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.

(d) To provide patent protection for a period of 20 years, from the date of filing once the parties decide to grant the patent.

(e) In the case of product patent applications in these areas, grant exclusive marketing rights for five years or until patent is granted or rejected, whichever period is shorter.

Granting of exclusive marketing rights is subject to three conditions:

(i) product patent for the invention has been granted by another member country;

(ii) market approval is obtained in such other member country; and

(iii) market approval from the country/member granting exclusive marketing right is granted.

Before the recent amendment Section 5 of the Indian Patents Act, 1970 Expressly prohibited product patents and only permitted process patent. After the implementation of TRIPS, the Patents (Amendment)Act, 2005 repealed it and therefore gave way to product patents as well. The difference between process patent and product patent is that under a process patent, medicine or drugs which have been patented can be manufactured by another manufacturer but by using a different process. However, in a product patent drugs which have been patented cannot be manufactured by any process. Thus, 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. It is open to a country signing the TRIPS Agreement to exclude from patentability inventions which are necessary to protect morality, order or health or avoid serious prejudice to the environment, but such exclusion can only be in areas where the majority of member States are also prohibiting the commercial exploitation and denying 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. The TRIPS Agreement obliges WTO Members to adopt and enforce high standards of intellectual property rights protection, which were derived from the standards used in developed countries. Conforming to TRIPS – by recognizing and strengthening protection of intellectual property rights over pharmaceutical products and processes – will cause problems for developing countries. Implementation of the TRIPS Agreement may lead to high drug prices, low access to medicines and a weakening of pharmaceutical industries in the developing countries. 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. There are about 10 industrialised countries with the pharmaceutical industry and research base, capable of developing new chemical entities or new medicines. The multinational drug companies in these countries own most of the pharmaceutical technologies and products through patents. The minimum term of 20-year patent protection required by TRIPS effectively allows a pharmaceutical company a monopoly over the production, marketing and pricing of patent protected medicines. It will be able to keep the price of the drug high during the protection period, free from competition. By virtue of TRIPS protection, no generic equivalent can come into the market until expiry of the 20 years, denying patients cheaper alternatives. Domestic manufacturing of pharmaceutical products in developing countries will come to a standstill. Developing countries are able to produce new medicines by a process of reverse engineering; that is, 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. Reverse engineering is possible only in countries where the patent law protects processes but not products. The TRIPS Agreement extends the scope of patent protection to both products processes. It would therefore be possible to apply for patent rights over products for 20 years, and thereafter, further periods of 20 years each could be applied for products covered by patented processes. Developing country pharmaceutical producers will find themselves pushed out of the market, having to compete with the large MNCs. For the smaller producers in the developing world, which specialise and depend on manufacturing cheaper generic alternatives, this would no longer be possible at least, until the expiry of the 20-year period. The TRIPS Agreement further requires patents to be granted, regardless whether the products are imported or locally produced. The means that patent holders can merely import their product, without having to work the patent in the country granting the right. This will mean that a MNC can supply global markets under the patent monopoly, exporting the finished product instead of transferring technology or making foreign direct investment. 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 TRIPS Agreement, in its present form, contains certain provisions that can be used to limit patent rights. These limitations or exceptions are to be effected through national legislation, in order to curb abuses of intellectual property rights and anti-competitive practices, and generally, to offset the negative impact of patent monopolies. 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, which allows for parallel importation of patented products.

National Pharmaceutical Policy, 2006 Announced

The National Pharmaceutical Policy, 2006 has been announced, it is focusing on research and drug development with clinical trials. 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). The policy aims at providing a better access to anti-cancer and anti-HIV/AIDS drugs to the patients.

Hon,ble Minister Shri Paswan said the draft National Pharmaceutical Policy, 2006 seeks to rationalise the excise duty on pharmaceuticals. It also seeks to streamline the system of bulk procurement of drugs by the Government besides promoting the generic medicines. The Minister said consumer awareness campaigns would be launched to educate the masses on the new policy. Drugs would be made available to the poor, especially the families living below the poverty line. He said the new policy encourages production of critical bulk drugs in India with emphasis on good manufacturing practices. There would be a Settlement Commission for settling old dues under the Drugs (Prices Control) Order, 1979. A Drug Price Monitoring Awareness and Accessibility Fund (DPMAA Fund) would be set up along with pharma parks. Shri Paswan said the policy lays greater thrust on pharma exports and on improving the retail system for an efficient network for distributing drugs. 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. These would be headed by the NPPA Chairman.

In addition to the existing 74 drugs and their formulations, the 354 drugs with specified strength as mentioned in the National List of Essential Medicines (NLEM), 2003 have also been included in the draft Pharmaceutical Policy. Apart from the cost plus method, other systems of price control like negotiated prices, differential prices, reference prices and bulk purchase price have also been proposed. He said the raw material cost would be obtained from the manufacturers, central public enterprises in the pharmaceutical sector, import data and market sources.

Govt. disclosed that the Maximum Allowable Post-manufacturing Expenses (MAPE), presently 100 per cent over the manufacturing cost, 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.

(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. It would be increased thereafter on the above pattern.

(d) Based on the given percentage of MAPE, prices would be fixed for all drugs in the cost plus price control system. Wherever possible ceiling prices would be fixed.

(e) Maximum Retail Price (MRP) would be inclusive of all taxes as in the case of all other packaged commodities.

(f) Some exemptions have been provided for certain drugs from the price control-new drugs developed in India through product patent, process patent and new drug delivery systems would be exempted from price control for 5 years. This will boost R&D in India. Simultaneously, vaccines and biological drugs, drugs for sale to hospitals only, drugs whose MRP is at Rs. 1 per capsule / tablet and generic formulations fulfilling the prescribed norms would be exempted.

(g) A new Drugs (Prices Control) Order would be issued under the Essential Commodities Act 1955 to replace the existing DPCO, 1995.

(h) Re-structuring and strengthening of the National Pharmaceutical Pricing Authority (NPPA) – greater computerization and better monitoring.

(i) Price Monitoring Cells in the State Drug Controller Offices with funding from Government of India.

(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.

(k) Trade Margins on generic-generic drugs, would be fixed (15% – wholesalers and 35%-retailers).

(l) Change in the name of Department of Chemicals and Petrochemicals to reflect Pharmaceuticals also (Name proposed is – Department of Chemicals, Petrochemicals and Pharmaceuticals).

(m) Draft policy along with Cabinet Note has been circulated to all Departments for their comments. On receipt of their comments it would be put up before the Cabinet.

3 Comments on “Intellectual Property Rights and The Challenges to Indian Pharmaceutical Industry”

  • janani


    can you tell me how was r&d in pharmaceutical industry before implication of ipr . . .
    pls do help me to know the details

  • arpit


    I want to know about history of IPR in pharma in india & further progress with some case studies.

  • aparna


    what is the current status of implementation of this policy 2006? if is implementaed properly? these proposed authorities and restructuring has taken place? or still it is a draft policy

Leave a Comment

Your email address will not be published. Required fields are marked *

* Copy This Password *

* Type Or Paste Password Here *

Cookies help us deliver our services. By using our services, you agree to our use of cookies. More Information   
%d bloggers like this: