Aditya samadhiya IPR

AMITY UNIVERSITY NATIONAL SEMINAR ON EMERGING TRENDS IN IPR
AMITY UNIVERSITY MADHYA PRADESH NATIONAL SEMINAR ON THE EMERGING
TRENDS IN INTELLECTUAL PROPERTY RIGHTS LAW’- 29th
JANUARY 2016
________________________________________________________________________________________
NAME OF THE PARTICIPANT: Aditya Samadhiya
CONTACT NUMBER: +91-9867603699
EMAIL ID: asvinsamadhiya@gmail.com
INSTITUTION: NMIMS- SCHOOL OF LAW, MUMBAI
COURSE AND YEAR OF STUDY: 2nd Year of B.A.LLB. (Hons.)
ADDRESS: 56, Kedia Niwas, JB Nagar, Andheri (East), Mumbai, 400059
TITLE OF THE ESSAY (Sixth theme):
Effect of IPR Regime on the Pharmaceutical Industry of India and the World.

________________________________________________________________________________________
ABSTRACT
________________________________________________________________________________________
Knowledge of Law is not an end in itself, it is a means for equipping the inquiring mind with a liberal education.1
Francis bacon, the English philosopher and essayist believed that “knowledge is power”. The implication of his
quote is further magnified in an increasingly globalised and modernized world. As we are rapidly transforming into
a knowledge based economy, the need for respecting and protecting the “intellectual capital” of an individual is
gaining even more importance. Aswords like patent,copyright, trademark etc.become a part of our vocabulary they
are re-defining the very nature of trade and commerce2
.IPRis the right of the people over their intellectual creations,
Ideas which are abstract representation of something must be protected once they have been materialized as a result
of human intellectual effort. IPR refers to Monopoly protection for creative works such as writing (copyright),
inventions (patents),processes (trade secrets) and identifiers (trademarks). Intellectual property is a combination of
human intellect, skill and labour3
. Intellectual property laws are the intangible laws having tangible expression,
which are to provide the safeguards to the new inventions and to encourage the scientific research,New Technology
and Industrial progress. It sharesmany of the characteristic associatedwith realproperty. Intellectual property owner
has right to prevent the unauthorized use of or sale of property. Intellectual property rights are the statutory right
granted by the state for the benefit of whole society for a limited period after that it become public4
.
Emerging Importance of Intellectual property right is growing awareness, Eclipse of national boundaries,
Harmonization of Law and the idea of next economy.5
‘Good health’ is an integral part of any ‘happy’ economy. Pharmaceutical sector has become indispensable to the
well-being of the population of a country. I shall address here the role of Intellectual Property Rights (IPR) is very
effective in pharmaceutical industries. In pharmaceutical industry regarding health sector it clearly defines the
market price of the drugs whereas during recession most company owners were spent their money to build the R&D
and also they strengthened the IPR cells. It also clearly defines the patent, patent term restoration and the change of
laws which are recently adopted by other countries. Moreover it covers evergreening of patentsand drug costfactor.
The relation between General Agreement on Tariffs and Trade (GATT) and IPR is established
Patents, copyrights, trademarks, geographical indicators, protection of undisclosed information, layout designs of
integrated circuits, industrial designs and traditional knowledge are recognized internationally by the trade related
intellectual property rights agreement (TRIPS) governed by the WTO6
. In the present article, a brief historical
background of intellectual property rights in relation to the Indian pharmaceutical sector is represented. The effect
of patent policy of 1970 upon the Indian industry is described as a revolution for the Indian economic. The concept
of compulsory licensing is briefly discussed. Finally, trade mark as the intellectual property right is discussed
according to the Indian pharmaceutical market.
1 Fali S.Nariman in Vonod Dhall (etd.) , Competition Law Today , (Oxford University Press:New Delhi),2007,p,XIII.
2 National Seminar of PG Collage,Department of Law.
3
Fourth Year Student of B.A. LL.B. (Hons.) (Five Years Integrated Course) at National University for Advanced Legal Studies,
Kochi. The author can be contacted at vtssdeepika@gmail.com
4
Fourth Year Student of B.A. LL.B. (Hons.) (Five Years Integrated Course) at National University for Advanced Legal Studies,
Kochi. The author can be contacted at aishwarya.hg@gmail.com.
5 Indian journal of research Volume : 3 | Issue: 9 | September 2014
6 University Instituteof Pharmaceutical sciences,Chandigarh ,Volume3, Issue2, July – August 2010;Article008

INTRODUCTION
Intellectual property is all about human creativities. Intellectual property rights are considered as reward
for creative and skilful work in execution of ideas. In other manner, industrial property and intellectual
property are closely associated sometimes ago and IP was considered as industrial property. Traditionally
a number of intellectual property rights such as, trademarks and industrial designs were collectively known
as industrial property. Finally we can define that the intellectual property is a “product of mind”. It is similar
to any property consisting of moveable or immoveable things wherein the proprietor or owner may use
his/her property as he/she wishes and nobody else can lawfully uses his property without his/her
permission. The different kinds of intellectual property rights could be categorized as 1. Copyright, 2.
Trademark, 3. Geographical indications, 4. Industrial designs, 5. Semiconductor chips and integrated
circuits, 6. Patents and 7. Trade secrets.
India is called the "pharmacy of the developing world" because it supplies the majority of the
generic medicines used in poorer countries.7 India, being a welfare state, has to look upon the greater good
of the public at large and the also take steps to solve to the basic problem of medication. The essence of
the Doha Declaration is that the TRIP’s Agreement does not prevent WTO member states from taking
measures to protect public health, and that it should be implemented in a manner supportive of member
states’ rights to protect public health and to promote access to medicines for all. TRIP’s provide flexibility
for this purpose.8 Furthermore, without any scope of doubt India is a country where the death rates due to
the unavailability of essential drugs is enormous and in addition to that the prices of life-saving essential
drugs are touching the sky.9 According to the latest World Cancer Report from WHO, nearly 7 lakh Indians
die of cancer every year, while over 10 lakh are newly diagnosed with cancer10 and the statistics for deaths
due to AIDS is even worse.11
Moreover, the patent cliff is having a devastating impact on revenues as some of the biggest
earning drugs lose out to competitive generic companies in India. This, and the pervading economic gloom,
is putting a squeeze on finances. With drugs taking 12 to 15 years to develop, costing perhaps a billion
pounds and with no guarantee of success.12 As Jagdish Bhagwati rightly notes, the inclusion of intellectual
property has turned WTO into a royalty collection agency.7 this is of the rationale that the existence of IPR
is directly harming the poor strata of the society and the middle class who cannot afford the ever increasing
prices of the patented drugs.13
Also, discussions on the natural rights of the producer of the drug, argument generally refer to John Locke’s
‘labour theory of property.’ 14 The American Food and Drug Administration (FDA), classifies the
applications it receives either as ‘priority drugs’ and ‘standard drugs’. Of all drugs approved by the FDA,
almost 80% are of standard drug category. The development of such drugs is not ‘labour-intensive’ (if
7
Mara Kardas-Nelson,“Impoverished PatientsBenefit fromRejected Drug Patent”, Mail And Guardian,05Apr2013.
8
WTOMinisterialConference.Fourth Session.Doha,9–14November2001. WT/MIN(01)/DEC/2, 20 November 2001.
9
Ibid.
10
Kounteya Sinha,“7lakh Indians died ofcancerlast year:WHO”,The Times ofIndia,Dec 14, 2013, 04.00AM IST.
11
<http://www.unaids.org/sites/default/files/en/media/unaids/contentassets/dataimport/pub/globalreport/2008
12
Nick Beckett, “India's patents versus India's patients”, PM Live, 21st January 2013. 7
J. Bhagwati,
“Patentsand the Poor’, FinancialTimes 16 September,2002.
13
Iftikhar Gilani, Cancerdrug price goes up fromRs 8,000 to Rs 1.08 lakh, DNA India,1 October2014 - 7:00am IST.
14
P. Laslett, ed. 1988. Locke, Two Treatises of Government. Cambridge. Cambridge University Press: 285–302.
<http://www.fda.gov/Drugs/DrugSafety/InformationbyDrugClass/>.

