Role Of IPR in Indian Pharma &

Generics in India

IPR PROJECT - FINAL (2018-2019)

Project submitted to:

Mr. Mahindra Prabhu,

Asst. Professor of Law,
Faculty of Intellectual Property Law, TN

Done By:
DENNY K ALEXANDER
BA0150011

IPR PROJECT 1
 DECLARATION

I DENNY K ALEXANDER, Registrar Number BA0150011, hereby declare that this project work
entitled “IPR IN INDIAN PHARMA AND GENERICS IN INDIA” has been originally carried out
by me under the guidance and supervision of and guidance of Mr. Mahindra Prabhu, Asst.
Professor of Law, Faculty of Intellectual Property Law, TNNLS. This work has not been
submitted either in whole or in part of any Degree/Diploma in this Institution or any other
Institution/University.

Place: Trichy
DENNY ALEXANDER
Date: 09-04-18

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 ACKNOWLEDGEMENT

I am immensely happy to express my heartful thanks to our Vice Chancellor Mrs. KAMALA
SHANKARAN, for having given me this opportunity to do a Doctrinal Research project on “IPR
IN INDIAN PHARMA AND GENERICS IN INDIA” at under graduate level.

With sense of gratitude, I would like to thank my Prof. Mr. Mahindra Prabhu, Asst. Professor
of Law, Faculty of Intellectual Property Law, TNNLS for their valuable guidance and
encouragement given to me at every stage of this small Doctrinal Research work.

THANKS AGAIN TO EVERYONE WHO HELPED ME WITH THIS RESEARCH WORK.

Index of Authorities

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I. Statute/International Convention/International Agreement Referred
Trade -Related Aspect of Intellectual Property Rights, Article 27.
Patents Act

II. List of Cases:

1. Application of Troiel, 274 F.2d 944 (CCPA 1960)
2. In re Rinehart, 531 F.2d 1048, 189 USPQ 143 (CCPA 1976)
3. In Gardner v. TEC Systems, Inc., 220 USPQ 777 (Fed. Cir. 1984)
4. Texas Instruments v. ITC, 805 F.2d 1558 (Fed. Cir. 1986)
5. (Nano crystalline Metals) Case, T0915/00
6. In re Merck & Co., Inc., 800 F.2d 1091 (Fed. Cir. 1986)

III. List of Abbreviations

TRIPS Trade Related Aspect of Intellectual Property

Rights

ART Article

IP Intellectual Property

USPTO United States Patent and Trade Office

NNI National Nanotechnology Initiative

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 TABLE OF CONTENT

Chapter – I 6
1. Introduction 6
1.1 Research Objectives 8
1.2 Research Questions 8
1.3 Research Methodology 9
1.4 Review of Literature 9
Chapter – II 11
Regulatory Environment in the Indian Scenario
Chapter – III 14
3. Generics In the Indian Scenario
3.1 Cost of Indian Generics 17
Chapter – IV
4. Impact of patent on indian Pharma 18
Chapter -V
5. Risk and Opportunities in the IPI
Chapter -VII
6. Drawbacks In the IPI 28
Chapter -VIII
6. Conclusion 29
Bibliography 32
Annexure 34

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 CHAPTER 1:
INTRODUCTION

The Indian pharmaceutical industry is presently going through a phase of transition and
potential consolidation, owing to India’s new TRIPS-compliant intellectual property regime
and other rules aimed at enhancing the industry’s credibility nationally and internationally.
Appropriate policy interventions can play a large role in cushioning the transition (and
gradual consolidation) of the industry . Using firm level data collected, this paper seeks to
make two major contributions in this regard. The research findings show that the Indian
pharmaceutical sector is a heterogeneous mix of firms with vast differences in innovative
capabilities.

Second, the paper highlights how the emerging strategies of firms in all three groups,
although different, underpin the importance of the existence of the highly regulated
pharmaceutical sector. The analysis links both these findings to policies pursued in the
pharmaceutical sector over the past four decades and highlights the role of differential
innovation policy in ensuring optimal sectoral performance.

The Indian pharmaceutical industry is one of the developing world’s largest and most
developed, ranking 4th in the world in terms of production volume and 13th in domestic
consumption value.1 India’s industry, valued at $5.3 billion in 2005, represents less than one
percent of the global pharmaceutical industry ($550 billion). 2 Over the last 30 years, India’s
pharmaceutical industry has evolved from almost nonexistent to a world leader in the
production of high quality generic drugs. India has garnered a worldwide reputation for
producing high quality, low cost generic drugs.

