Impact patent process on indian pharma industry Essay Example

the country will increase. Additionally, stronger intellectual property protection laws could encourage multinational corporations to establish research centers or outsource production to FDA-approved facilities owned by Indian companies. With a current market share of 70% within the industry, these positive changes facilitated by the new patent system will reduce production costs while prioritizing research and development efforts. This will also cultivate a highly skilled and innovative workforce along with modern laboratories that receive government support. Ultimately, these developments will enable the Indian pharmaceutical industry to grow and effectively compete with multinational corporations in the long term.

Table of Contents:
1. Certification
2. Recognition
3. Abstract Background Problem Statement Aim of Study Introduction Impact on the Indian Pharmaceutical Industry Decision Background: An Overview of the Indian Pharmaceutical IndustryThe Indian pharmaceutical sector is ranked third globally in terms of volume and thirteenth in terms of value. It excels in technology, quality, and the range of medicines produced domestically. The industry manufactures various medications, from simple over-the-counter pills to complex cardiac compounds. However, it faces intense price competition and government-mandated price controls.

The sector consists of 250 large units and approximately 8,000 small-scale units that manufacture a variety of pharmaceutical products including ready-to-use medications for consumption and about 350 bulk drugs. These local manufacturers meet around 70% of the country's demand for bulk drugs, intermediates, capsules, tablets, injectables, and other preparations.

India has also emerged as a leader in the production of active pharmaceutical ingredients (API). One strength of this industry is its ability to quickly develop cost-effective technologies for drug intermediates and bulk drugs without compromising on quality.

Currently having the highest number outside the US, India boasts numerous US FDA approved manufacturing facilities.

Indian companies have made significant progress by filing more Drug Master Files (DMFs) with the FDA compared to companies from other countries. They have expanded their presence globally by exporting drugs to over 200 countries, including highly regulated markets such as the US, Europe, Japan, and Australia.In the fiscal year 2008-09 alone, exported drugs had a value of $8 billion. Additionally, there has been a notable increase in patent applications recently. In the last financial year, a total of 35,218 patent applications were filed. Of these applications, 6,040 were from domestic applicants and 29,178 were from foreign applicants (Economic Times, Jan.7, 2009).

This surge in patent applications showcases the growing emphasis on research and development (R&D) among Indian companies for driving new drug discoveries. To support this R&D growth and encourage new drug discoveries in India's pharmaceutical industry, the government has allocated Rs.150 crore towards a pharmaceutical research and development support fund.

Patents play an essential role in this process as they grant exclusive rights to inventors over their innovations. These rights prevent others from using or selling products or services that incorporate patented inventions. It is important to note that patents are only valid within the country that grants them and have a limited duration.

They provide inventors with both financial rewards and recognition for their contributions. To obtain a patent for an innovation, it must be new, non-obvious,and demonstrate industrial use.

After 18 months, patents become publicly available for review worldwide.There are currently about 40 million patent documents globally with an additional one million published annually.The pharmaceutical industry relies heavily on patents to protect investments in research and development and safeguard technology used by others. These patents

serve as a reward for pioneers who create marketable innovations that are technologically feasible.

In India, the initial patent system focused on procedures but has since been replaced by a merchandise patent system aligned with TRIPs (Trade-Related Aspects of Intellectual Property Rights). A comparison between India's Patent Act and TRIPs reveals several key differences.

Under India's Patent Act, only procedures were eligible for patents, while TRIPs allows both procedures and merchandise to be patented. The term of a patent under India's law was 14 years, with chemicals and drugs having shorter terms of 5-7 years. In contrast, TRIPs grants a standard term of 20 years.

India's Patent Act permits compulsory licensing to some extent, whereas TRIPs imposes limitations on compulsory licensing. Exclusions from patents in India's law include areas such as agricultural methods or medicinal surgery techniques. However, almost all fields of technology are considered patentable under TRIPs except for plant varieties and certain biotechnology and agriculture sectors.

Furthermore, India's government has limited scope to use patented products according to TRIPs regulations; however, its own Patent Act allows the government more flexibility in using patented products to prevent scarcity.The Indian Pharma industry has undergone significant changes that will shape the growth of Indian Pharma companies in the market for the next 5-10 years. This survey aims to evaluate how the shift from process patent to merchandise patent has impacted the Indian pharmaceutical industry, while also considering the advantages and limitations associated with this change. On December 26, 2004, the Government introduced a Regulation on Patents Amendment to align India's patents laws with WTO standards and fulfill its commitment under TRIPS. Starting from January 1, 2005, this amendment granted

merchandise patent protection for Drugs, Food, and Chemicals. TRIPS is an agreement administered by WTO that establishes minimum standards for intellectual property regulations. As a member of WTO, India aimed to comply with TRIPS through the implementation of the patents (amendment) act in 2005. Article 27 of the TRIPS Agreement explicitly allows patents to be granted for any type of innovation, whether it is a product or a process in all technological fields. However, specific criteria must be met including novelty, inventive step, and industrial applicability. Importantly, patent rights are not discriminatory based on factors such as place of innovation or technology field nor do they depend on whether products are imported or locally produced.TRIPS, in order to address the negative effects of monopolized merchandise patents in areas like healthcare and pharmaceuticals, implements several measures. These encompass a transition period for adjustment, compulsory licensing that permits usage of patented inventions without patent holder consent under specific circumstances, public non-commercial usage of patents by the government without permission from the owner, parallel imports allowing importation of patented products from other countries in certain situations without right holder authorization. Additionally, TRIPS provides exceptions to patent rights and patentability along with limits on information protection.

The Patents (Amendment) Act made significant changes in 2005 regarding merchandise patents. It expanded patent protection to drugs, food items,and chemicals while also establishing a standard 20-year term for patent protection. Furthermore, it allowed granting compulsory licenses specifically for exporting medicines to countries with limited manufacturing capabilities. This export was permitted if these countries had previously issued compulsory licenses or authorized importation as per regulations outlined in the Doha Declaration on TRIPS and Public

Health.A new provision has been added to the patent system, stating that discovering a new form of a known substance without enhancing its effectiveness or uncovering any new property/use will not qualify for a patent. Similarly, if a known process/machine/setup does not result in a new product or involve at least one new reactant, it is also ineligible for a patent. The purpose of these amendments is to make the Indian Pharma industry more competitive against multinational companies and encourage contract research and development as well as joint ventures with them.

Impact

Initially, when the regulatory system only focused on process patents, it helped establish a strong and highly competitive domestic pharmaceutical industry in India. This was achieved through strict price controls that allowed the industry to supply bulk drugs and medicines at affordable prices not only in India but also in developing countries. The use of process patents and reverse-engineering brought international recognition to the Indian Pharma industry due to its generics.

However, with the introduction of product patents, this successful period will come to an end as participants with scientific and technical resources are favored. Despite this change, major players in the Indian Pharma industry who are already thriving under stringent patent laws will not be discouraged. The Research & Development act serves as their "survival kit" during the era of product patents.The Government of India has granted a 10-year tax holiday to the Pharma sector and allocated $34 million towards promoting R&D within the drug industry in order to support this transition. The implementation of product patents leads to an inevitable increase in drug prices. In poor countries, factors such as exclusive marketing

rights (EMRs), product patents, and cheap imports influence the affordability of drugs. For example, Pfizer sells the antiretroviral drug Flucanazole in Thailand for US $6.2, while a local Thai manufacturer offers it at only US $0.3 - making it 207 times cheaper than Pfizer's price. South Africa, where no generic versions were available, sold the same drug for a higher price of US $21.4. Generally speaking, countries with product patents have significantly higher drug prices compared to those in India.Glaxo sells Ranitidine in India for Rs.7.20, while it is priced at Rs.65 in Pakistan and Rs.545 in the U.S.A. To protect consumers from high prices resulting from low buying power, the Government of India should regulate the prices of essential drugs, including patented ones.

However, new companies entering the research and development (R) sector face challenges due to the high costs and risks associated with R activities. Developing nations often have limited R facilities and rely on others' research findings.

Studies indicate that only a small fraction of compounds synthesized during applied research eventually make it to market, and the number of successfully developed drugs decreases significantly at each stage of development.

Initially, local pharmaceutical companies in India focused on developing new processes and technology rather than discovering new drugs. However, there has been a recent shift due to a change in government, prompting many Indian companies to allocate more resources towards increasing their research and development (R&D) efforts.

