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Intellectual Property Rights and The Challenges to Indian Pharmaceutical Industry The Indian pharmaceutical industry has changed

remarkably over the last 50years, from being traders in imported drugs in the fifties, to major bulk drug producers by the eighties. During this transitional period Indian pharmaceutical units have learnt the technology of bulk drug production by their own research and adaptation, and today they produce more than 250 bulk drugs, emphasizing on import substitution and use of indigenous raw materials. At present the Indian pharmaceutical industry has about 300 large units, 1700 medium-size units and about 8000 small-scale units throughout the country. The Indian law on this subject is contained in the Patents Act, 1970 (a law made by the Indian Parliament) as amended from time to time. In pharmaceutical industry what is patentable is an invention for making a product, and not a discovery in the field of fundamental science. In a discovery nothing new is created. On the other hand, an invention is creation of a new entity, or a new process, though this usually involves utilization of scientific discoveries. The basic requirement for patentability under the Patents law is that the invention should be new and useful, that is, it must have novelty and utility, vide Bishwanath Prasad Radhey Shyam v.Hindustan Metal Industries Once an invention is patented the patentee gets exclusive right to use it, though he may sell or lease it to another. Infringement of the patent can be prevented by an injunction in a civil suit. TRIPs, the Agreement on Trade-Related Aspects of Intellectual Property Rights is an International treaty by the World Trade Organization (WTO) which sets down minimum standards for most forms of intellectual property (IP) regulation within all member countries of the World Trade Organization. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) treaty in 1994. After India signed the General Agreement on Trade and Tariff (GATT) and the Trade Related Aspects of Intellectual Property Rights Agreement, 1994 (TRIPS) and became a member of the World Trade Organization (WTO). As India is a signatory to the TRIPS Agreement and is a member of WTO, the Patents Act is amended in 2005 to make it confirm to these international agreements. Under Article 70(8)(9) of the TRIPS Agreement regarding pharmaceutical industry, India has the following obligations: (a) To recognize in principle all kinds of inventions in the area of pharmaceutical and agricultural chemical products in accordance with Article 27 of the Agreement. (b) To provide a mechanism by which applications can be filed for new inventions as understood in Article 27 in these areas from 1-1-1995. (c) To apply the test of patentability as laid down in the Agreement irrespective of the law of the country on the date of filing, at the time when patent is granted or rejected.

It is feared that patent protection for pharmaceutical products and processes will have the effect of reducing or eliminating competition from generic production of medicines. which were derived from the standards used in developed countries. low access to medicines and a weakening of pharmaceutical industries in the developing countries. the Patents (Amendment)Act. It is open to a country signing the TRIPS Agreement to exclude from patentability inventions which are necessary to protect morality. Thus. medicine or drugs which have been patented can be manufactured by another manufacturer but by using a different process. (e) In the case of product patent applications in these areas. from the date of filing once the parties decide to grant the patent. The multinational drug companies in these countries own most of the pharmaceutical technologies and products through patents. marketing and pricing of patent protected medicines. The difference between process patent and product patent is that under a process patent. However. grant exclusive marketing rights for five years or until patent is granted or rejected. 1970 Expressly prohibited product patents and only permitted process patent. (ii) market approval is obtained in such other member country. There are about 10 industrialised countries with the pharmaceutical industry and research base. Granting of exclusive marketing rights is subject to three conditions: (i) product patent for the invention has been granted by another member country. Implementation of the TRIPS Agreement may lead to high drug prices. The minimum term of 20-year patent protection required by TRIPS effectively allows a pharmaceutical company a monopoly over the production. order or health or avoid serious prejudice to the environment. capable of developing new chemical entities or new medicines. It . 2005 repealed it and therefore gave way to product patents as well. whichever period is shorter. The TRIPS Agreement obliges WTO Members to adopt and enforce high standards of intellectual property rights protection. The implementation of the TRIPS Agreement will give rise to factors that can put access to medicines out of reach for millions of people in the developing world. product patent is a much stringent restriction than process patent. In consequence of India signing the TRIPS Agreement and WTO India accepted the product patent from 1-1-2005 in accordance with the obligation under Article 27(1) of the TRIPS. in a product patent drugs which have been patented cannot be manufactured by any process.(d) To provide patent protection for a period of 20 years. but such exclusion can only be in areas where the majority of member States are also prohibiting the commercial exploitation and denying protection. Conforming to TRIPS – by recognizing and strengthening protection of intellectual property rights over pharmaceutical products and processes – will cause problems for developing countries. Before the recent amendment Section 5 of the Indian Patents Act. and (iii) market approval from the country/member granting exclusive marketing right is granted. After the implementation of TRIPS.

The TRIPS Agreement further requires patents to be granted. without having to work the patent in the country granting the right. further periods of 20 years each could be applied for products covered by patented processes. National Pharmaceutical Policy. The Minister said consumer awareness campaigns would be launched to educate the masses on the new policy. denying patients cheaper alternatives. Developing countries are able to produce new medicines by a process of reverse engineering. no generic equivalent can come into the market until expiry of the 20 years. that is. It also seeks to streamline the system of bulk procurement of drugs by the Government besides promoting the generic medicines. Domestic manufacturing of pharmaceutical products in developing countries will come to a standstill. having to compete with the large MNCs. exporting the finished product instead of transferring technology or making foreign direct investment. researchers in developing countries may develop a new process different from the process invented (and protected by patent) to manufacture the new medicine or chemical entity. which specialise and depend on manufacturing cheaper generic alternatives. The policy aims at providing a better access to anti-cancer and anti-HIV/AIDS drugs to the patients. 2006 seeks to rationalise the excise duty on pharmaceuticals. The means that patent holders can merely import their product.will be able to keep the price of the drug high during the protection period. contains certain provisions that can be used to limit patent rights. For the smaller producers in the developing world. regardless whether the products are imported or locally produced. He said the new policy encourages production of critical bulk drugs in India with emphasis on good manufacturing practices. to offset the negative impact of patent monopolies. Drugs would be made available to the poor. Two of the most important measures include the right of government to grant compulsory licenses and the application of the principle of exhaustion of intellectual property rights. The TRIPS Agreement. By virtue of TRIPS protection. which allows for parallel importation of patented products. and generally. it is focusing on research and drug development with clinical trials. free from competition. and thereafter. 2006 Announced The National Pharmaceutical Policy. Reverse engineering is possible only in countries where the patent law protects processes but not products. This will mean that a MNC can supply global markets under the patent monopoly. in its present form.ble Minister Shri Paswan said the draft National Pharmaceutical Policy. Hon. There would . Developing country pharmaceutical producers will find themselves pushed out of the market. It would therefore be possible to apply for patent rights over products for 20 years. These limitations or exceptions are to be effected through national legislation. The TRIPS Agreement extends the scope of patent protection to both products processes. especially the families living below the poverty line. until the expiry of the 20-year period. 2006 has been announced. This is contradictory of the argument of TRIPS proponents that strict patent regimes will increase the flow of technology and investment into developing countries. The policy lays emphasis on developing human resources in pharmaceutical sciences by opening more institutions on the pattern of the National Institute of Pharmaceutical Education and Research (NIPER). this would no longer be possible at least. in order to curb abuses of intellectual property rights and anti-competitive practices.

1979.be a Settlement Commission for settling old dues under the Drugs (Prices Control) Order. central public enterprises in the pharmaceutical sector. import data and market sources. Wherever possible ceiling prices would be fixed. drugs whose MRP is at Rs. presently 100 per cent over the manufacturing cost. vaccines and biological drugs. drugs for sale to hospitals only. the 354 drugs with specified strength as mentioned in the National List of Essential Medicines (NLEM). A Drug Price Monitoring Awareness and Accessibility Fund (DPMAA Fund) would be set up along with pharma parks. This will boost R&D in India. Simultaneously. Shri Paswan said the policy lays greater thrust on pharma exports and on improving the retail system for an efficient network for distributing drugs. 1 per capsule / tablet and generic formulations fulfilling the prescribed norms would be exempted. other systems of price control like negotiated prices. prices would be fixed for all drugs in the cost plus price control system. disclosed that the Maximum Allowable Post-manufacturing Expenses (MAPE). (g) A new Drugs (Prices Control) Order would be issued under the Essential Commodities Act 1955 to replace the existing DPCO. is proposed to be revised as follows: (a) 150% in general (b) 50% additional MAPE for R&D intensive companies which fulfill the laid down standards. . reference prices and bulk purchase price have also been proposed. He said the raw material cost would be obtained from the manufacturers. 1995. (f) Some exemptions have been provided for certain drugs from the price control-new drugs developed in India through product patent. It would be increased thereafter on the above pattern. (e) Maximum Retail Price (MRP) would be inclusive of all taxes as in the case of all other packaged commodities. A Pharmaceutical Advisory Forum would be set up at the national level besides an advisory committee in the National Pharmaceutical Pricing Authority(NPPA) at its head office and five in different regions. differential prices. In addition to the existing 74 drugs and their formulations. process patent and new drug delivery systems would be exempted from price control for 5 years. These would be headed by the NPPA Chairman. (c) For existing 74 drugs under price control MAPE would continue to remain at 100% for one year in order to avoid a sudden increase in prices. (d) Based on the given percentage of MAPE. Apart from the cost plus method. Govt. 2003 have also been included in the draft Pharmaceutical Policy.

