Impact of Product Patent on FDI in Indian Pharmaceutical Industry

An Ordinance on Patents (Third) Amendment was promulgated by the Government on December 26, 2004 to make the Indian patents law WTO compliant and to fulfill India’s commitment under TRIPS to introduce product patent protection for Drugs, Food and Chemicals with effect from January 1, 2005.

billion in exports, is showing satisfactory progress in terms of infrastructure development, technology base and product use. The industry now produces bulk drugs belonging to all major therapeutic groups requiring complicated manufacturing processes and has also developed excellent ‘good manufacturing practices’ (GMP) compliant facilities for the production of different dosage forms. The strength of the industry is in developing cost-effective technologies in the shortest possible time for drug intermediates and bulk actives without compromising on quality. This is realized through the country’s strengths in organic synthesis and process engineering.
The focus under the R&D effort is to encourage development of new molecules. A provision of Rs. 150 crore has been made under the Pharmaceutical Research & Development Support Fund. A Drug Development Promotion Board under the Department of Science & Technology has also been set up for the utilisation of this fund. Feasibility of setting up a Mega Chemical Industrial Estate in the country with world class infrastructure facilities is also being studied. For the first time in many 명품레플리카 years, the international pharmaceutical industry is finding great opportunities in India. The process of consolidation, which has become a generalised phenomenon in the world pharmaceutical industry, has started taking place in India.

The pharmaceutical industry, with its rich scientific talent and research capabilities, supported by Intellectual Property Protection regime, is well set to take a great leap forward. As regards product patents for
drugs, an amendment to the Indian Patents Act has been carried out through the Patent (Amendments) Ordinance, 2004 on December 26, 2004. The Ordinance amends the Indian Patents Act, 1970 for the third time with a view to introducing product patents for drugs, food and chemicals. Apart from manufacture of drugs, the product patent regime will help the pharmaceutical industry to tap outsourcing of clinical research. By participating in the international system of IPR protection, India, with its vast pool of scientific and technical personnel, and well-established expertise in medical treatment and health care, has unlocked vast opportunities in both exports and outsourcing and has the potential to become a global hub in the area of R&D based clinical research. The Patent Ordinance also provides adequate safeguards to protect the interest of the domestic industry, and the citizen from any increase in prices of drugs.

Impact of product patent on Indian Pharma industry

With a regulatory system focused only on process patents, helped to establish the foundation of a strong and highly competitive domestic pharmaceutical industry which in the grip of a rigid price control framework transformed into a world supplier of bulk drugs and medicines at affordable prices to common man in India and the developing world. Introduction of product patents will, however, mark the end of a golden age for IPI (Indian Pharmaceutical Industry). The new regulations will reshape the landscape of IPI forcing significant changes and divide within the industry.

A look into organization of pharmaceutical producers of India (OPPI) directory shows only 300 units out of 10,000 registered companies are in the organized sector. While process patent helped to flourish IPI into a world-class generics industry, product patent regime will filter the best from the pack and would be favorable to players with built-in scientific and technical resources. The impact of the new regulations will not deter the Indian pharma majors as they are already doing roaring business in the very countries where these patent laws are strictly in force.

Export markets increasingly drive IPI: in a turnover of US$5 billion, exports constitute $3.2 billion and the industry is poised to grow to $25 billion by 2010. The share of IPI in world pharmaceutical market is 1.0% (ranks 13th) in value and 8% (ranks 4th) in volume terms. The global market for generic drugs is estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80 billion (2005) offers a huge opportunity to IPI. India today has the largest number of US Food & Drug Administration (FDA) approved drug manufacturing facilities outside the US. In addition, Drug Master Files (DMFs) filed by Indian companies with the FDA is 126 higher than Spain, Italy, China and Israel put together. DMF has to be approved by FDA for a drug to enter the US market.
Research & Development (R&D) is a key to the strength of pharmaceutical industry especially in the product patent period. The global pharmaceutical industry spent $30.4 billion (2001) on R&D. The R&D expenditure (as a percentage of turnover) by the IPI is low (1.9%) when compared global giants (1016%). With transition into the new regime many Indian companies are mobilizing their resources war chest with an increase in their R&D budget. Government of India (GOI) encouraged the R&D in pharmaceutical companies by extending 10 year tax holiday to this sector. Besides, planning commission has earmarked $34 million towards drug industry R&D promotion fund for the tenth plan.

FDI in India was low in prior Product Patent era. Why?

Bringing a new drug into the market costs a company an average of about $800 to $900 million. Some estimates show that patient recruitment and medical personnel account for nearly 70 per cent of the clinical costs that are required to bring a drug to market. The less expensive means to raise research productivity is outsourcing research to low cost havens such as India and China. The global pharmaceutical outsourcing market stands at $10 billion (2004). Pharma multinationals have maintained a low-key presence in Indian market due to absence of product patents and rigid price controls. Pharmaceutical industry did not receive significant foreign direct investment (FDI). From August 1991 to December 1998 this industry accounted for a meager 0.44% of the total FDI. Introduction of product patents will see multinationals strengthening their presence in the country. The second largest population in the world, a growing economy and rising income levels makes Indian market difficult to ignore. Global companies would be reluctant to invest in a country where there is no IPR protection. Eli Lilly (world’s 7th Largest Pharma Firm) has its clinical research focus in the country and had spent considerable amounts over the last 2-3 years. But we would be only maintaining the quantum and will not expand even though there is huge potential. Global companies face the same frustration.

So the main activity of the company in the country would be to introduce products from the parent pipeline.mIn the domestic market, the share of Indian companies has steadily increased from around 20 per cent in 1970 to 70 percent now. Ranbaxy Laboratories is the market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories. Glaxo is the only multinational to figure among the top ten pharma companies in India. In India, 97 per cent of drugs are off patent and are manufactured by a vast number of companies. The key therapeutic segments include anti-infectives, cardio vascular and central nervous system drugs. Anti-infective comprise the largest therapeutic segment in India, accounting for about 26 per cent of the market.

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