The industry currently meets India’s demand for bulk drugs and nearly all its demand for
formulations, with the remainder supplied by foreign multinational corporations (MNCs).

1
National Pharmaceutical Policy, 2006, Department of Chemicals and Petrochemicals, Government of India,
Dec. 28,
2
“India gears up for unprecedented manufacturing growth,” in-Pharma Technologist.com, Aug. 8, 2006.

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 India’s pharmaceutical industry is one of the fastest growing segments of the Indian
economy with an average annual growth rate of 14 percent during 2002-2005. Overall, the
Indian market for pharmaceuticals is projected to grow at an average annual rate of between
15 and 20 percent during 2005 - 2010. The surge in production has been driven by legislative
reforms, the growth in contract manufacturing and outsourcing, value added foreign
acquisitions and joint ventures, India’s mastery of reverse engineering of patented drug
molecules, and India’s efforts to comply with its World Trade Organization (WTO) Trade
Related Intellectual Property Agreement (TRIPs) obligations.

When India joined the WTO in 1995, its pharmaceutical exports were valued at less than
$600 million. By 2005, its exports had grown to $3.7 billion and accounted for more than
61 percent of industry turnover. Currently, Indian pharmaceutical companies produce
between 20 and 22 percent of the world’s generic drugs (in value terms) and offer 60,000
finished medicines and nearly 400 bulk drugs used in formulations.3

With changes in India’s patent laws in the early 1970s, Indian drug producers became
experts in ‘reverse engineering’ and increased its supply of less expensive copies of the
world’s best-selling patent- protected drugs. India’s pharmaceutical industry grew and
prospered in a highly regulated environment with government price controls on a significant
number of formulations and bulk drugs. In January 2005, India amended its patent laws
governing pharmaceuticals, bringing them into conformance with the WTO TRIPs
agreement. Under the new patent law, Indian drug markers can no longer manufacture and
market reverse-engineered versions of drugs patented by foreign drug producers. To replace
sales lost to TRIPs compliance, many of India’s leading pharmaceutical producers have
increased their exports of generic drugs to the United States and Western Europe and entered
into research and development agreements, mergers and acquisitions, and other alliances
with foreign pharmaceutical firms.

RESEARCH PLAN

3
“Cuts Drug Prices, Else Face Action, Paswan Tells Industry,” The Associated Chambers of Commerce and
Industry of Industry, Nov. 29, 2006.

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Research Objective
The aims and objectives are:

1) To study the problems faced by Pharmaceutical companies in the Indian market

analysing the conception idea to pilot product manufacturing before filling patents at
national and international level.

2) To study the impact of intellectual property rights on financial gains for Pharmaceutical
companies in the Indian market through innovation in pharmaceutical drug
manufacturing.

3) To give suggestion for effective implication of IPR policies to pharmaceutical

companies.

Research Questions
1. Whether Product patenting acts as a protection or threat to pharmaceutical companies in
the Indian IPR scenario?

2. Whether the strategies of Indian generic players have effected the status of generic market
in India both before and after 2005 ?
3. Whether the Status of government policies which are offered for innovation & creation
has created in boost of protection for homegrown pharma companies?

Research Methodology
Primary Data:
Primary data are the original observations collected by the researcher for the first time and
used for investigation.

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The sources of primary data include: The source for primary data is structured personnel
discussion for legal experts of intellectual property rights (Lawyers) and medicine
practitioners (Doctors with different specialization) and E-mail for pharmaceutical industry.

Secondary Data:
The Source of secondary data :
Secondary data is information has already been obtained. Generally, the objective of any
secondary data is to further refine the decision in some very specific way. The sources of
secondary data includes Research Journals, Economic Surveys (various issues of patent and
pharmaceutical industry and other research materials), Magazines, Periodicals, news papers,
Website based trade data etc. and interaction with the number of lawyers, doctors as well as
executives of various pharmaceutical companies

REVIEW OF LITERATURE:

1. “Wadehra B.L, Law Relating to Intellectual Property, 1-40(5th Edition, Reprint 2016),
Lexis Nexis, Haryana.
The Author in this book in part 1 deals with the patents and its protection for the
beeterment of securing the intellectual rights and in depth the author also discussed
about the proceedings to handle subject matter of patents and its application in the
indian pharma. So, it is very helpful for me to research in patents.