Petrochemicals and Pharmaceuticals). (m) Draft policy along with Cabinet Note has been circulated to all Departments for their comments. (k) Trade Margins on generic-generic drugs. Given the high expectations they have built up.000 crore. 2009 3:05 IST Email Print Share Mumbai: Large Indian companies are faced with a dilemma. (l) Change in the name of Department of Chemicals and Petrochemicals to reflect Pharmaceuticals also (Name proposed is – Department of Chemicals. (j) Drugs (Price Management and Distribution) Act to be enacted for effective regulation of drug prices and for handling health emergencies – it will also provide compounding of minor offences. Cipla has taken a more conservative approach of a 10% growth as its revenue base quickly doubled in about three years to a whopping Rs 5.4 billion. the key question before them is how to grow from the present levels and keep investors hooked. On receipt of their comments it would be put up before the Cabinet. would be fixed (15% – wholesalers and 35%-retailers).(h) Re-structuring and strengthening of the National Pharmaceutical Pricing Authority (NPPA) – greater computerization and better monitoring. June 11. . Indian pharma faces the big-league challenge Pillman / DNA Thursday. While Dr Reddy's says it is working on a comprehensive plan to shore up sales to $3 billion from the present $1. (i) Price Monitoring Cells in the State Drug Controller Offices with funding from Government of India.

Flood the products and reduce the price --. but soon realised that there could be a higher . albeit missing in many other Indian companies. Piramal Healthcare is another company to watch out for. but the gap has always been widening. but it has been able to amply demonstrate that it can be a strong force. Lupin is trying its best for the last three years to challenge Cipla's domination in the asthma products market. digging deeper in the US and also struggling to get Taro hooked up. riding on its nimble and efficient US operations. the future outlook in basic research and the growth plans in emerging markets. Sun has been able to get the numbers right even as large part of its profits came from one-time opportunities of risky launches like pantoprazole or on the back of successful patent challenges. Lupin has perhaps been a slow starter in the quest to widen its geographic reach. but technologically. Dr Reddy's has a strong management bandwidth. In what could be called a much-needed confidence-building exercise recently. but then took a big plunge into branded generic drugs market in the US. In the past. Lupin has a decent growth graph for the next three years. Lupin is another Indian company making noises about its achievements in the US and other markets. Piramal Healthcare saw enough opportunities in the steadily growing Indian formulations market. Lupin prided itself on its obsession to replicate the Ranbaxy model of spreading out in the emerging generic markets. Also. good product pipeline and entry into markets such as Philippines.Cipla's time-tested approach of partnering for supply of medicines and going all out in penetrating deep into the Indian market cannot be questioned. South Africa Australia and Japan. Many companies have tried to get close to Cipla in the therapy area. The company made big mistakes in the past but has been able to learn from those experiments. Nothing wrong with that approach. but more consistent revenue streams are expected from India's most highly valued pharmaceutical company. Cipla might just take the game to the next level. Dr Reddy's hosted a analyst conference and laid out its plans including marketing strategies in the US. where it acquired small companies all through 2008. Cipla has attained the position of an invincible player in India's respiratory and inhalation devices market. Many analysts keep their hopes alive in the way Dr Reddy's has handled its business programmes and tried to be different in everything that is done from the marketing perspective. While a large part of the market remains bullish on Sun Pharma. According to recent analyst reports. a few analysts have voiced the opinion that the company has to grow its base business in the US to keep the confidence levels intact. Sun Pharma has been a darling of the markets and so that much higher is the pressure on the company to keep all its cylinders firing.the policy seems to have worked so well for the company in retaining its leadership position over the past year. Sun has been silently strengthening its presence. Turning its back on the generic drugs boom in the US.

. after many setbacks. however. Glenmark is still hard-selling its discovery research dreams and continues to be the most exciting discussion topic for financial analysts. each of them could figure prominently on the map of the $900 billion global pharmaceutical industry. the Wockhardt management is trying to get out of the vicious debt trap the company has run into. Over the last four years. refuse to die down about Piramal selling part or full equity stake to some multinational companies. Two other companies struggling to retain their identities are Ranbaxy and Wockhardt. How much the company gets out of this can only be ascertained in a few years time. Nobody knows how long the pain will last for these two.from the discovery research stage right up to putting the product into the manufacturing process. If they manage to survive and grow for the next 3-4 years. Importantly. While some hopes are kindled for Ranbaxy after Malvinder Singh was eased out by Daiichi Sankyo. Pillman is an executive closely linked to the global pharma industry.growth potential in doing contract research and manufacturing work for multinational companies. the company built a pipeline of contracts from foreign companies interested in working alongside Piramal --. but the most unbelievable things can and do happen in the world of mergers and acquisitions. Rumours. This defies logic for the buyer or the seller. It may make the cut someday if it remains relentless about discovery research. These companies are all at the crossroads.