‘labour’ is understood as creative intellectual labour). The argument of compulsory licensing that seems
strong against the demerits of patents fall on the point that the compulsory licensing is possible only for
drugs which are patented in the country and not for those which are patented elsewhere. Pharmaceutica l
companies can therefore avoid compulsory licensing if they do not apply for a patent in India.15 This
practice completely destroys the power and regulation of the govt. over the control of prices. First and
foremost is a need to invest in health infrastructure and services as well as addressing the determinants of
health
Evolution of Compulsory License
The birth of the concept of compulsory license can be traced back to the UK Statute of Monopolies 162316
which disallowed monopolies which were mischievous to the state or hurt trade.17
During that time patents
were a tool to bring in foreign inventions into the local market and to boost local industries. Therefore the
patent holder had to manufacture/work the invention locally in order to retain his patent rights.18
This
working obligation was based on the idea that an invention to which the privilege of exclusivity is granted
should be implemented in such a way that the society also benefits from it.19
This would result in creation
of employment and industrial and technological advancement.
But the later developed Paris Convention for the Protection of
Industrial Property, 1883,20
aimed to reduce the burden on patentees to set up manufacturing facilities in
each and every country for getting a patent grant by doing away with the local working requirement.
Subsequent amendments10
to the Convention however brought in the concept of compulsory licensing in
case of failure to work the patent. The Hague Revision of the Paris Convention in 1925 introduced this
concept. The most recent revision conference was held in 1967 in Stockholm which reaffirmed the concept
of compulsory licensing. Thus the working obligation which was originally a condition for granting the
patent became a ground for giving a compulsory license. Presently, The TRIPS Agreement which was
negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade in 1994 is the
most comprehensive international agreement on intellectual property. It sets the minimum standards for
intellectual property protection which all member countries have to comply with. In many ways, it signifies
a radical departure from earlier standards of patent protection. However in contrast to the Paris
Convention, TRIPS does not mention the term compulsory license let alone deal with working
requirements.
15
Chittaranjan Andrade, Nilesh Shah, and Sarvesh Chandra, “The new patent regime: Implications for patients in India”, National
CoalitionBuilding Institute Journal PMCID:PMC2900001, 2007 Jan-Mar; 49(1): 56–59.
16
Statute ofMonopolies,1623,21 Jam. 1, c.3 (Eng.),in 1 STATUTESREVISED (BRITAIN) HENRY III TOJAMESII, 1253-1685.
17
Deli Yang, Compulsory Licensing: For Better or For Worse, the Done Deal Lies in the Balance,17 JournalofIntellectualProperty Rights,76-81
(2012).
18
Supranote 5.
19
Hiroko Yamane, Interpreting TRIPS:Globalization ofIntellectualPropertyRights &Access to Medicines,HART Publishing,2011.
20
Paris Convention forthe Protection ofIndustrialProperty,Mar.20, 1883, revised July 14, 1967, 21 U.S.T. 1583, 828 U.N.T.S. 305
[hereinafterParis Convention],The Convention came into force in 1884 with 14 member states.It establishedprinciples

IMPACT OF RIGHTS ON HEALTH SECTOR:
In India because of low level income of the people, most people prefer for the local medications like
Ayurveda etc., and also the prices of medicines were raised too high so the common people can’t afford to
buy the modern medicines and antibiotics. Moreover, many of the new medical researchers are targeting
developed countries with promising profits for medicines for lifestyle diseases whereas developing
countries are still in need of basic health care except three sectors i.e., food processing, pharmaceutical
and agrochemicals. The Indian patent act allows product patent only. Only in these three sectors process
patent is allowed, as on today. India has only process patent regime with relation to pharmaceuticals
product21.
PHARMACEUTICAL COMPANIES DURING RECESSION:
According to Tyron Stading 22, when money becomes tight, companies look for alternatives to increase
their cash flow and find two paths i) product innovation, and ii) litigation. Some companies neglecting
innovation or protection of innovation for the sake of cutting costs or avoiding risk will be at a disadvantage
both in current downturn markets and, to a greater extent, when the economic storm passes and trading
activities increase again. Companies that continue to focus on their IP assets during the downturn will
definitely gain a competitive edge after it 23. At the time of recession most of the pharma companies were
concentrated in the field of R&D areas. As far as wockhardt limited, a renowned Indian pharmaceutical
and biotechnology company, Mumbai concerned, did maximum R & D works during recession period. Its
IP policy states that being a research and technology driven organization, they strongly believe in creating,
maintaining and respecting IP.
However, IP budgets for most of the industries such as wockhardt was a major concern during recession
budgeting. This put a lot of focus on creating the intellectual wealth, increased by 7 to 10 % and hovered
in the range of Rs 15-20 crores during recession we can conclude as i) Spending in R&D and IP has not
stopped during recession, ii) Innovation is the way to emerge, iii) Cost cutting in the areas where it is
necessary will be helpful during recession. Since cash flow is less, investments should be limited to
selected areas, and iv) There is huge concentration on maintaining only that patent which promises to
generate potential products or have high market value however rest are being abandoned 24.
RECENT CHANGES IN IPR LAWS IMPACTING PHARMACEUTICA INDUSTRY:
The pre-Trade Related Intellectual Property Rights (TRIPs) era saw the world divided into group of nations
i) allowing patent in all fields of technologies (products and processes) and ii) Having restrictive patent
laws providing for process patents in all fields except for product patents in selected fields such as
pharmaceuticals and drugs, food etc. In addition, the term of patents, conditions for compulsory licensing,
whether importation should be considered as working of patents, etc., varied based on existing national
laws. TRIPs attempt to harmonize the IPR laws by bringing the disparities into focus.
21 P Kumar, Impactof Intellectual Property Rights in Indian sector,health action august,2010,p.22-25.
22 S Tyron, http://www.innography.com/blog/will –a-recession-impact-the- patent-industry.htm
23 F Fields Bruckhaus Deringer,Global intellectual property Survey 2009
24 S Chopra and A Negi, Role of Intellectual Property J.I.P.R. vol 15, march 2010, pp122- 129

Since the formation of the World Trade Organization (WTO) on January 1, 1995, several nations have
made significant changes in their national laws governing IPR. Proper understanding and utilization of the
IPR laws in various countries would help in the global positioning of pharmaceutical companies.
The European Parliament on July 8, 1998, approved the biotechnology directive, which set the guidelines
for legal protection to biotechnology products and processes within the European Union. This would
markedly influence the pharmaceutical industry in Europe. It was implemented in the European Union by
July 2000. However, there had been some opposition from Holland. The outcome of the opposition
proceedings decided the future of the biotechnology directive in Europe. Since June 1995, USA changed
the term of patents from 17 to 20 years. The practice of “first of invent’’ as opposed to “first to file’’ has
been extended to all members of WTO. All patents in force on 8th June, 1995, will have a term of 20 years
from the date of issue, whichever is longer. As per this provision, several patents received an extension of
their term. This has had a significant effect on the pharmaceutical industry. In November 1999, the US
introduced the system that a patent specification will be published 18 months after its filing.
The Japanese Patent Law was amended on December 14, 1994, with amendments falling into two groups,
one effective from July 1, 1995 and the other from January 1, 1996. With effect from July 1, 1995 the term
of patents was made 20 years from the date of filing. There were other features dealing with provisions for
the restoration of lapsed patents, priority-based filing in WTO Member-countries, etc. The second
category, effective from January 1, 1996, was the replacement of pregrant opposition proceedings to post-
grant opposition and procedures for accelerated patent processing. A few landmark judgments related to
“parallel imports’’ into Japan and “research exemption’’ in the area of development of generic drugs are
of significance. Further amendments were introduced in 1999 that were made effective from January 2000.
On March 10,1999, the Indian Parliament passed a Patent Amendment Bill, which regularized the
transitory “mail-box provision” (with effect from January 1,1995) to file product patents for inventions
relating to drugs, pharmaceuticals, agrochemicals and to grant “exclusive marketing rights’’ in these
selected fields only. Other changes in the Patent Act, 1970, have been introduced to meet the immediate
obligations of TRIPS such as the withdrawal of Section 39 that required inventions in India to be first field
in India before being filed elsewhere, considering importation as the working of an invention in India, etc.
A second patent amendment bill (1999) was introduced in the Parliament in December 1999 to meet all
the other obligations of TRIPs. This is presently under review. India also joined the Paris Convention and
the Patents Cooperation Treaty on December 7, 1998.
In Spain, the patent law was amended in January 1998 to remove the requirement that pharmaceutical
companies must make the patented product in Spain before an injunction would be granted against an
accused infringer. Now it is getting easier to obtain interim injunctions from Spanish courts.
In Argentina, the 1995 Patent Law brought provisions in line with TRIPs to make the term of patents 20
years from the date of filing, rather than 15 years from the granting date. The problems of where the old
patent law ends and where the 1995 legislation starts have not been satisfactorily resolved.
The Australian Patent Act was changed on August 10, 1998, to give pharmaceutical patents an effective
term of 20 years to bring them in line with the laws in USA, Japan and Europe. The most significant
provision in Australia for pharmaceutical patent owners has been the extension of patents to give an
effective term of 15 years, where product registration requirements have held up the introduction of the
product to the market.

IPR AND INDIAN PHARMACEUTICAL INDUSTRIES:
After the GATT changed into WTO, most of the developed countries were awakened to protect their
products. Initially most of the world leading pharmaceutical industries built a separate cell for IPR and
regulated very well. So the profit of the companies were increased and IP played a major role in controlling
the counterfeit and copycat drugs. But in India that time only pharma companies were plan to set their IP
cell some of the companies in India established the IPR cell in the year 1995. Majority of the companies
started IPR cell after 2000 in India. By the end of year 2004, majority of companies started a separate
department to look after the issues related to patents. It can be safely presumed that the patents that are
granted to Indian pharma companies or applied by these companies are for either new processes or new
drug delivery systems 25.
EVERGREENING STRATEGY IN PHARMACEUTICAL INDUSTRY:
So many number of strategies have been followed by the innovator companies to extend the term of
patent, like methods of treatment, mechanism of action, packaging, derivatives, isomeric forms, delivery
profiles, dosing regimen, dosing range, dosing route, combinations, screening methods, biological targets
and field of use. These strategies involve skilled addition of patents to the product by the innovator
companies that force the generic manufacturer to maintain forbearance for all the patents to expire and
applying for marketing authorization bearing the risks of litigation and associated penalties and delays26.
The innovator companies in the name of life-cycle management maximize revenues from their so called
evergreen products and also choke their generic competition at the outset of product life-cycles. Even
though strict strategies are followed still most of these companies represent misuse of pharmaceutical
patents and regulations governing authorization.
Ever greening strategies that have been usually followed by the pharmaceutical industries involve: a)
redundant extensions and creation of next generation drugs which result in superfluous variation to a
product and then patenting it as a new application, b) prescription to OTC switch, c) exclusive partnerships
with cream of generic players in the market prior to patent expiry thus significantly enhancing the brand
value and interim earning royalties on the product, d) defensive pricing strategies practice wherein the
innovator companies decrease the price of the product in line with the generic players for healthy
competition and e) establishment of subsidiary units by respective innovator companies in generic domain
before the advent of rival generic players27.
PATENTING AND PHARMA RESEARCH COST:
Pharmaceutical organizations pour resources into R&D of various molecules for the benefit of mankind.
The development of a pharmaceutical goes through a series of permutations and combinations resulting in
uncertainties which could be many and substantial. Maximizing the certainty that a research-based
manufacturer can obtain enforce, defend, and make full, legitimate use of IP rights is essential to maintain
25 MD Janodia;JV Rao; S Pandey; D Sreedhar, VS Ligade; N Udupa. Impact of patents on Indian Pharma Industry's Growth
and Competency: A View point of Pharmaceutical Companies in India.J. I.P. R., 2009, 14, 432-436
26AnantharamanM.G,Evergreeningofpatents,http://www.training.isupportjpo.jp/en/modules/smartsection/item.php?itemid
=56.
27 Hunt M I, prescription drugs and intellectual property protection, NIHCM foundation. (2000)