2. Ahuja VK, Law Relating to Intellectual Property Rights, 479-610(2nd Edition, Third
Reprint 2015), Lexis Nexis, Haryana.
The author in this book clearly explains about the patent and its essentials need to get
patent with reffering all the procedures and its rules regulations. Also, it deals with the
process how to get patent in various aspect.

3. Elizabeth Verkey, Intellectual Property, 293-443(1stEdition, 2015), Eastern Book

Company, Lucknow.
The Author in Chapter 4 of the book talks about the treaties, convention and agreement
relating to the patents with the judicial interpretations with the newly amend issues.

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 4. Raul J.Martin-Palma & Akhlesh Lakhtakia, Nanotechnology: A Crash Course,
(Edition, 2010), SPIE Press.
In this book the author discussed about the future aspects of the patents and its effects
with prior use and prior publications.”.

CHAPTER 2:

REGULATORY ENVIRONMENT IN THE INDIAN

GOVERNMENT

“To find an end to the monopoly of foreign companies, the Indian government enacted a
series of policies designed to foster self-sufficiency in the production of basic drugs, because
these measures lowered barriers to entry, thousands of medium and small Indian
pharmaceutical companies entered the market challenging the MNCs for control. These
actions laid the foundation for today’s highly competitive domestic industry that is capable

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 of offering some of the lowest drug prices in the world.4 These policies ended India’s
dependence on expensive foreign drugs, fostered the development of a competitive
pharmaceutical industry, and guaranteed the Indian public access to inexpensive drugs.
Nonetheless, the Indian pharmaceutical industry also became one of the country’s most
heavily regulated. The industry currently faces restrictions on imports, high tariff rates,
ration requirements, and equity ceilings for foreign participation.

The Patent Act, 1970: The Act’s stated objective was to foster the development of an
indigenous Indian pharmaceutical industry and to guarantee that the Indian public had
access to low-cost drugs.5 The Act replaced intellectual property rights laws left over from
the British colonial era and ended India’s recognition of Western-style “product” patent
protection for pharmaceuticals, agricultural products, and atomic energy. Product-specific
patents were disregarded in favor of manufacturing “process” patents that allowed Indian
companies’ to reverse engineer or copy foreign patented drugs without paying a licensing
fee. This allowed the domestic industry build up considerable competencies and offer a large
number of cheaper “copycat” generic versions legally in India at a fraction of the cost of the
drug in the West, as long as they employed a production process that differed from that used
by the patent owner. The Act protected process patents for years instead of the usual 15
years needed to develop and test new drugs6.”

Drug Price Control Order, 1970 (DPCO): The order was introduced when most of India’s
drugs were under strict price controls. Since its introduction, the number of bulk drugs under
price controls gradually declined from 347 in 1987 to 163 in 1994 to 74 in 1995.8 In 2005,
the government capped prices on 74 bulk drugs and 260 formulations that account for
approximately 25 percent of India’s retail pharmaceutical market (attachment).7 Trade
margins for these drugs were capped at 8 percent for retailers and 16 percent for wholesalers.

4
The Bengal Chemical and Pharmaceutical Works (1930) as India’s first public sector drug manufacturer; The
Hindustan Antibiotic Ltd. (1954) with the assistance of the United Nations and UNICEF; Indian Drugs and
Pharmaceutical Ltd. (1961) with assistance from the former Soviet Union; Bengal Immunity Ltd; Smith
Stanistreet Pharmaceutical; and the Indian Drugs and Pharmaceutical Corporation.
5
The Patent Act, 1970, Office of the Controller General of Patents, Designs, and Trademarks, Government of
India.
6
“India’s new product patent law: challenges and opportunities for local drugmakers,” Pharma Market Letter,
Dec. 6, 2004. The Indian Pharmaceutical Industry: Collaboration for Growth, KPMG, 2006.
7
Sanjay Kumar, “India to extend price controls on drugs,” BMJ Journal, Aug. 14, 2004. “The Cloning of
Viagra,” Asia Week.

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 The National Pharmaceutical Pricing Authority, founded in 1997, is responsible for
monitoring prices using the DPCO to fix ceiling prices on drugs and ensure that no Indian
company in a monopoly position takes advantages of its monopolistic position by
profiteering. In June 2006, the National Pharmaceutical Policy 2006 (Part A) proposed to
add price controls on 354 specific drugs listed as essential medicines.8 The new policy will
cap margins on generic drugs at 15 percent for wholesalers and 35 percent for retailers. It
will also enforce a 5 percent price cut on more than 75 commonly-used medicines resulting
from import duty reductions of 5 to 7.5 percent on certain active pharmaceutical ingredients
(APIs).9 The NPPA controls ceiling prices for controlled bulk drugs in all intra-industry
transactions as well as the retail ceiling prices for controlled formulations.

