The TRIPs Agreement and its effect on

Indian Pharmaceutical Industry

Ishaan Punj
Roll no.15
MBA-IB

Contents

1. Introduction

1

2. Research Objective

6

3. Need of the Study

6

4. Review of Literature

6

5. Findings
a. Genesis of patent system in India

9

b. Trips Exclusivity

10

c. Impact on drugs

13

d. Impact on research

14

e. Productivity

15

f. Import scenario

18

6. Conclusion

25

7. References

27

It is expected that competition would result in lower prices. an important part of health sector.7 million in 2009. The Competition Commission of India (CCI) was established on October 14. have a vital role to play in the process of economic development of a nation. Global pharmaceutical sector accounts to $ 643 billion in 2006 and it is expected to become $ 1300 billion in 2020. Sustained research and development is very important for this sector in order to obtain improved. quality medicine at low prices. a country should ensure fair and healthy competition to attain inclusive growth. The pharmaceutical market generated total revenue of $ 10838. Introduction Competition is central to the operation of any market or sector. Health sector is one of the most important sectors in the world and healthcare industry is the world‟s largest industry valuing $ 2.3 percent for the period spanning 2005-09. representing a compound annual growth rate of 11. Drugs and pharmaceutical sector. 2003 and it became functional from May 2009. and for matters connected therewith. 2002 was formulated for the purpose of economic development and it was enacted on January 13.8 trillion. to protect the interest of the consumers and to ensure freedom of trade carried out by other participants in the Indian market.1. Pharmaceutical sector is one of the most dynamic. to promote and sustain competition in market. For the economic development of any nation. research intensive industry and falls under the priority sector as is concerned with the welfare of individuals. The Competition Act. The establishment of the commission is to prevent anti competitive practices having adverse effect on competition. better quality products and would encourage invention and innovation − all of which maximizes social welfare. so as to enable efficient allocation of resources in the economy. This sector is influenced by sets of rules and regulations so as to promote better research and . The main idea behind any competition policy is to preserve and promote competition. 2003.

The diffusion impact of such knowledge economy will help various sectors to think of global dominance following the example of pharmaceutical industry and would provide means and drive in such achievement. It basically consists of the active pharmaceutical ingredient or the chemical molecule that is responsible for the therapeutic effect. • The smaller firms which mainly produce off-patent products or are under license to a patent holder Moreover. Firms which are into production of formulations are further classified into innovating firms and non-innovating firms.development. technology. the whole world acknowledges the supremacy of Indian pharmaceutical capabilities in chemistry. manufacturing and adhering to stringent guidelines of most advanced nations. Due to excellent regulatory and fiscal climate. This high-technology and knowledge intensive sector has a two tier structure: • The larger firms which account for majority of the investment in research and development and hold maximum number of patents. to keep in view the necessity and welfare of the consumers. This segment has grown at an annual growth rate of 20 percent in the past decade. to control public and private expenditure etc. Today. India needs . Intricate science. we have travelled a significant distance. the global pharmaceutical industry can be divided into two broad structures: • Bulk drugs: This part consists of 20 percent of the pharmaceutical sector. In addition to generating revenues and securing appropriate medicines for its citizens. the pharmaceutical industry propels the country to emerge as a knowledge economy. legal aspects and regulations involved in pharmaceuticals industry creates a great scientific and business tempo that propels the nation. The Indian pharmaceutical industry is the • Formulations: This division consists of the rest 80 percent and has grown at a rate of 15 percent annually.

It is possible that TRIPS agreement would have some impact over India‟s economy on all sectors including pharmaceutical sector. The impact of TRIPS on pharmaceutical 8 sector could be immense due to the introduction of „product patent‟ which was earlier not there in India. Thus there is a tradeoff between competition which is supposed to be welfare maximizing and the grant of intellectual property right which retards competition for a short period of time resulting in a dichotomy between the two. . Some people criticize IPRs as monopoly power that would affect the growth and expansion of the health sector. road maps and measure our success with conscious effort to emerge as an alternate power in the global health sector. which gives the inventor monopoly power for a limited time period to avoid the free rider problem. Copying of an already existing knowledge is easy. patent pooling etc. But misuse of this right is not desirable and it is not expected that patent holders would get into anti competitive ways such as ever-greening of patents. and draw key milestones.to protect what it has achieved. Patent is one of the IPRs which gives the inventor sole right to produce his property or license it to other producers.India being one of the members of the World Trade Organization (WTO) has to comply with the clauses of Trade Related Aspects of Intellectual Property Rights (TRIPS) from 2005 onwards. the monopoly power in the short run would encourage more innovation and greater enthusiasm in research and development which would be beneficial in the long run. I would like to take a close look on the impact of TRIPS agreement in the pharmaceutical sector in India with some emphasis on the anticompetitive attitude of the intellectual property holders and its negative impact on society. The question of intellectual property right comes as it is costly to produce any new knowledge or product. In this paper. It is known that competition in any sector is desirable and pharmaceutical sector is no exception. However. costless and it is basically a public good with the property of non excludability and non rivalries. Hence the concept of Intellectual Property Right (IPR).

& a large number of firms with almost similar market shares. academia and industry .2. hampering the development of various networks of research institutes. (2002).The Indian pharma industry has developed enough capabilities and patents to make ourselves self sufficient in health care needs and also improve our export ability thereby making it a strategic trade sector in the Indian economy. Research Objective To study the effect of Trips agreement on Indian pharmaceutical industry 3. The Indian pharmaceutical industry exports generic drugs to Commonwealth of Independent States countries. Africa. a low level of Research & Development intensity ratios with a high level of brand proliferation. The Indian pharma industry is characterized by low degree of concentration. Need for study Although a lot many research have been conducted on this issue with respect to the Asian pharmaceutical industry but an in-depth study in Indian context has been missing. The ease of imitation in reverse engineering further resulted in intense competition amongst the Indian firms for market share. there is a lack of structured analysis of the trade of pharma industry in particular which is emerging as a credible foreign exchange earner for the economy. REVIEW OF LITERATURE Ramani. and to the highly regulated markets of US and Europe.according to the research paper . While there is no dearth of research and trend analysis of the production and trade of pharmaceuticals from India. This research aims to fill that gap by providing an analysis of the same 4.

This study reveals that enhanced IP protection in China and the approaching introduction of product patent law in India are already having an effect on the product and market strategies of Indian firms. Therefore as a response to biotechnological change.(Wendt. (Clark. attracted by the lower cost structure – estimated to be one-eighth (in R&D) to one-fifth (in manufacturing) compared to Western firms. In case of pharmaceutical R&D. large pharmaceutical firms not only developed new competencies through discontinuous learning but also reconfigured existing system of managing and creating knowledge in new way. according to the research . and the activity was limited to applying the known knowledge. 2000). MNCs have been interested in working with Indian firms for some time. and subsequently it altered the relationship between different components of knowledge involved in pharmaceutical R&D. or to making small adjustments in the contents. The introduction of product patents means that Indian firms will have reduced revenue options for the sale of drugs domestically. the biotechnological change required new competencies in both research and process development. as evidenced by the large concentration of FDA approved manufacturing.carried out a research on the introduction of product patents in India and China and its subsequent impact.during the last three decades the large private Indian pharmaceutical firms have focused their efforts on reverse engineering the various process of R&D. in contrast to what many would predict. The 1972 Patent Act therefore changed the pattern of competition towards volume / price led competition rather than traditional pharmaceutical competition based on the development of new medical treatments. and large market size. advanced chemistry and process engineering skills. To compensate for this revenue loss. Indian firms have increased their emphasis on exporting to the more profitable regulated markets. In conclusion. 1990) showed that in order to adapt and change as a response to such challenges of technological capabilities. . (Cheri. since generic copies of newer drugs will become illegal.2004). firms must learn not only new components of knowledge but also the new linkages between the components and so requires the reconfiguration of existing system of managing and creating knowledge in new way. the prospects are extremely positive for the future of the Indian industry.

However. A number of firms(10 to12) have invested in innovative R&D and have products in advanced stages. 1996). The main motive of this legislation is to promote invention of new and useful products and to give incentive to the inventor to disclose the technology by conferring them limited monopoly right for a period of fourteen years. 1859 and 1872 according to changes in the laws made in the United Kingdom. Subsequently this act was modified in 1857. Further amendment of this act was done in 1930 and 1945. Some of them have out licensed their molecule to the multinational pharmaceutical firms thereby demonstrating the capability in innovative research. This has restricted the number and nature of firms chosen for the study. Hence.(Spender. . But all these previous Acts were replaced by the Indian Patent and Design Act. after independence. not end reverse engineering means that only a handful of pharmaceutical firms in India has started moving towards innovative activity. as the others do not yet perceive a need for innovative R&D in the immediate future. according to his research the realization that the new patent regime will restrict. but for the purposes of analysis only those firms have been selected for the study which has filed patents in USA and India for new drug delivery systems or new chemical entities. For securing priority this act was further amended in 1920 in order to have reciprocal arrangements with United Kingdom and other nations also. 1911 which brought patent administration under the management of Controller of Patents for the first time. Genesis of patent System in India and Trips Arrangement Product Patent and Process Patent and its History: The first legislation relating to patents in India was the Act VI of 1856. there was a strong need to review the patent law to suit the new political and economic environment of the country.