the cycle of innovation for the benefit of public health. In the absence of strong IP rights at each stage of
the innovation cycle, promise of pharmaceutical innovation could be lost28.
Pharmaceutical products often rely on substantial amounts of upfront investment and technical
knowledge and for the resources involved, companies eventually secure patents for every product they
develop. The pharmaceutical companies screen large number of molecules and out of the thousand
potential drugs screened, only 4-5 reach clinical trials stage form, of which finally one is approved for
marketing. It costs on an average around 800 million dollars to develop and test a new drug before it is
approved for use. In the case of pharmaceutical companies, monopolies over the fruits of their R&D efforts
are vehicles through which they could recoup huge investments. The costs of research done on screening
out the molecule and taking into clinical trial stage are recovered through appropriate pricing mechanisms
from the patients who receive the patented drugs. Providing market exclusivity to an inventor through
patent protection can encourage the initial outlay of resources needed to develop the products29. Capital
investment by the innovator companies in the development of new molecules which have reached the stage
of marketing also encourage the challenge to invest more in further research, development and refinement
of related innovations to expand and improve therapies and cures. Moreover due to innovation in providing
products of medicinal importance, patent protection on the same creates a platform wherein generic
companies compete with research oriented innovator companies following the expiration of IP rights. After
the patent on a drug expires, any pharmaceutical company can manufacture and sell that drug. Since the
drug has already been tested and approved, the cost of simply manufacturing the drug will be a fraction of
the original cost of testing and developing that particular drug. E.g. Lamictal is an anticonvulsant
medication (active ingredient: lamotrigine) sold by GlaxoSmithKline (GSK) for use in the treatment of
epilepsy in adults and children. Lamictal is indicated as adjunctive therapy for partial seizures, generalized
seizures of Lennox-Gastaut syndrome, and primary generalized tonic-colonic seizures in adults and
pediatric patients. Lamictal is indicated for conversion to monotherapy in adults with partial seizures who
are receiving treatment with carbamazepine, phenytoin, Phenobarbital, primidone, or valproate as the
single AED. GSK had applied the patent for the active ingredient in 1980 which expired in many countries
in 2000. Lamictal is marketed as chewable/dispersible tablets which may be swallowed, chewed or
dispersed in water or diluted fruit juice (swallowing the resulting liquid dispersion). GSK also applied for
a patent in 1992 for the chewable/dispersible tablet formulation of lamotrigine which will expire in most
of the countries in 2012. The chewable tablets have the advantage of providing ease of use and compliance
to patients. An earlier patent claiming lamotrigine as the active ingredient had already expired in many
European countries. This provided the scope of use of the particular patent in European territories. It could
be comprehended that any generic manufacturer could make the formulation and compete with the
innovator product. Several such generic products are being sold, and it depends on the market that has the
option to choose between the original GSK product and a generic version. 30
GATT AND THE INDIAN PHARMA INDUSTRIES:
With the advent of the product patent era, as required by his/her obligations under the WTO’s mandate,
India can no longer produce and market patented products in any country where valid product patents exist.
During the last four decades nearly, since the advent of IPA 1970 (operative since 1972), Indian companies
launched patented drugs in India within 3 years of their first launch by innovator companies at prices one
fifth to one tenth of their patented versions. In the new era, Indian companies have to rely on manufacturing
28 Andrade C. Shah N. Chandra S, The new patent regime implication for patients in India,Indian journal of psychiatry,49(1)
(2007) pp 56-59
29 I S Bansal,D Sahu,G Bakshi and S Singh Ever greening –A Controversial issuein Pharma MiliewJ.I.P.R, vol 14, July 2009,
pp.299-306
30 GSK briefings ,(2007),www.gsk.com/policies/GSK-and-evegreening.pdf

and marketing generic (off patent) drugs unless they get licenses from the patent owners. If they are to
launch new drugs, they need to develop strategies, skills and adequate resources to enter the drug discovery
and development area. The top 15 Indian companies have already initiated major efforts in this area fully
realizing that it is indeed a very expensive, long gestation and high risk activity with little guarantee of
success. Total investments of the order of around a billion dollars are being expended annually which,
however is still less than one sixth of what Pfizer spends annually on R&D[24].
PATENT TERM RESTORATION:
Several countries have adopted the practice of Patent Term Restoration to compensate for the time lost in
testing the pharmaceutical product to assure its safety and efficacy. These tests, performed after or granting
of the patent, are sometimes as long as half the patent term of 20 years, leaving a short period to the
company to recover its investments after launching the product in the market. The Patent Term Restoration
(PTR) gives back to the patent owner time lost due to regulatory delay. In the USA, the system adopted is
governed by the Hatch-Waxman Act of 1984, which provides up to a maximum restoration of five years
to give a maximum effective patent life of 14 years from marketing.31
In Japan, since January 1, 1988, PTR provides up to a maximum restoration of 5 years. In Europe, PTR is
implemented through the system of Supplementary Protection Certificate (SPC). In the European Union,
SPC was brought into effect on January 2, 1993, by Regulation No.1778/92 dated June 18; 1992. It applies
to pharmaceutical products only. The SPC has a maximum term of five years to give a maximum effective
patent life of 15 years from the date on which a product is authorized for the marketing in a EU country.
The SPC is applied for in each of the countries where the patent exists. Korea, Taiwan, Mexico, Slovenia
and Australia have adopted or are implementing laws providing PTR for pharmaceuticals.
CASE LAW :NATCO V. BAYER
In India, the Patents Act, 1970 ensures that the monopoly granted to the patent holder does not just benefit
him but also contribute to the promotion of technological innovation and the social and economic welfare
of the country. It expressly recognises the concept of compulsory licensing under Section 84. Also, non
working is an independent ground for granting a compulsory license in India.
In the case of Natco v. Bayer, M/s. Bayer Corporation, an internationally renowned manufacturer of drugs
invented a drug useful in the treatment of advanced stage liver and kidney cancer and obtained a patent
for it in India in the name Nexavar. This was sold at a very high price of Rs. 2,80,428 for a month‘s
therapy. Natco Pharmaceuticals an Indian drug manufacturer filed an application for compulsory license
under section 84 of the Patents Act in respect of the patent granted to Bayer and proposed to sell the drug
at a much lower rate of Rs. 8800/-.
The main issue in this case was whether the requirements of Section 84 (1) upon which a compulsory
license can be granted were satisfied. On an analysis we find that firstly, Section 84 (1) requires at least
three years to have elapsed since the grant of the patent before the license can be applied for. This
requirement was satisfied in this case.32
Further Section 84 (1) of the Act sets out three grounds on which
a compulsory license can be granted. These grounds are alternative grounds in the sense that satisfaction
31 P Ganguli,Intellectual Property Rights Unleashingthe Knowledge Economy, Tata McGraw-hill Publishingcompany limited,
New Delhi,p.332.
32
Bayer had obtained the patent in 2007 by Patent Application No. 1633/MUMNP/2007, available at
http://124.124.193.235/patentpublishedsearch/publishApplicationNumber.aspx?application_number=1633/MUMNP/2007.

of a single ground alone would entitle the applicant to get a compulsory license. Section 84 (1) lays down
that a compulsory license can be granted on any one of the following grounds viz. when the reasonable
requirements of the public with respect to the patented invention have not been satisfied or when the
patented invention is not available to the public at a reasonably affordable price or when the patented
invention is not worked in the territory of India.
Section 84 (6) prescribes certain factors which have to be taken into account by the Controller while
deciding the grant of the application. In this regard, the following circumstances will have to be considered.
Firstly, the efforts taken by the patentee, the nature of the invention, the time elapsed since the grant of the
patent, and the measures taken by the patentee to make full use of the invention are to be considered. Also,
the ability of the applicant to work the invention must be reckoned. Lastly, it must be seen whether the
applicant had made efforts to obtain a license directly from the patentee on reasonable conditions. In this
regard, Natco had the necessary business experience in the market to work the invention and make it
available to the public. Also, the negotiations for getting a license from Bayer to manufacture and sell the
drug had failed.
On deciding whether the potential requirements under Article 84
(1) have been satisfied, the Controller, first looked into statistics regarding the existing and projected
demands. Only 2% of the affected population had access to the drug and the projected demands were also
high. It was therefore concluded that the reasonable demands of the public with respect to the patented
invention was not met.
On the subject of whether the price was affordable, Bayer had submitted that it incurs huge costs for
developing new drugs. Further it contended that Nexavar has been granted an orphan drug status in various
countries which means that it is a drug which treats a rare disease33
. Another argument was that the drug
price was similar to other oncology based drugs. More importantly, it strongly argued that as the inventor
of the drug, having invested huge resources in developing the drug, it must have a say in determining the
reasonable price of the patented invention. The Controller however reasoned that such high prices were
one of the reasons affecting the availability of the drug. Thus the price affecting the availability, the
Controller leaned in favour of the conclusion that the patented invention was not available to the public at
a reasonably affordable price.
As regards the non-working clause, it was submitted by Natco that since the product was imported into
India it did not satisfy the working requirement in 84 (1) (c). Bayer however, brought to notice the fact
that the phrase ―manufactured in India‖ was specifically removed from the earlier Act through the
amendment to Patent Act in 2002, in order to make it comply with Article 27 of TRIPS. Article 27 of
TRIPS provides that all patent rights shall be enjoyable regardless of whether products are imported or
locally manufactured. The Controller however observed that it was removed from 90 (a) in the earlier act
in the context of requirements of public, but was made as a separate ground under Section 84 for granting
compulsory licenses.
In support of this logic, the Controller looked into Section 90 (2) of the Act wherein it is mentioned that
no license by the Controller can authorise the importation of a patented product. Using this provision, the
Controller concluded that if a licensee cannot import products to satisfy the working condition, it is implied
that importing cannot amount to working an invention by the patentee. Further, it was held that a
reasonable fetter on the rights of patentees‘by compulsory licensing mechanism does not violate the
provisions of TRIPS. In fact, TRIPS does recognise such a mechanism under Article 30 which provides
for limited exceptions to patent rights.
33
In the United States,Nexavarwas granted an orphan drug status because less thantwo lakh patients met the indications which the
drug treats.