Patents (Amendment) Act 2005: To meet its TRIPs obligations, India amended its patent
law on March 22, 2005, abolishing its “process” patents law and reintroduced Western style
“product” patents for pharmaceuticals, food, and chemicals10.This action effectively ended
36 years of protection for Indian pharmaceutical companies and stipulated that Indian
companies selling copycat drugs must pay foreign patent holders a “reasonable” royalty for
copies sold in the Indian market. The amendment made reverse engineering or copying of
patented drugs illegal after January 1, 1995. The Act allowed for only two types of generic
drugs in the Indian market: off-patent generic drugs and generic versions of drugs patented
before 1995. At present, nearly 97 percent of all drugs manufactured in India are off patent
and therefore will not be affected by this Act. It also introduced a provision establishing
compulsory licenses for exports to least developed countries with insufficient
pharmaceutical manufacturing capacities.11

8
New policy adds 354 to the list of controlled drugs,” domain-b.com, July 1, 2006.
9
Government to enforce 5-per cent cut in prices of 75 drugs,” domain-b.com. March 27, 2007.
10
Novartis (Switzerland) recently challenged India’s patent laws before the Chennai High Court alleging that
India’s refusal to grant a patent on its leukemia anti-cancer drug, Gleevec, violated the WTO’s TRIPs
agreement. In Jan. 2006, India’s patent office rejected the patent application insisting that Gleevec was only a
new form of an existing drug and was therefore not patentable in India. Amy Yee, “Novartis in Indian patent
dispute,” Financial Times, Dec. 22, 2006. “Novartis contests India’s patent law,” Chemistry World, Feb. 15,
2007.
11
The Indian Patent Act, 1970 was amended by the Patents Amendment Ordinance, 2004 (the thirds
amendment), which was amended by the Patents Act, 2005. Important Changes Incorporated in the Patent

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 The Amendment grants new patent holders a 20-year monopoly starting on the date the
patent was filed and, without a compulsory license, no generic copies can be sold during the
duration of the patent. The WTO also required India to establish a “mailbox” where patent
applications could be filed between January 1, 1995 and 2005.

The Act encouraged significant numbers of foreign pharmaceutical companies to participate

in the Indian market and, in 2005, foreign drug producers filed approximately 8,926 patent
applications to cover their patented drugs sold as generics in the Indian market. Roche
(Switzerland) became the first foreign company to win a patent under India’s new product
patent regime and that patent, granted in March 2006 for a drug to treatment of hepatitis C
(Pegasys), will be valid for 20 years from May 15, 1997. Pfizer (US) has submitted the
largest number of patent applications (373) followed by Johnson & Johnson (262) and
Procter & Gamble (187).

CHAPTER 3:

GENERICS IN INDIAN SCENARIO

“A generic drug is a prescription drug which is not manufactured by the originator of the
product; the molecule is off patent and available from multiple sources, and the product is
known by the chemical name, not a trade name. A generic drug should possess the same
active ingredients in the same dosage form and strength as the original brand drug. For
generic drugs to be marketed and sold, it needs to demonstrate similar bioequivalence which
means that there is a similar absorption rate as the original brand drug12. The generic drug
also needs to produce the same therapeutic effect and safety profile as the initial or
innovator’s brand name product. Equal standards apply for brand name and generic drugs

(Amendment) Bill, 2005 As Compared to the Patents (Amendment) Bill, 2003, Press Information Bureau,
Government of India, March 23, 2005.
12
Guennif, Samira, and Shyama V. Ramani. "Explaining divergence in catching-up in pharma between India
and Brazil using the NSI framework." Research Policy 41.2 (2012): 430-441.

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 in regards to drug safety, efficacy, purity, stability, manufacturing, and labeling, which are
set and enforced by the Food and Drug Administration (“FDA”)..”

Developing and Marketing Generic Drugs :

“In developing generic drugs, the manufacturer only needs to demonstrate the
bioequivalence of its drug to the branded product, and that the manufacturing process
produces acceptable purity and consistency. The development does not involve lengthy and
costly clinical trials because generic manufacturers only need to prove bioequivalence. On
average, the development of generic drugs takes only 3 years, in contrast to the six to seven
years of development time spent on branded products13.