This shift can be seen through the growth of R&D expenditure among major pharmaceutical companies, with Ranbaxy being the highest investor. The table below displays the R&D expenditure in crores for each year from 1998 to 2008 along with corresponding

growth rates for each company: [Please refer to table]The text highlights the increasing importance of R&D investment in a time where product patents are crucial. The strengthening of intellectual property rights is expected to attract more FDI into the R&D sector, which can be achieved through various methods such as direct fabrication, outsourcing, in-licensing, out-licensing or joint ventures. The flow of FDI depends on factors like achievements, engineering and R&D capacity, competency and institutional support, and infrastructure. Interestingly enough, underdeveloped countries may experience varying impacts on FDI flow due to patent regulations. While some may not see significant changes in FDI flow with strong IP regulations, others have observed an increase after implementing them. Overall, the text suggests that patent regulations may not greatly impact trade benefits, investments and FDI flow; however, high development costs and quick obsolescence can hinder technology transfer. Patent holders might choose to develop or import products directly instead of transferring technology due to competition fears. If technology transfer does occur, the patent holder may demand high royalties or face competition that negatively affects R&D expenses.Large TNCs' technology transfers initially did not support India's indigenous technological capabilities. However, since the 1970s, many small and medium-sized companies have transferred drug technologies to India, fostering a competitive atmosphere in technology transfer. Accessing HFC 134 A has been challenging for India as the owning companies are unwilling to transfer it without gaining control over Indian company ownership due to patents and trade secrets protecting the technology.
From 1995 to 2008, the Indian pharmaceutical industry performed strongly with factors like improved production efficiency, increased foreign exchange earnings, and becoming a powerhouse in API production contributing to

this success. Research and development expenses significantly increased during this period, with Ranbaxy investing more in research and development compared to other pharmaceutical companies.
Additionally, India's percentage of drug master filings with the USFDA grew from 14% in 2000 to 50% in 2007. Access to medication is a major concern for the public in impoverished or developing nations such as India due to product patent regulations.
The Patent Amendment Act of 2005 will impact India's generic drug industry; however, it has not effectively protected generic manufacturers who produce and sell drugs.These manufacturers would be required to pay a "reasonable royalty" for manufacturing drugs subject to patent applications lodged through a "letter box." However, the act does not provide clear definition for "reasonable royalty," giving patentees unrestricted freedom in determining payment without fixed standards. Canada has set this rate at 2 percent to prevent confusion or complications.

To ensure easy access to medication during the era of product patents, certain factors should be considered: using TRIPS flexibilities such as compulsory licensing while ensuring low-cost production by generics and resisting pressures from multinational corporations. mechanisms should be implemented to control drug prices and encourage new innovations through research and development activities. To prevent other countries from patenting India's traditional knowledge on Ayurvedic medicine and other alternatives, it is crucial that any changes or new laws do not hinder economic progress or violate people's constitutional rights to health and life.

Therefore, the government must take appropriate measures to protect the public's interests, which is the ultimate goal of patents. In India, the pharmaceutical market is renowned for its expertise in reverse-engineering and is a leading generic market. The sector consists of around

250-300 companies, accounting for 70% of the entire Indian pharmaceutical market. Additionally, local manufacturers fulfill 75% of India's medical specialty demand.India previously had a procedure patent act that benefited domestic pharmaceutical companies and supported the growth of the generic market. These affordable generic drugs were accessible to the general population. However, this period of prosperity is ending as multinational companies (MNCs) are now entering India to sell their products, thanks to new regulations. This will also lead to increased joint ventures, outsourcing, mergers, and acquisitions.

To survive in this new era, significant investments in research and development (R&D) are necessary. Indian companies are increasing their investment in R&D with support from government funding. However, there are concerns about rising drug prices after patents expire. Given India's high poverty rate, many people cannot afford essential medical treatment due to the high cost of drugs.

Therefore, it is crucial for the government to maintain control over drug prices as neglecting this responsibility would hinder societal progress and economic advancement. To achieve this goal, regulations on branded product prices must continue to be enforced and essential medications should be included in the list of vital drugs.

The patent era will incentivize India's pharmaceutical industry to focus on R&D and foster collaborations with MNCs attracted by India's low R costs, skilled scientific workforce, and affordable production expenses.The collaboration between Indian companies and multinational corporations (MNCs) will lead to increased profits and foreign direct investment (FDI) as MNCs outsource their research centers to India. However, it is essential for the government to ensure that MNCs do not have monopolistic advantages that harm society or gain control over local companies. The success and development

of the Indian Pharma industry/market can be attributed to various factors such as low research and development (R) costs, a higher investment in R, an increase in patent filings, a greater number of FDA approved facilities, a well-educated and trained workforce, advanced technology, a generic hub, and excellent national research laboratories. Additionally, both patent regulations and government support indicate that the Indian Pharma industry will continue growing and competing with MNCs. Furthermore, mergers and acquisitions will contribute to the enhancement of R in new product development which will benefit the market. As a result, MNCs will seek research and manufacturing facilities in India that meet international standards for conducting their own research and production.