“PATENTS IN  INDIAN  PHARMA SECTOR”
PAVITAR PARKASH SINGH & SANDHIR SHARMA

PHARMACEUTICAL INDUSTRY IN INDIA 

The Indian Pharmaceutical industry is a successful high technology based industry that has witnessed consistent growth over the past three decades. From being an importer of medicines in the first few decades after independence, today we are able to meet a good part of our essential requirement through indigenous production. A net foreign exchange earner, with an annual turnover of Rs. 15000 crore, the Indian Pharmaceutical industry today ranks among the most developed in the third world, in terms of technology, quality and range of pharmaceutical manufactured. The current industry players comprises several privately owned Indian companies that have captured a substantial share in the domestic pharmaceutical market due to the factors such as favorable government policies and limited competition overseas. However, the liberalization of the Indian economy is revolutionizing Indian Industries as they begin to emerge from domestic market and gear up for international competition.

Factors such as protection of intellectual property rights are increasing in significance due to the growing recognition of the need to ensure protection of valuable investment in research and developments. Efforts are being made in India to curb problem of weak enforceability of existing intellectual property legislation, and the Indian government is moving towards establishing a patent regime that is conducive to technological advances and is in keeping with its global commitments.

Patent rights were introduced in India for the first time in 1856 and in 1970 the patent Act 1970 was passed, repealing all previous legislations. The patent act provides that any invention that satisfies the criteria of newness non obviousness and usefulness can be subject matter of a patent.

With regard to pharmaceutical in the case of substance intended for drugs or medicines or substance produced by chemical process, patents are granted only for the process of manufacture of such substance themselves. Hence, the pharmaceutical products are currently not granted patent protection under Indian Law.

The lack of protection for product patent in pharmaceutical industry had a significant impact on the Indian Pharmaceutical industry and resulted in the development of considerable expertise in the reverse engineering of drugs that are patentable as product.  As a result of this, The Indian pharmaceutical industry grew rapidly by developing cheaper version of a number of drugs patented for domestic market and eventually moved aggressively into the international market with generic drugs once the international patent expired. The term of patents in case of processes or methods of manufacture of a substance intended to be used or capable of being used as food or as a medicine or drug is for a period of seven years from the date of filling or five years from the date of sealing the patent whichever is less.

THE IMPACT OF WTO ON PHARMACEUTICAL PATENTS IN INDIA

The establishment of the world trade organization has led to a tremendous paradigm shift in world trade. The agreement on Trade Related Intellectual Property Rights was negotiated during the Uruguay round trade negotiations of the General Agreements on Trade and Tariffs and “one of the primary reason for incorporating intellectual property issues into the GATT framework was the pharmaceutical industry”. India signed the GATT on 15 April1994, thereby making it mandatory to comply with requirement of GATT, including the agreements on TRIPS.

The WTO’s TRIPS Agreement is an attempt to narrow the gaps in the way these rights are protected around the world, and to bring them under common international rules. It establishes minimum levels of protection that each government has to give to the intellectual property of fellow WTO members. In doing so, It strikes a balance between the long term benefits and possible short term cost to the society. Society benefits in the long term when intellectual property protection encourages inventions, especially when the period of protection expires and the creation and invention enter the public domain. Governments are allowed to reduce any short-term costs through various exceptions, for example to tackle public health problem. And, when there are trade disputes over intellectual property rights, the WTO’s dispute settlement system is now available.

The agreement covers five broad issues:

1.   How basic principles of the trading system and other international intellectual property agreements should be applied.

2.   How to give adequate protection to intellectual property rights.

3.   How countries should enforce those rights adequately in their own territories.

4.   How to settle disputes on intellectual property between members of the WTO.

5.   Special transitional arrangements during the period when the new system is being introduced.

India is thereby required to meet the minimum standards under the TRIPS agreement in relation to patents and the pharmaceutical industry. India’s patent regime legislation must now include provisions for availability of patents for both pharmaceutical products and process inventions.

Compulsory license provisions under the Indian Law will be required to be limited and conditional to comply with the TRIPS agreement and the government will grant such license only on the merit of each case after giving the patent holder an opportunity to be heard. In addition, there will be no discrimination between imported and domestic products in the case of process patents, and the burden of proof will rest with party that infringes.

The new legislative measures to meet India’s TRIPS obligation are currently in process of being finalized. The Patents (Second Amendment) Bill 1999, which introduce product patents for pharmaceutical industry in India’s patent law is yet to be enacted.

PATENTS AND FUTURE OF INDIAN PHARMACEUTICAL INDUSTRY

Product Patent Regime will change the character and shape of Indian pharmaceutical industry. The absence of product patent protection for pharmaceutical products led many international to limit their portfolios to patent expired products or a few selected patented products. This resulted in an erosion of their market share because local manufacturers introduced advanced medicines through reverse engineering. Foreign firms were required to pay royalties for international drugs, while Indian companies would access the newest molecules from all over the world and reformulate them for sale in the domestic market. Thus, this resulted in the systematic weakening of patent rights for pharmaceutical products in India led to exodus of several international researches based pharmaceutical firms.

The obligation imposed on India under the TRIPS Agreement is going to have a significant impact on India’s successful bulk and formulation oriented pharmaceutical industry. Indian companies will have to compete with the multinationals by focusing on drug development and thereby producing their own-patented products. Alternatively Indian companies could focus on producing patented drugs under license from foreign or concentrate on generating revenues from producing generic drugs.

Currently, conflicting views exists within the Indian drug companies with regard to India’s transition into the product patent regime. Some of the existing pharmaceutical companies believe that product patent will pave the way for innovation in India; while others hold the view that the high cost of R&D will stifle the growth of the Indian Pharmaceutical Industry. The key to survival for Indian Pharmaceutical companies would be the exponential growth of R&D expenditure. Indian companies need product patent protection to encourage research in developing inexpensive that suit the Indian disease Profile.

In addition, the advent of product patents is bound to be a boost for multinational companies that have previously been reluctant to invest in India in the absence of product patent protection, and it will increase competition in the domestic market.

MISCONCEPTIONS AND FACTS REGARDING PHARMACEUTICAL PATENTS

Some people hold the view that anti patent lobby has created some misconceptions regarding patent laws which are based on conjecture and unsupportable on facts. The two most frequently are “High prices” and “Impact on Local Industry”. Persons favoring Patent act are of the view that it is only a myth that prices of medicines will accelerate because the transition provisions of TRIP’S ensure that patents in India will only be granted for totally new discoveries, Post Ist Jan 1995. Within the transition period (1995-2004) allowed for India, not more than handful of new drugs will actually qualify for any form of exclusivity. Even after India commences granting patents, by the time patented products become significant proportion of those already available locally; it will be another 10-15 years i.e. 2015-2020.

 It is not correct to believe that Multinational Corporations (MNCs) have only one price for a product every where in the world and as such the price charged in India will be exorbitant. There are several examples to show that even when the product is unique, it is introduced in India at a price significantly lower than in western countries. Most international manufacturers will base their strategy for countries, like India, on “affordability criteria”.

They further argue that anti patent lobby has created a myth of “Damage to Local industry”, actually it is not so because it takes anywhere between 8-12 years for a new drug to be granted registration by drug authorities of any country after which marketing permission is given. This registration period comes out of the overall patent life of the medicines, which is now almost universally 20 years from the date of application. A discoverer thus enjoys at best only 8-12 years of exclusive marketing for recovering the cost of research. Once the patent life ends the other manufacturers are free to market “generic versions” of the same product. Worldwide, generic markets are growing at a rate faster than that of patented products. There will therefore always be a large generic market in India and this will continue to be dominated by Indian companies.

CONCLUSION

The use of IPR will not be an unmitigated disaster if the industry invests well in basic research, new product launches, a thrust into global generic market and licensing- in of products from companies that do not have a presence in India. There need to be a rapid development of innovative, non-infringing processes for products going off patent internationally and a leveraging low cost domestic manufacturing. In ironic sense India has already benefited from IPR regime. For, with the recent attempts by the western countries at patenting age old Indian botanicals such as neem, turmeric, jarmala and several others, Indian policy makers woken up to the advantage of patenting our bio diversity.

To conclude, the use of IPR in the Indian pharmaceutical industry must be perceived judiciously in lights of its strengths and weaknesses. The role of government must be more bold and imaginative in dealing with the industry’s problem and opportunities.

PAVITAR PARKASH SINGH & SANDHIR SHARMA
FACULTY, DEPTT. OF BUSINESS MANAGEMENT
PUNJAB COLLEGE OF TECHNICAL EDUCATION
LUDHIANA(PUNJAB) INDIA

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