The potential for company earn millions if first to market with good practices, resulted in
crisis that virtually destroyed the generic industry. Four year after the passage of “Waxman-
Hatch act”, the rush to launch generic versions of branded pharmaceuticals created intense
pressures on the FDA to approve products, and on manufacturer seeking to be first to
market. In the late 1980’s, some manufacturers falsified application, going so far to alter
branded pharmaceuticals and submit these products as their own.”.

“The scandal slowed new product approvals for all generic company with the USFDA
approving approximately 80 ANDAs in year 1990, as compared to more than 250 in 198914.
As an outgrowth of the scandal, the demand for heightened scrutiny of all aspects resulted
in FDA inspections of manufacturer and testing firms, and the analysis of more than 2800
samples of widely used generics. The large number of innovator products due to lose patent
protection over the next ten years will foster robust growth in generic industry.

Cost of generic pharmaceutical:

Generic pharmaceutical cost 30-60% less than the equivalent, branded product. Yet, the
consumer is getting the same product, manufactured to the same high standards, as the
branded name products. Company that discovers and develops new drugs claims that the
cost of research and development on average exceeds $ 400 million . This process can take

13
Chandran, S., Roy, A., & Jain, L. (2005). Implications of new patent regime on indian pharmaceutical
Industry: challenges and opportunities.
14
Janodia, Manthan D., et al. "Impact of Patents on Indian Pharma Industry’s Growth and Competency: A
Viewpoint of Pharmaceutical Companies in India." (2009).

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 as long as 12 years to complete. As a result, when innovator sets its price for all brand name
pharmaceutical, it seeks to recover development costs as well as dollars spent to market the
product, while still returning a profit. For the generic manufacturer, the cost of developing
the generic product and getting an approval to make and sell it are considerably lower.”

The development of generic drug industry:

“Generic have always been in existence along with branded pharmaceuticals. However, the
industry was restricted to a few small players. The event often acknowledged as the start of
the modern generic pharmaceutical industry was the approval of the drug price competition
and patent restoration act in 1984. This law often called as “Waxman-Hatch act” permitted
manufacturers to life ANDAS for generic versions of all post 1962 approved pharmaceutical
products15.

The act opened the floodgates for generic competition for pharmaceutical products creating
the modern generic pharmaceutical industry. In the first year following approval of the act,
the FDA received more than, 1000 applications for generic drugs. The subsequent growth
of the generic pharmaceutical industry, from $ 2.6 billion in year 1990 to nearly $10 billion
in year 1998 was fueled by the expiration of market exclusivity for an extraordinary number
of products, making them available for generic competition.”.

“Additions, generic pharmaceutical companies, spend significantly less to market their

products. In this way, they offer the same product at a greatly reduced priced. Also generic
results in competition that can help lower price. By the year 2005, 40 blockbuster drugs
went of patent in US giving additional sales of Rs. 4000 crore in year 2003. in this year USA
market is estimated to be US$18 million, which is 40% of world generic market. In this
market- 60 % of drugs sold are imported from outside US. Indian pharmaceutical company
with 45% less manufacturing costs, 30% low labor cost and 40% less infrastructure cost can

15
Bazzle, Timothy. "Pharmacy of the developing world: Reconciling intellectual property rights in
India with the right to health: TRIPS, India's patent system and essential medicines." Geo. J. Int'l L.
42 (2010): 785.

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 top this huge opportunity. Street price of drug in US is 6 times more than India and 4 times
more than in Europe than India.

16
This leads to opening of new doors of opportunities for Indian pharmaceutical firms. This
is because of their increasing exports to developed countries and enhancing their
manufacturing capabilities not only in India, but also on other countries.

Options available:
After drug goes off patent when new player enter in to market, prices of drug drops by
around 35%. With further entry of competitors in market segment of drug prices of
particular drug reduce by almost 50-70%. This benefits both consumer and generic
manufacturers17.”.

There are two classes of generic as

1. Bulk generic: these are raw material for formulation of generic and are sold in wholesale.
2. Formulation generic: these are sold in tablet, injection etc.

CHAPTER 4:
THE IMPACT OF PATENTS ON PHARMACEUTICAL
INDUSTRY (2005 PATENT REFORM)

“The development of the Indian pharmaceutical company has been shaped by the position
of the Indian government on intellectual property law as outlined in the Indian Patent Act
of 1970, under which only process patents were covered. Furthermore, the Act provided
only seven years of process patent protection for pharmaceuticals about half of the average
15 years required to develop and test a new drug.