1972. headed by N. These sectors were only covered by process patent (Section 5). The main features of this act were: • There were no product patent system for pharmaceuticals. Non working of patent might lead to withdrawal of monopoly power of patent. • The patent holder was under obligation to work with the patent in the country itself. food and chemicalbased products. This was mainly done to encourage in development of new Indian industries and sustain better employment opportunities in India. These committees found that more than 90 percent of Indian patents were held by foreigners and more than 90 percent of them were based on work done outside India. to make sure that food. further changes were made in patent law which formulated the Patent Act of 1970. patents are mainly granted to encourage inventions and to secure inventions in India so that it can result in high scale commercialization and profit in the long run. Based on the recommendation of the committee. In order to reform this act. medicine and other surgical and curative devices are available cheap to the common people. there was a system of “licensing of right” which prevailed for the sectors covering process patents (Section 87 & 88). • The term of the process patent was seven years from the date of application or five years from the date of sealing patent. • In order to ensure effective role of domestic enterprises. In 1957. the 1911 Act was amended in 1950 in relation to compulsory license. effective from April.Government of India constituted a committee under the chairmanship of Dr. • The royalty ceiling was stipulated at four percent of sale price in bulk of the patented product for “licenses of right” (Section 88(5)). whichever period was less (Section 53). Government of India appointed another committee. prevention of abuse of patent right. This committee also dealt with anti-competitiveness in the patent system. The Patent Act of 1970 was of real importance. • There were no restrictions on export of pharmaceutical products or other products (Section 90(a) (iii)). Rajagopala Ayyangar. (Section 83). Under this act. Bakshi Tek Chand in 1949. . Thereby foreigners were exercising monopolistic rights over Indians at that time.

the Government had the right to use a patented invention in necessary circumstances. For a product patent. According to Section 48 of Indian Patent Act 1970. licenses or right and revocation of patents were put in so as make a healthy working of patents in India. . The mere improvement or combination of two or more things is not patentable. the patentee has exclusive right to the product or process and no third party can exercise the patentee‟s right without his/her permission. The average number of Patent applications before Paris Convention in India is around 3000 among which 1000 are from Indians. For a process patent the right consists of using that particular process in making the product or selling the process mechanism. using or selling it.The fundamental principle of India‟s patent law is that patents are granted only for those innovations which are new and useful and which would have some utility to human kind. Moreover clauses like compulsory licensing. Via this act. the rights consist of making of the product.

Impact after Implementation of trips agreement The growth Indian Pharmaceutical industry has been characterized by extensive Governmental control and absence of strong patent protection before 2005. India‟s advantage remained in formation of generic drugs and it remained competitive in the world pharmaceutical market in terms of price mainly through reverse engineering and advantage of process patents. It was the developed countries that feared their monopoly rights and profit margins might get affected from low price drugs . generic companies can refer to or use the data submitted by innovator companies when they apply for approval of their products. If a country does not grant data exclusivity rights. data exclusivity provides protection to the clinical data generated by innovator companies to prove the safety and efficacy of their products. The most difficult issue is whether government use of data submitted by innovator companies to determine bioequivalence of generic drugs is a commercial use or not. nor does it refer to any period of data protection. Innovator companies are required to submit clinical test data relating to safety and efficacy to national regulatory authorities to obtain market approval for new drugs. In the case of pharmaceuticals. the TRIPS Agreement does not refer to data exclusivity. There were almost fifty developing countries which did not exercise product patent in the pharmaceutical sector during the Uruguay round of GATT and actually resisted introduction of product patent in this sector for the fear of increase in drug prices.TRIPS Agreement and data exclusivity Another controversial TRIPS compliance issue in India is data exclusivity. Generic companies are not required to conduct their own clinical testing and submit their own test data to gain market approval. Grant of product patent became one of the necessary conditions in order to become a member of World Trade Organization. The introduction of data exclusivity depends on the interpretation of Article 39(3) of the TRIPS Agreement because data protection regimes vary considerably among WTO members. Article 39(3) of the TRIPS Agreement requires WTO members to protect confidential information (undisclosed data) against unfair commercial use. Strictly speaking.

supplied by countries like India. So introduction of product patent might enhance R & D in these concerned issues which would result in improved health scenario and in effect sustained economic growth. . more than 100 countries have agreed not to free-ride on invention efforts of others. at least for the diseases which concerns developing countries. cholera etc. But it is expected that Indian companies would work on Research and Development for innovation of newer drugs. are generally not carried out by developed countries and these diseases tend to possess serious threat to health sectors of many developing countries. TRIPS may be the result of the world resurgence of capitalism and hence cannot be a cause of strengthening the world patent system. In the TRIPS agreement. It is true that there would be huge pressure on copiers and firms which work mainly based on the process of reverse engineering and reformulation of the latest drugs. Thus these developed countries were keen in implementation of product patent for all WTO members. R & D for drugs meant for diseases like malaria. typhoid. Introduction of product patent is expected to impact Indian pharmaceutical market.

we are usually more concerned about increase in consumer surplus than producer surplus as it is assumed that consumer surplus indicates better welfare situations. the price of that particular commodity will be high. Moreover. . consumer surplus is less under compared to perfect competition and there is a net deadweight loss in the former case. This is due to the reason that monopoly price is always higher than perfect competition prices. Impact on prices of drugs It is true that under any kind of intellectual property right. Though producer surplus increases under monopoly.

. This shows that Indian companies are trying their best to catch up with the developed countries in a globalized world where intellectual property rights are highly rewarded. Secondly.5 to 4 times more than that of foreign companies based in India. except in 1999 and 2007. It is worth noting here that domestic pharmaceutical companies over time are putting in higher percentage of sale proceeds in R & D expenditure compared to foreign companies. R & D expenditure done by Indian companies is 1. The reason why foreign pharmaceutical companies are putting in less investment may be attributed to either of the two reasons. they have no incentive for development of Indian R & D and train Indian people with the high tech knowledge or are basically pretentious about their R & D activities based in India. they are not much confident regarding the returns from India in terms of rewards and profits even after implementation of TRIPS strategy in India after 2005. The growth rate is quite fluctuating and nothing can be concluded. The foreign companies also showed an absolute increase in R & D expenditure. apart from the fact that it showed a positive growth rate for 15 years. Firstly. In India. Impact on Research and Development Expenditure There has been a steady increase in R & D expenditure by domestic companies over the past 15 years.

Sato and Kamiike use the Annual Survey of Industries (ASI). TFP is defined as a residual of economic growth that cannot be measured by an increase in factor inputs such as capital and labour. Empirical analysis is based on nationaland state-level data for the period 1973 to 1997 in the case of the growth accounting approach and for the period 1984 to 1997 in the case of the production function approach. Productivity in the Indian Pharmaceutical Industry Sato and Kamiike estimate the production function and total factor productivity (TFP) of the pharmaceutical industry in India in order to understand the drug policy and the industrial development described above. The growth accounting approach measures TFP growth as a residual by subtracting the overall contribution of factor inputs from the growth rate of real value added. as the main data set. the residual of economic growth not explained by input growth can be interpreted as pure technological progress under certain conditions. By using the production function approach. In other words. not only TFP but also other structural features of production like scale economies and non-neutral technological progress can be understood. and substitutability between capital and labour. technological level. It employs the growth accounting approach and the production function approach to estimate TFP growth and clarifies the characteristics of the Indian pharmaceutical industry. The production function approach clarifies the technical relationship between output and production factors. The primary unit of enumeration in the survey is a factory in . It can examine economies of scale. which is collected by the Central Statistical Organization of India.

In addition. secondly. the average annual growth rate of TFP is reaching about 7 to 10 percent. While units in the census sector are approached for data collection on a complete enumeration basis every year. TFP fell from 1973 to 1979 and then increased slowly but steadily from the 1980s. there are economies of scale. and thirdly. sample sector units are covered on the basis of welldesigned sampling. the registered sector covers 65 percent of the total value added in the manufacturing sector in 1997. According to the National Account Statistics of India. the production function approach finds that firstly. contribute significantly to the value of the manufacturing sector‟s output. The ASI factory frame is classified into two sectors: the sample sector and the census sector. The census sector comprises relatively large plants. It means that productivity improvement has been the driving force of the sustainable growth of the Indian pharmaceutical industry since 1980. and data are based on returns provided by factories. According to Figure 5-1. The sector covered by the ASI is called the registered or organized sector.the case of manufacturing industries. The sample sector consists of small plants employing 20 to 99 workers if not using electricity and 10 to 99 workers if using electricity. . there is labour-saving technical progress. It covers all units having 100 or more workers and also some significant units that although having fewer than 100 workers.

During this period. which were easily imitated. the Drug Policy of 1986 saw the enforcement of stricter regulations for foreign companies again and the deregulation of Indian companies. In addition. At the same time. gave the Indian pharmaceutical industry the incentive to export rather than sell to the domestic market because drugs could be sold at higher prices in overseas markets than in the domestic market. Firstly. The introduction of GMP has contributed to the enhancement of trust in Indian products in the global market. economic reforms in 1991 significantly relaxed the regulations on foreign investment. competed with foreign companies. which was introduced in 1970 with the aim of supplying drugs at affordable prices to the poor. As the export markets and the domestic market expanded with a learning effect and an economies of scale effect. The Indian pharmaceutical industry. had been suppressed by strengthening regulation and the growth of Indian companies was insufficient to recover the drop. which were more efficient. the international competitiveness of the Indian pharmaceutical industry improved.Based on the estimation results. complying with the GMP standards of US and Europe has increased exports to Western countries and has . India decided to introduce GMP in the Drug Policy of 1986. and anti-patent policy. TFP itself fell in the 1970s. Secondly. (2) Indian companies raising the share of the domestic market and improving the level of technology have been increasingly export-oriented since the early 1980s when economic liberalisation started. achieved trade surplus all over the world in the late 1990s. Sato and Kamiike summarize the development history of the pharmaceutical industry as follows: (1) While Indian companies were protected and foreign companies were regulated by drug price controls. the Drug Price Control Order (DPCO). GMP was laid down in Schedule M of the Rules and came into force in 1987. Then. gradually accumulating R&D capabilities. the oil crisis probably influenced the fall in TFP. This is because the growth of foreign companies. (3) In addition. (4) Two important institutional developments can be emphasized. regulations on foreign share holdings. good manufacturing practice (GMP) increased the reliability of Indian drugs in the world market. the Indian pharmaceutical industry with international competitiveness in the field of generic drugs.

India is a well known world market player for drugs and has performed quite well. then both exports and imports have increased over the years. As such India is almost self sufficient in the production of majority of formulations and other pharmaceuticals. Growth rate of imports shows that there has been a decline after 2009-10.  Import Export Scenario One of the most important motives for development is to promote export of pharmaceuticals. India is one of the best players in the world market due to its strength in production of low priced drugs through reverse engineering. the DPCO provides incentives towards export orientation and GMP gives an institutional basis for supporting the export orientation of the Indian pharmaceutical industry. Manufacturers of drugs and . Generally speaking. This development of skills in reverse engineering perhaps might be accounted for the sustained development in educational infrastructure in India over time. For the past decade it is seen that India has a remarkably positive trade balance. If we look in terms of absolute values.expanded opportunities for contract manufacturing. exports increasing more.

Pharmaceutical sector accounted for 4.0 percent in 2008-09 and 2009-10 respectively and again dropped to 4. On the other hand share in total imports in this sector constitutes only 0. it is expected that more foreign companies will apply for patent of their products and there will be a boost in R & D investment. This share increased to 4.7 percent over the same time period.6-0.  FDI situation With the introduction of product patent in India. it is seen that R & D . It is expected that after implementation of TRIPS Agreement. R & D is an important part of the pharmaceutical sector without which the sector cannot thrive and develop.pharmaceuticals are free to produce any drugs approved by the drug control authorities. But the actual scenario is quite different. investment by multi-national corporations (MNCs) would rise in India.2 percent in 2010-11. If we compare the top ten pharmaceutical companies in the world market and their expenditure on research and development with that of MNCs operating in India in this sector.5 percent share in total exports in 2006-07 and 2007-08.7 percent and 5.