Apart from these provisions, the general principles in Section 83 also turned the decision in favour of the
applicant. Section 83 (a) states that patents are granted to encourage inventions and to secure that the
inventions are worked in India on a commercial scale. 83 (b) clarifies that patents are not granted merely
to enable patentees to enjoy a monopoly for the importation of the patented article. Section 83 (d) further
states that patents should not impede protection of public health and nutrition.
With these in mind, the Controller finally issued the compulsory license in favour of Natco
Pharmaceuticals. The license is non exclusive which would be valid till the patent for Nexavar ends in
2021, and the royalty was set at 6 % of total net sales payable by Natco to Bayer Corporation. It is
worthwhile to mention here that though the Controller has granted the license on all three grounds under
Section 84 (1), it would have sufficed if a single ground alone was satisfied. The huge controversy around
the meaning of what amounts to working in India need not exert too much influence on compulsory
licensing decisions, as high prices and public demands not being met can independently be a ground for
issuing the license.
After this decision, U.S. condemned it calling it a dilution of the international patent regime as it violates
TRIPS.34
But in spite of the strong opposition by U.S, after this decision several developing countries
are considering an amendment to their patent laws to include compulsory licensing.35
India has thus set a
trend which many countries could opt for in the future.In the next section, we would like to throw light
on the divided opinions which countries have with regard to limitations on patent rights.
34
Shamnad Basheer, Compulsory Licensing,: Pot vKettle SPICY IP, http://spicyipindia.blogspot.in/2012/05/compulsory-licensing-pot-vs-
kettle.html (last updated May 07, 2012) Also see C.H. Unnikrishnan, US steps up lobbying efforts against compulsory license, Livemint,
http://www.livemint.com/2012/07/16203019/USsteps-up-lobbying-efforts-a.html(last updated Jul.17, 2012).
35
Archana Shukla, Developing worldsupports India‘s compulsory license policy,CNBC TV18, http://www.moneycontrol.com/news/cnbc-tv18-
comments/developing-worldsupports-indias-compulsory-licence-policy_746844.html,(last updated Aug.17, 2012).

FUTURE SCENARIO OF THE INDIAN PHARMACEUTICAL INDUSTRY
The above discussion highlights that the impact of IPR will largely depend on the developmental status of
the economy such as the availability of technical manpower and infrastructure, capacity of the domestic
industry, and so on. A country with a strong domestic industry such as India is in a relatively advantageous
position than a country where domestic industry does not have much presence and depends on
multinationals. It is true that the impending WTO regime has stimulated the R&D investment in India.
Some of the big units have started strengthening their R&D and have also filed number of applications for
patents. There is some evidence available regarding the mergers and amalgamations to pool the human
and financial resources (CMIE, 2000) to strengthen the R&D in new product development. These firms
will definitely benefit by the stronger protection. Some of the R&D and manufacturing facilities set up in
these firms meet the international standards, and they have already been approached by multinationals for
conducting research and undertaking manufacturing on their behalf. Besides the R&D investment in
traditional chemical based screening, some of the R&D firms are looking for breakthroughs in
biotechnology research. With TRIPS allowing the patenting of the living organisms, research in
biotechnology is the latest buzzword in the Western pharmaceutical industry. Significant breakthroughs
have already been made in the area of stem cells and cloning which have potential cure for some of the
dreaded diseases like cancer, Parkinson disease, Alzheimer’s and nervous disorders. Cloned animals have
been patented and are being used for research purposes. The human genome project or the sequencing of
DNA, which has already spent about $3 billion, will be highly beneficial for the pharmaceutical companies
to identify the toxicity of the new drugs on different population or in knowing the reasons for prevalence
of certain diseases in specific regions or communities.
Pharmaceutical outsourcing is increasing world over and it is expected that contract research and
manufacturing would reach $6.4 and 22.5 billion respectively in 2001 (Scrip’s Year Book, 2000). These
figures could increase still more with the vertical disintegration of activities by the multinationals as they
review their core competencies. Henceforth, R&D could take place in one country, manufacturing in
another and marketing rights could be given to a totally different country. Domestic units with state of
art facilities, infrastructure and manpower that matches the product profile of the multinationals would
derive the maximum benefits. These units could flag off the foreign direct investment in manufacturing
and R&D. This segment that has been able to export its products to both developed and developing
countries can widen the market further in the universal patent regime provided the manufacturing practices
and the quality standards match the standards at the export destination. While the medium and big units
can adopt any of the or combination of strategies that were mentioned above, at present the future of the
thousands of small units is not very clear. Under normal circumstances, units that are producing the generic
drugs should not get affected because these drugs are not patent protected. But it is likely that, they may
face competition from large producers who may compete on larger volume and lower cost of production.
Evidence from Jordan indicate that the local industry had to suffer in terms of investment and production
and a number of small local firms had to close their operations (Correa, 2000).
In order to increase the global prospects of the pharmaceutical industry in the post 2005 period, the Central
Government has fixed the deadline of December 2003, to comply with the Good Manufacturing Practices
set by World Health Organisation. Since this is mandatory for all the units, it means incurring expenditures
that could range from Rs. 15 lakhs to 1 crore per unit. In some cases, it would involve shifting to new
premises altogether. A few units might exit from business because of this. As contract manufacturers it is
essential that both the parent unit and the loan licensee meet these requirements in cases where the

production is meant for exports. While these standards improve the quality on par with international
standards, it will also act as potential entry barriers for new firms to enter (Lalitha, 2002b).
The strength of the Indian pharmaceutical industry is in reverse engineering. Such units by utilising the
provisions under compulsory licensing, exceptions to exclusive rights and the Bolar exception should aim
at producing the generic version of the patented product and those that are nearing patent expiry. Such
firms should also be engaged in research leading to new drug delivery mechanisms and in identifying new
uses of existing drugs. In this context, it is also essential to protect the innovations that have been
introduced by the technology spillovers. Evenson (in Siebeck et.al 1990) and Watal (1997) suggest that
in order to develop domestic innovations, developing countries require utility models or petty patents.
These petty patents can be available for a shorter period of time for process innovations made over an
existing product. The TRIPS agreement leaves members to introduce such legislation, as there are no
specific rules on this subject. Such patents will encourage the small firms.
One of the concerns regarding product patents is the access to patented products. Some of the provisions
within the TRIPS agreement mentioned in the above paragraphs, clearly indicates that price controls could
be imposed on the patented products. However, exemptions from price controls has been suggested by the
government for the products that are produced domestically using the domestic R&D and resources and
are patented in India. Such exemptions will keep the prices high and make access to the drugs difficult. It
appears that `who patents the product’ matters more for the government than what is patented. In the
recently concluded Doha meeting, a separate declaration on the TRIPS agreement has clarified that
members have the right to grant compulsory licence in the area of pharmaceuticals and that they have the
freedom to determine the ground upon which such licenses are granted (Economic Times, 21 November,
2001) which can have a considerable impact on the availability as well as on their prices. However, the
amendments made by the Government of India, make the procedures very cumbersome which needs to be
revised in the third amendment to the Patents Act. While parallel trade in pharmaceutical may facilitate
access to medicine, yet compulsory licence will be the only course of option to facilitate flow of technology
and R&D. Scherer and Watal (2001) suggest that tax concessions should be provided to the pharmaceutical
manufacturers to encourage them to donate the high technology drugs to the less developed and developing
countries which is a viable option.
A majority of the population does not have access to the essential medicines (most of which are off patent)
either in the government or private health care systems because they are not within their capacity to reach.
Now that the percentage of drugs under price control has been reduced drastically it is essential to keep
the prices of the essential drugs under check, especially those concerning the common diseases.
Currently only a handful of pharmaceutical firms in India invest in R&D which needs to be improved. The
Pharmaceutical Research and Development Committee (1999) has suggested that a mandatory collection
and contribution of 1 per cent of MRP of all formulations sold within the country to a fund called
pharmaceutical R&D support fund for attracting R&D towards high cost-low-return areas and be
administered by the Drug Development Promotion Foundation. The domestic universities and other
academic institutions can play the role of research boutiques or contract research organisations (CRO),
which can supply the technical know-how and manpower. Units that already have such facilities can also
function as a CRO for other firms.
In the post TRIPS era, the government will have to probe in to factors that contribute to the widening gap
between the proposed FDI and the actual FDI and rectify these bottlenecks. Similarly the difference
between the number of patents filed and the patents granted calls for a detailed analysis to figure out where
the Indian firms are lacking.

Governments at various levels should take active part in disseminating knowledge about the IPRs and the
possible strategies that can be adopted by the industry. This will remove some of the impediments. Lessons
should be drawn from the Chinese experiences where systematic efforts were taken to educate the
bureaucrats, policy makers and the industry about the WTO and product patents in the pharmaceutical
industry. India will have to strengthen the patent examination process and speed up the processing
procedures. This will help in checking the products that may enter the country utilising the import
monopoly route provided by the EMR. Besides a strong institutional and judicial framework will have to
be set up for monitoring the prices, to prevent infringement and trade dress cases of patented products
respectively.
As far as India’s pharmaceutical industry is concerned, various options are possible in the WTO regime.
These are to: (a) manufacture off patented generic drugs, (b) produce patented drugs under compulsory
licensing or cross licensing, (c) invest in R&D to engage in new product development, (d) produce
patented and other drugs on contract basis, (e) explore the possibilities of new drug delivery mechanisms
and alternative use of existing drugs, and (f) collaborate with multinationals to engage in R&D, clinical
trials, product development or marketing the patented product on a contract basis and so on. Besides these
strategies, India’s strength lies in process development skills. This expertise utilised within the WTO
framework with emphasis on quality standards will provide India a competitive advantage over other Asian
countries.
GLOBAL STATUS OF INDIAN PHARMACEUTICAL INDUSTRY
The media giants like the New York Times coming out with misguiding editorials36, possibly aimed at
stifling India's strength and powers in science and technology. It is important yet to analyse threadbare
whether the new Patent Act is a sell-out or a well-planned game plan to isolate India at the WTO. Without
reforms, India would not have reached such dizzy heights. It yet does not select Indian companies to seek
extra protection on their home turf. Ironically, these pharma majors are also filing patents abroad and are
doing roaring business in the very countries where patent laws are strictly in force. It also demeans the
well-established strength of the Indian intellect that is headed for the destination 2020. There is a concerted
move to crush India's science and technology skills. The well-known British think-tank Chatham House
ran a seminar entitled, "Can Indian research changes the paradigm of the global pharmaceutical industry?
After the conference many Indian companies showcased their research. Consequently, streams of foreign
R&D heads have been arriving in India to seek partnerships with Indian companies across the whole
pharma supply chain including clinical, discovery, herbal research and manufacturing.
Robert Blackwill, former Dean of Harvard University and Ambassador to India said, "There has been a
sea change in attitude by the people of India towards patents as they reap the benefits of the knowledge
economy. The science and technology prowess of India is cutting edge and she must take her rightful place,
along with China at the head of developed economies."
Similarly, in the 229th meeting of the American Chemical Society, the policy makers noted that scientists
from India would soon be able to have the most innovative products outclassing the Americans. While a
new drug development costs touch $1.5 billion overseas, it is an established fact that India can produce
state-of-the-art drugs at a fraction of that amount leveraging on low cost, high quality, speed and large
patient profile.
36 Sarah Hiddleston,“Patent Trouble”, Frontline,February 23, 2007 at 131

Together with the presence of largest number of US FDA approved plants outside37 the USA, producing
high quality drugs at lowest cost, India is in an enviable position to take on the best in the world. It is this
reality that is causing worries for the policy makers in the West.
The Patent Act, 2005 can in no way influence cost of drugs. The government has taken care that drugs
patented before 1995 are not covered by the patents. These include the drugs in the WHO essential list.
With over 20,000 competitors, market forces will keep the prices under control. Rise in prices, if at all,
would be more due to illogical policies of the finance ministry and rising duties and taxes than the patent
law. In India, 97 per cent of drugs are off patent and are manufactured by a vast number of companies.
Besides, physicians will always have the alternative of using older, cheaper but equally effective molecules
to treat patients.
The new Patent Act Ordinance, introducing the long awaited product patents. The Ordinance includes
several provisions aimed at rationalizing timelines, allowing flexibility and reducing processing time for
patent applications. The new Act will boost R&D and will help to bring in foreign direct investment in the
industry and contribute to improved healthcare. There are three areas where India will continue to lag
behind in ushering in World Class IPR standards. The first is that India should join other leading countries
and progressive nations in moving away from pre-grant opposition. The Ordinance as announced will
provide representation by third parties and lengthen time for grant of Patent. The second area of concern
for the Industry are the existing CL provisions that go much beyond national emergency and extreme
urgent situations, public health crises and anti-trust situations. Broadening the scope of CL can lead to
unfair commercial gains to favored companies. The third area of concern for the research based
manufacturers is that a new provision has been added in the Ordinance that treats patent holders in respect
of mailbox applications on a discriminatory footing in so far as them being denied the rights and privileges
from the date of publication retrospectively.
The Patent Amendment opens up vast opportunities for the Indian pharmaceutical firms. Large companies
like Ranbaxy, Nicholas Piramal, Dr Reddy's, Wockhardt, Lupin etc, are investing heavily in R&D and in
a few years should be able to launch their own patented molecules all over the world. We also have the
largest number of US FDA approved manufacturing facilities outside USA. Therefore, India is poised to
emerge as a significant player in the area of generics. There is an apprehension that medicine prices are
going to go through the roof in the product patent regime. This is a myth propagated by some sections of
the industry. Over 97% of the drugs in the WHO list of essential drugs are already out of patent, and will
continue to be available at current prices. And there are several therapeutic equivalents available for the
rest. The NPPA will keep on monitoring medicine prices. As such, medicines contribute to only about 15%
of healthcare expenditure. The bulk of the expenditure (85%) comes from diagnostic tests, hospitalization,
doctor's consultation fees etc. Therefore, this obsession with medicine prices in India is not warranted.
Big pharma companies may enter India, not just to set up their own facilities but also to actively partner
with Indian scientists, academic institutions and hospitals. Kerala, Maharashtra and Gujarat are already
leading in clinical trials and work done there is accepted even by the foreign regulatory agencies, where
quality requirements are most stringent. India, by not reneging on its commitment, will now be part of the
global knowledge economy. This, in turn, would increase manifold cross border research, alliances,
outsourcing, contract manufacturing, clinical research and in-licensing/out-licensing of products and
services. Consequently, this would also bring in a paradigm shift in the pharma industry worldwide,
37 M. D. Nair,“From Local to Global- The Growth Path for Indian Pharmaceutical Industry”,The Pharma Review, December,
2006 at 37.

