Patents are a legal protection for new medicines discovered through research in the

pharmaceutical companies. Patents are very much important, especially in the pharma
industry where new discoveries are made every now and then and there needs a protection for
the ownership of the discoveries. Patents guarantee can guarantee profit to the company who
discovered and owns the drug after putting in a lot of money and time along with effort in
research and development to formulate a new drug. Patents play an important role in the
pharmaceutical industry as the industry is a high risk industry and also copying or coming up
with a similar type of drug can be quite easy. And the amount of money spent by companies
on research and development of a new drug is very tremendous. However, the liberty to
patent a discovery gave them the power to price their exclusive drugs in their accordance.
Thus, this can majorly affect the access of these new drugs by the general public. Even in the
absence of a market competition, these firms have the power to abuse the market through
their highly priced drugs.

Initially according to the patents law - 1970, only processes of discovery of a new drug were
applicable to be patented and not the product. However, since 2005, products were also
started to get patented in India. The government provides a patent for a minimum of term of
20 years. Thus, many companies started the game of ‘evergreening’ where in they come up
with a different process or a slightly modified new product and files a patent so as to increase
the term of the patent for further more years. Thus, the government removed these
flexibilities by introducing the TRIPS agreement. The law does not grant patent to any minor
modifications of a known substance. The applicant needs to prove the improved efficacy of
the new drug from the existing drug to apply for a new patent. But being a highly research
oriented industry, the amount spent will be much higher even to arrive at a very small minor
modification of the drug which cannot be protected through patents. This can be vulnerable
threat among the players in the industry in coming up with similar drugs. The issues of a
compulsory license to the drug can only be done after 3 years from the date of issue of the
patent. Only under certain exceptions such as a national emergency, will the company be
given a license in advance. This helps in preventing the companies from charging exploiting
prices on their drugs and making compulsory working of these drugs in the local market as
well. The Indian pharmaceutical industry has a significantly better performance in the
international markets. The leading companies of the industry are more export oriented than
concentrating on the domestic market. The average revenue from the exports of the industry
has been in an increasing stage in the past few decades. India also has been consistently
recording a trade surplus in the pharmaceutical industry. Due to the strong export
performance, the total trade in Indian pharmaceutical products increased from 2 billion USD
to 27 billion USD in the last tow decades.