. Now it is expected that introduction of patents will help in knowledge diffusion which would help in increasing the efficiency of production of drugs and efficiency in research and development for the innovation of newer drugs. there will be a loss in balance of payment and loss of self-sufficiency. but also will have a strong bearing who is the patent holder. Moreover. then net gain and loss would not matter much.e. i. So with such low R & D expenditure it is quite difficult to attain competition and ensure development.53 percent while that for MNCs operating in India is only 3. if local production is replaced by imports. If the newly available patent rights are assigned entirely to individuals or groups outside India. The transfer of consumer surplus from the consumers to profits which accrue to the producer will basically change the distribution of income and the overall welfare of the country will not be affected much. But in a multi nation scenario. All the monopoly profits will go to foreign firms in terms of royalty payments. . then there might occur a loss in skilled employment as well.51 crores. an amount much larger than the top ten companies in the world. But in a multi country world. The sudden introduction of a twenty year intellectual property right from a free market scheme is bound to have economic impacts. the static cost consists of not only the deadweight loss accruing to the economy. Introduction of product patent might result in a number of static costs and dynamic gains. Now if the world consists of one single country. but is imported from somewhere else. But to obtain the new knowledge. Moreover. This kind of attitude for MNCs world-wide have developed due to the apathy developed among them as India did not allow product patent in this sector before 2005. Ranbaxy Ltd.94 crores while that of the latter is only Rs 60. then the consumer surplus will be a net loss without any gain in profits.15 crores. if the production of the drugs is not made in India.54 percent. This shows that much new development in this sector in India is not possible. The static cost constitutes of monopoly pricing and the dynamic gains consist of innovation. In a single country world the identity of the inventor is not of much concern. when we look for the data of R & D expenditure as a percentage of sales the average for world top ten companies is around 8. we would be keen in examining what gains are accruing to India out of the product patent rights. R & D intensity of Indian companies when compared with global major players is minuscule. is the largest Indian MNC in terms of R & D expenditure and accounts for Rs 460.expenditure on average for the former is Rs 162. As a result of this.

The patent holder in order to retain its royalty payments sometimes buys out competitors or frustrates competitors out of the market for a longer period of time. Also. Many of the multinationals have slowed down their research and development in new invention of novel drugs and try to make their way out by changing the mere composition of already existing drugs. Evergreening of patents basically give the patent holder the chance to retain monopoly over its product after the patent period has expired by bringing about small changes and then claiming a patent right for another twenty years. the patent holder fears the competition which comes from generic drugs that may result in a decline of the drug price resulting in lower profit margin. The Indian patent law has the provision which prohibits the patent of a new form of a known substance. Abuse of dominance basically concerns itself to the unilateral act of dominant firms as it might infringe competition laws. Many patent holders try to abuse the patent right in various forms. Generic drugs sometimes can reduce price even to the extent of 90 percent. Anti competitiveness and abuse of patent Rights Patent right is basically given to the discoverer to reap benefits of his invention. This particular clause considers salts. particle size. Intellectual property laws matter to location decisions too. One of the major forms of abuse of patent right is ever-greening of patents. metabolized. unless it significantly improves the medical efficacy of the drug. thus ever-greening the intellectual right. This fact is elaborately stated in Section 3(d) of the Indian Patent Act. . polymorphs. The ultimate consequence is borne by the patients who have to live on with not only poor quality of drugs. Ever-greening of patent is the most common way of anti-competitiveness in the pharmaceutical industry. esters. in order to get access to easy price competition. pure forms.one of the important factors is location. When the generic drug manufacturers intend to copy the drug at the time of the expiry of patent right. but also have to pay a higher price for it. ethers. The main function of CCI is to enquire into any of the anti-competitiveness going on in the economy and impose proper penalties for that. The patent holder in order to have monopoly right usually claim large number of complex and often highly speculative patents. the patent holder intends to threaten away the generic drug manufacturers for breaching of their ever-greened patents and try to get a court order so as to stop the marketing of the generic drugs.

complexes. Many recipients of these threatening letters actually chose to submit to the . a drug used for the treatment of acute Myeloid Leukaemia. Unfortunately. Patent troll is another kind of anti competitiveness observed in the economy. Therefore. including many things that should never have been patented in the first place. Novartis. combination and other derivatives of known substances as the same substance. Armed with these overbroad and vague patents. which can often range to the tens of thousands or even hundreds of thousands of dollars.isomers. the price increased from $230 to $2740. a Swiss pharmaceutical drug maker company wanted the patent of the Gleevec (name used in US) drug in the name of Glivec in India. A related. unless they differ a lot with respect to efficacy. One of the examples of ever-greening of patents is the Novartis case of the drug Glivec. Trolls are in the business of litigation (or even just threatening litigation). This is nothing but a way of cheating on the implicit bargaining of patents. Recently. instead of actually creating any new products or coming up with new ideas. with these patents covering a broad ground as their territory. the troll then sends out threatening letters to those they deem infringe their patent(s). They often buy up patents cheaply from companies down on their luck who are looking to monetize whatever resources they have left. in April 2013. such kind of regulation would definitely help a developing country like India to work on generic versions which would be affordable by the poor population of India and should be set as an example for all other developing countries wherein it is impossible to afford patented drugs. It is a derogatory term used for a person or company that enforces its patents against one or more alleged infringers in a manner considered unduly aggressive or opportunistic. Basically a patent troll uses patents as legal weapons. often with no intention to manufacture or market the product. patents are being issues for ideas that are neither new nor revolutionary. When this company was first given exclusive marketing rights for Glivec in November 2003. The key motive of the manufacturer is to gain a patent so as to extend control over the product. less derogatory concept is Non-Practicing Entity (NPE) which describes a patent owner who does not manufacture or use the patented invention. These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee. such as patents. Supreme Court denied the case of Novartis after the six year legal battle saying that the small changes and improvement in the drug Glivec did not amount to innovation which deserves a patent.