enabling India to take rightful place at the head of the table among the developed nations. This would also
mean that Indian drugs would move up the value chain.
The opportunity for the MNC pharma is improving their growth by launching patented new products.
However, just having the Patent Law on paper will not be enough inducement to launch patented products.
Once the TRIPS compliant law is in place the MNC's will monitor its implementation and if they find that
it is being done in a transparent and fair manner only then they will launch their products. MNC's are also
requesting the government to provide data protection to the safety and efficacy data developed by them
through costly and time consuming clinical trials. All over the world in countries such as USA, Europe,
China, Korea, Singapore etc., data protection is in force. We have recommended to the government that at
least 5-year of data protection is granted from the time of marketing approval. It is necessary for the
government to provide an environment of IPR protection that fosters innovation and stimulates launch of
patented molecules, which will result in better healthcare for all. Another opportunity for MNC's is to enter
into alliances with domestic companies for generic drugs sourcing for use by their overseas formulations
plants. Again the local manufacturing units of MNC's can be utilised to manufacture bulk drugs and
formulations for global supply to other affiliates.
The global pharmaceutical industry is under tremendous pressure to reduce costs. While the drug discovery
cost has ballooned to a reportedly US $ 1 billion per NCE the R&D productivity is continuously declining.
The global industry, therefore, is looking for cost containment through outsourcing and India offers
tremendous opportunity in the area of contract R&D, manufacturing, clinical trials, bio-informatics,
custom synthesis, technical services etc.
India will emerge as a leading country in the world pharmaceutical market. Many Indian companies like
Ranbaxy, Dr Reddy's, Wockhardt etc., have begun international operations which will make a significant
contribution to their turnover. Exports will be the major thrust of the industry, in the Post Product Patent
Era. Also, the manufacturing costs for formulations would be half of what it is in the developed world due
to lower costs of inputs. MNC's may make their Indian manufacturing facilities "centres of excellence" for
supplying to other countries. Partnering for developing NCE's by outsourcing to India offers tremendous
cost advantage without sacrificing on quality. The biopharmaceuticals market is also evolving very fast
and the Indian market is flooded with biogenetics like erythropoietin, filgrastim, TPA, Interferon, human
insulin, vaccines, etc. In fact India is likely to emerge as one of the largest producers of vaccines in the
world in few years’ time.
China brought world-class patent act and data protection laws years before it was required to for similar
reasons. Although it is behind India in research and development, it seems to be catching up quickly and
is pouring billions of dollars in life sciences and biotechnology. Singapore, Thailand and Korea, too, are
leaving no stone unturned to be on the forefront in the area of knowledge economy.
IP is a journey and will evolve over time as has happened in cases of telecom, insurance sectors. These
sectors, due to new legislations, not only have witnessed steep fall in costs, the quality has also improved
manifold. It is not by accident that CSIR9-11 has filed largest number of patents abroad. It only shows that
the Indian intellect is capable of creating its own space given the freedom to spread the wings of its intellect
to its full potential. The patent law is a step that would help in opening of knowledge centres in the Indian
villages and lead us to be a developed economy in the coming decades.

CONCLUSION
IPR in the pharmaceutical company scenario plays a vital role in the patent filling, legally punishing the
counterfeit drug manufacturing industries and establishing the industry name in the market for their drug
safety and quality. Whereas in India it increased awareness regarding patents which helped companies file
patents in lucrative markets and international treaties that were done will be helpful to Indian companies
with respect to filing multiple applications. While in the field of biotechnology, response of IPR had a
huge role in protecting plant, animal and human welfare. For coming years GMO will be the great
supplement of proteins to the human life. Hence these are legally protected whereas the hazardous activities
like cloning are strictly banned in human with the help of IPR.
The Indian pharmaceutical industry has achieved remarkable progress in the last three decades or so. It is
now a source of low cost drugs to the entire world including the largest and most regulated market of USA.
One of the most important factors which made this possible is the abolition of product patent protection
in pharmaceuticals under the Patents Act, 1970. But in line with TRIPs agreement of WTO, India has
again introduced product patent protection in pharmaceuticals since 1 January, 2005. This study analyses
how the new patent regime will affect:
• The market structure and prices
• The growth of the Indian generic companies, particularly SMEs
• Provides some suggestions for improvements.
In the product patent regime, the prices of the new drugs would depend on:
• What prices the MNC’s holding the patents would charge
• What steps can be taken to regulate such prices.
• What prices (and manufacturing decisions) the MNC’s will take for the new patented drugs
• What extent they will introduce them in India and other developing countries in the first place, are
still not clear.
As and when they introduce new products, if they charge lower prices in developing countries, drugs will
become more affordable. But in general the MNC’s do not seem to be keen on such differential pricing in
pharmaceutical products. Thus it is very important to put in place other mechanisms to control the prices
of new patented products. Two important and immediate flexibilities related to intellectual property are
exemptions from grant of patents and CL.
Developed countries, for example, USA follow very liberal patent standards. Patents are granted not only
for NCE’s involved in the new drugs. Secondary patents can also be taken for new formulations, new
combinations and new uses of existing NCE’s which effectively enhances the life of the patent and hence
generic competition.
The Patents Amendment Act of 2005 has provided the important qualification that some secondary patents
cannot be granted “unless they differ significantly in properties with regards to efficacy”. But what is
“significant” in terms of efficacy is a matter of interpretation. The patentees can claim even a minor
innovation as significant. The generic companies may not be able to afford the time and the resources to
fight such cases and hence the MNC’s may get an unfair advantage. The way out is to replace the phrase
“unless they differ significantly in properties with regards to efficiency” by “unless they are therapeutically
different”. It is also important to put in place a proper procedure to scrutinize the product patents
applications already made and those which will be made in future. The detailed procedure under the Indian
Patents Act 1970 has been diluted. Full scale proceedings for opposition to grant of patents can now start

