal
for owners
and
tenants
to
share
the
costs
of
seeds
and
fertilisers
in
the
same
proportion
1996