but any other businesses or individuals who are co-owners. since the alternative is a much more expensive and enduring legal endeavor. making it cheaper to settle. 2013 (PAR). Few of the features of PAR are: • Section 285 institutes a “loser pays” rule for unreasonable litigation. fight against patent abuses has been picking up momentum with efforts ranging from celebrated judgment against patent trolls to formulation of full blown piece of legislatures to curb such practices. and to fish for more ways in which they can apply their claims. Latest attempt by a Texas Senator is Patent Abuse Reduction Act. and pay. and shifting much of the cost of unreasonable discovery back to the patent troll. • Patent trolls usually hide their actual owners behind shell companies. Section 281A of the bill removes the anonymity of patent trolls and forces them out of hiding. • Patent trolls are notorious for hiding their claims behind weak lawsuit pleadings. These patent trolls do not want publicity because they don‟t want to be known for who and what they are. This is the ultimate tool for balancing litigation. freeing businesses and individuals from having to shoulder the massive financial burden of fighting a frivolous patent infringement claim. Section 281A of the Patent Abuse . assignees. Trolls use discovery to drive up the cost of the lawsuit. licensees or have a legal right to enforce the patents in question. The Patent Abuse Reduction Act beams necessary sunlight onto these alltoo-frequent proceedings and is a major step toward fixing the problem of patent abuse. by requiring them to identify not only themselves. The current standards for making an accusation of patent infringement do not require plaintiffs to explain what they allege to be infringing or how the defendant infringes. • One of the most expensive parts of a patent lawsuit is something called “discovery” –where companies are forced to organize and hand over huge number of internal documentation to the patent trolls so that they can introduce “evidence” of patent infringement.threat. Faced with the dire scenarios. Section 300 of the PAR Act adds fairness to the discovery process by limiting discovery until after the meaning of the patent has occurred. This lack of clarity forces anyone accused of patent infringement into an endless (and expensive) guessing game. along with exposing any person or business with a financial interest in the patent infringement case.

5-5 percent and import growth rate of around 0. India is a net exporter of pharmaceutical products. which mainly concerns product patent in all sectors and increased the length of patent to twenty years is bound to affect India‟s pharmaceutical sector. model numbers and other information of the products or services alleged to infringe the claim and where the infringement occurs. it is quite obvious that it is very difficult for India to reap the benefit from IPRs. agricultural products. the idea of making India compliant with TRIPS policy thereby attracting more foreign direct investment or multi-national corporations in this sector. needs to be looked into carefully. On the other hand.7 percent. Thirdly.5 times less than the latter. pharmaceutical sector needs to be a highly regulated sector not only in terms of price and quantity. food products and any kind of chemical products. but the long term benefits are enormous. Secondly. Conclusion Introduction of TRIPS Agreement. India being a 1. So this sector needs proper regulation so that it can improve India‟s balance of payment situation. Though it creates a short term monopoly and loss in social welfare. product patent was not allowed for pharmaceutical products. we would see that companies based in India spend at least 2. Majority of the foreign pharmaceutical companies based in India spend much less than half of what an Indian company spend on R & D of the sector. It seems from the preceding sections that grant of intellectual property right for an invention is absolutely necessary in the domain of pharmaceutical sector. the names. 1970. but also in the way it functions.2 billion population country with a large chunk of . Lastly. and a host of other factors most patent trolls can currently omit from their suits. Thus. These specifics include how the patent is being abused. if we compare the R & D expenditures of the companies working in India and top ten pharmaceutical companies in the world. mainly generic versions with an export growth rate of around 4. Under Indian Patent Act.Reduction Act forces patent assertion entities (PAEs) to spell out their claims and be specific about their complaints.

right to licenses. Price control is mainly done to ensure availability and quality medicines at affordable prices.people living below the poverty line. Few suggestions that might boost up competitiveness are discussed as follows: • To provide subsidies for investment in R & D so that it might boost up inventions under the new patent regime in this sector. • To rationalize Drug Price Control Order: It is extremely important to have liberalized price control regime. In this case the IPR will be owned by the academic institutions and they can share only a part of the total profit. Given that India is still a developing country. including extensive disclosure of exhaustive personal. • The procedure for procurement of licenses should be made more stringent. Moreover. but help in better inventions. Intellectual property right in the pharmaceutical sector is an important issue. under WTO regime. The main motive is basically to boost competitiveness in the economy. while industries can take up the commercialization part. because this sector is a vital priority sector. the Government should look into the abuse of patent rights and monopoly rights in this sector. financial and business information and a detailed background check. This would tackle the problem of spurious drugs. The main function of CCI is to check all possible anti-competitive practices going on in this sector like ever-greening of patents. patent pooling. patent infringement etc. But price control should not be to such an extent that it makes firms unprofitable to invest in R & D. without this investment. most of the cases relating to spurious drugs remain undecided for years and there is strong need for mechanisms which would result in faster trials. Moreover. This will not only improve academic excellence in India. and hence is vulnerable to . • Exemptions in tax: Income tax exemptions should be given for clinical trials in order to boost up profits and encourage research. The R & D can be encouraged in different universities or academic institutions. not letting in manufacturers of generic drugs for marketing. Another factor which can hinder growth is that small companies which were mainly benefited from the protective regime before 2005 may eventually close up or may be forced to become contracting units. • An academic cum industrial relationship can further be explored. the nation can never come to the forefront and become a global leader.

One of the strengths of India from long has been its know-how in herbal medicines. India is working hard to retrieve its past knowledge in an organized fashion by the formation of Traditional Knowledge Digital Library (TKDL). Also. due to the introduction of patents researchers in India and abroad. regulation policies in this sector should be seriously taken into account. Given the bright future of India‟s pharma sector. Without this opportunity. There is a renewed interest in the modern world to shift from the modern medicines to traditional medicines. India exports about five percent medicinal plants and herbal medicines and comes after China (exports about 30 percent). The Indian herbal market is expected to double from $1. India will face nothing but brain-drain . Moreover.0 billion in 2015.global shocks. Policies should be made taking into consideration India‟s strength. there will be renewed opportunities in India and the consumers will be benefited. the Government should help in the set up laboratories for research and development in herbal medicines. Intellectual property right in these traditional medicines is very important. Since these herbal medicines does not come under the purview of TRIPS Agreement and research in new chemical products involve huge investment expenditure. Indian companies should work in herbal medicines. India needs to give special attention to exim policies. it needs to look into the issues of R & D investment which will boost up this sector. Hence India should encourage healthy competitive practices.5 billion in 2010 to $3. India should adopt a balanced approach in making regulations and policies for this sector. so as to get the maximum return out of it. In the long run.

org/english/tratop_e/trips_e/t_agm0_e. Working Paper 6366.com/blog/how-the-new-patent-abuse-reduction-act-levelsthe-playing-field/ . TRIPS Agreement. Indian Patent Act. http://www. Adelman.References 1. 1970. http://www. 2010. 2002. Competition Law and Indian Pharmaceutical Industry. Ministry of Commerce and Industry. http://www.pdf 8. http://www.htm 6.net/uragreements/tripsagreement.ipindia. Vanderbilt Journal of Transnational Law.wto. New Delhi. „Prospects and Limits of the Patent Provision in the TRIPS Agreement: The Case of India‟. http://dipp. „The Introduction of Pharmaceutical product Patents in India: “Heartless Exploitation of the Poor and Suffering”?‟.aspx 5.pdf 7.rackspace. http://www. JO. 2.in/English/Publications/FDI_Statistics/FDI_Statistics. The Competition Act.org/papers/w6366 3. MJ and Sonia.nic. Competition Commission of India. B.nic.in/ipr/patent/patent_Act_1970_28012013_book. FDI Statistics. 9. Centre for Trade and Development. TRIPS Agreement.worldtradelaw. National Bureau of Economic Research. 4.nber. Department of Industrial Policy and Promotion.1998. Lanjouw.