only after the patent is granted and unlike as under the Act of 1970, a patent can be granted even when it
is not convincingly settled that it can be granted, Since TRIPS does not impose any restriction on what
procedures WTO member countries can adopt, there is no need or justification for India to change the
procedure of pre-grant scrutiny as provided in the 1970 Act. A properly administered CL system is of vital
importance in promoting competition while ensuring that patentees get compensation through royalties.
Article 31 of the TRIPs agreement permitting CL does not place any restriction on the grounds on which
CL can be given. Some conditions are required to be followed. But it is not difficult to take care of these
conditions. The Amended Patents Act has elaborate provisions of CL, but these have not been
operationalised to have a simple and easy to administer CL system. Without violating TRIPs, India can
adopt such a system. Price control is not forbidden in any WTO agreement. The government of course is
free to fix maximum selling prices of such monopoly products. But if the patentees do not want price
control, they can simply threaten to withdraw the patented protected monopoly products from the market,
which is such a small market for them. The better option is to have a competitive market structure. This is
possible with a proper CL system. Genetic competition can play a much more effective role in regulating
prices than official price control measures. So far as new drugs are concerned, the options for the Indian
companies in the post 2005 scenario are to:
• Produce these under CL arrangements
• Develop new drugs themselves.
• Collaborate with the MNC’s as manufacturing and/or marketing partners for the new drugs
developed by the MNC’s.
A number of Indian companies are very optimistic about the prospects of increasing marketing and
manufacturing alliances with the MNC’s. The latter of course may find it profitable to take advantage of
India’s low costs and infrastructure. Outsourcing by MNC’s from Indian companies has started but the
present size is modest. India’s prospects depend on how important costs would be in deciding on alternate
locations and how the opposition to job loss in developed countries is dealt with. So far as the existing
generic drugs are concerned, the Indian companies can of course continue to produce these in India and
abroad. The Indian companies can also start production of the new drugs after expiry of patents. But in the
new product patent regime, Indian companies will no longer be able to produce the new drugs patented
abroad. Thus competition will intensify in the existing generic market. The SMEs will be exposed to
increasing competition from the larger companies as the latter will have less opportunity to diversify to
new patented products. It is anticipated that a number of SMEs will not be able to face such competition
and continue independent operation. A significant re-structuring of the pharmaceutical industry is under
way.
The relationships between the larger and smaller units in the pharmaceutical industry in India have been
competitive and collaborative. While a large number of smaller units in both bulk drugs and formulations
manufactured for the larger units, they also competed with them. As competition increases in future, the
elements of competition will decrease. In the retail formulations market, the smaller units will find it
increasingly difficult to compete with the larger units, which have greater marketing and other resources.
Independent small formulators will increasingly be confined to pockets of regional and local markets. The
smaller units can play a much bigger role if the institutional markets grow in India.
Because of the weak drug control administration in India, not all the products available in the market are
considered to be equal in quality, efficacy or safety. As a result, the doctors’ and public confidence appears
to be more with the products of the reputed companies. A good quality product of a small formulator may
not sell much because it may not have the resources to spend on branding and establishing its reputation.

It is of fundamental importance to improve the drug control administration in the country. If drug control
administration improves in the country, if all the products available in the market can be considered to be
equally good, then SMEs with the price advantage can muster a much larger market share. Another
important step which can be taken not only to enlarge the scope of SMEs but also to make drugs more
accessible is to improve public health and health insurance facilities. Public funded health care and/or
subsidized insurance not only can influence prices. It can shift the financial burden from the poor who are
unable to afford the cost themselves and hence can improve accessibility. It also provides a greater scope
for smaller units which manufacture quality drugs but cannot afford the marketing costs and hence find it
difficult to compete in the retail markets.
The Indian pharmaceutical industry is in general quite optimistic about the export prospects. In fact many
of them believe that the growth in exports will more than compensate for the declining domestic
opportunities in the new product patent regime. But our assessment is that the export prospects in coming
years may not be as bright as it is often thought to be Product patent protection in pharmaceuticals in India
was abolished in India in 1972. The positive impact of this was not felt immediately. It took almost two
decades for the Indian generic companies to take full advantage and establish themselves. Similarly, it will
take some time for the negative impact of product patent protection to be felt. It is possible that Indian
generic companies are still too much influenced by the past growth and experience and are yet unable to
properly assess the negative impact of shrinking domestic opportunities.
If we want the Indian generic companies to have a steady growth in future, then there is no alternative but
to devise measures so that they can continue to manufacture and sell the new patented products in the
domestic market. This is possible within TRIPs by having a simple and easy to use CL procedure.
The most important recommendation from the point of view of ensuring a competitive market structure
and affordable prices and helping the growth of Indian generic companies, it is of fundamental importance
to have a proper CL system. The government will take the Ordinance route to bring about amendments to
the Patents Act. Sources in the group of ministers, constituted to look into the draft Bill, said there were
only "minor issues" to be sorted out.

APPENDIX

Table 1
Balance of Trade in Pharmaceutical Sector
(Rs. Crores)
Year Exports of
Drugs
Imports of Drugs Balance of Trade
1960-61 1.55 17.60 -16.05
1965-66 3.80 13.80 -10.00
1970-71 8.46 24.27 -15.81
1973-74 37.33 34.16 3.17
1980-81 76.18 112.81 -36.63
1987-88 289.99 349.44 -59.75
1988-89 467.6 446.91 20.69
1989-90 856.8 652.12 204.68
1990-91 1254.6 604.0 650.6
1991-92 1489.5 807.38 682.12
1992-93 1541.5 1137.4 404.1
1993-94 1991.7 1440.0 551.7
1994-95 2465.3 1537.0 928.3
1995-96 3443.2 1867.0 1576.0
1996-97 4340.0 1039.2 3300.8
1997-98 5353.0 1447.1 3906.0
1998-99 6153.0 1446.8 4706.2
1999-00 6631.0 1502.0 5129.0
Sources: Pillai and Shah, 1988, Chaudhury, 1999, and 39th IDMA Annual Publication 2001.
Table 2
Patent Applications by Units with R&D
Recognized R&D Units Number of Applications
Panacea Biotec Ltd 95
Ranbaxy Laboratories Ltd 51
Lupin Laboratories Ltd 28
Cipla Ltd 26
Sun Pharmaceutical Industries Ltd 20
Tablets (India) Ltd 18
Hoechst Marion Roussel Ltd 17
Ajanta Pharma Ltd 15
Dr. Reddys Research Laboratories 14
Natural Remedies Private Ltd 13
Natco Pharma Ltd 12
Kopran Ltd 11
Source: Intellectual Property Rights, (IPR) Vol. 6. No.9, September 2000.

Table 3
Exports of Pharmaceutical Products from India*
Country 1995-96 1999-00
Total Exports 34432 66310
USA 4238 6718
Russia 3036 4932
Hong Kong 1919 3562
Germany 3418 3252
Nigeria 1199 2577
UK 1142 2568
Singapore 868 2452
Netherlands 1436 2192
Iran 634 1796
Brazil 170 1627
Italy 721 1514
Vietnam 885 1413
China 361 1371
Spain 765 1287
Srilanka 825 1242
* Total Exports to top 15 countries 21617 38503
Source: 39th IDMA Annual Publication, 2001
Table 4
Foreign Direct Investment in India
(Rs. Crores)
Year Amount
Approved
Actual Inflow FDI Approved
in Pharma
% of Pharma
FDI to total
approvals
1991 534 351
1992 3888 675
1993 8859 1787 29.9 0.34
1994 14187 3289 163.0 1.15
1995 32072 6820 185.8 0.58
1996 30147 10389 118.2 0.33
1997 54891 16425 182.9 0.33
1998 30814 13340 91.1 0.30
1999 28367 16868 79.8 0.28
2000 37043 12763 1614.6 4.36
Total 246802 82707 2465.3 1.00
Source: Handbook of Industrial Policy and Statistics, 2000, Foreign Trade and Balance of Payments,
CMIE, July 2001.

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