16
Ramanna, Anitha. "Interest groups and patent reform in India." (2012).
17
Janodia, Manthan D., et al. "Impact of Patents on Indian Pharma Industry’s Growth and
Competency: A Viewpoint of Pharmaceutical Companies in India." (2009).

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 18
The establishment of the World Trade Organization (WTO) has led to a tremendous
paradigm shift in world trade. The agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPS) was negotiated during the Uruguay round trade negotiations of the
General Agreement on Tariffs and Trade (GATT) and one of the primary reasons for
incorporating intellectual property issues into the GATT framework was the pharmaceutical
industry. India signed the GATT on 15 April 1994, thereby making it mandatory to comply
with the requirements of GATT, including the agreement on TRIPS.

India is thereby required to meet the minimum standards under the TRIPS Agreement in
relation to patents and the pharmaceutical industry. India’s patent legislation must now
include provisions for availability of patents for both pharmaceutical products and processes
inventions. Patents are to be granted for a minimum term of 20 years to any invention of a
pharmaceutical product or process that fulfils established criteria. Compulsory license
provisions under Indian law will be required to be limited and conditional to comply with
the TRIPS Agreement, and the government will grant such licenses only on the merit of
each case after giving the patent holder an opportunity to be heard. In addition, there will
be no discrimination between imported and domestic products in the case of process patents,
and the burden of proof will rest with the party that infringes.19

India has decided to avail itself of the full transition period for developing countries and has
until 1 January 2005 to extend patent protection to pharmaceutical products. In keeping with
the TRIPS commitments, India has started on a process of amending the Patents Act by
providing exclusive marketing rights (EMRs) and creating a mailbox system for patent
applications for a period of five years or until the patent is granted or rejected, whichever is
earlier”.

4.1 Patenting Scenario

“The analysis of the post-TRIPS (1994-95 to 2007-08) patenting scenario of the
pharmaceutical industry of India shows that the patents in drugs and pharmaceutical
industry have grown at a higher rate of 6.06 percent per annum as against the 5.57 percent
growth of total patents granted. Following Table shows that prior to 1995, except Ranbaxy,

18
Ramanna, Anitha. "Interest groups and patent reform in India." (2012).
19
Chandran, S., Roy, A., & Jain, L. (2005). Implications of new patent regime on indian
pharmaceutical Industry: challenges and opportunities.

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 majority of Indian pharma companies did not have US patents. However in the post-TRIPS
period, more firms like DRL, Torrent, Aurobindo, Wockhardt and Sun have also marked
their presence in patents granted. Majority of the pharma companies got patents after 2000.
This may be attributed to the fact that the process of acquiring patents takes a few years.
One of the plausible reasons could be filing of patents immediately after India adhered to
the TRIPS agreement.”

“Regarding patenting, that pharmaceutical industry seems to respond better in post- TRIPS
period. The results show that the patents in drugs and pharmaceutical industry have grown
at a higher rate of 6.06 percent per annum as against the 5.57 percent growth of total patents
granted20. Majority of the sample pharma companies got patents after 2000. This may be
attributed to the fact that the process of acquiring patents takes a few years. One of the
plausible reasons could be filing of patents immediately after India adhered to the TRIPS
agreement.”
4.2 Patents and the Future of the Indian pharmaceutical company
The absence of product patent protection for pharmaceuticals and agrochemicals led many
multinationals to limit their portfolios to patent expired products or a few selected patented
products.
This resulted in an erosion of their market share because
1. Local manufacturers introduced the most advanced medicines through reverse
engineering.
2. Foreign firms were required to pay royalties for international drugs, while Indian
companies could access the newest molecules from all over the world and reformulate them
for sale in the domestic market.

4.3 Possible options for IPI:

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,

20
Ramanna, Anitha. "Interest groups and patent reform in India." (2012).

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 (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 lays 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.

India’s core competencies :

The core competencies that have led Indian pharmaceutical companies to heightened global
visibility are:
1. Complex synthesis capabilities
2. Increasingly good manufacturing practices (GMP)
3. Low-cost production.

4.4 Cost advantages of Indian firms

“Indian firms have lower costs estimated to be one-eighth (in R&D) to one-fifth (in
manufacturing) compared to Western firms. The following factors are the basis for this cost
advantage:

1. Fixed asset costs:

The cost of building a new manufacturing facility complying with international regulatory
norms is about one-fourth the cost of setting up a similar facility in the US or Europe. Civil
construction is $8-$12 per square foot versus $75 in the US. Material costs (used for
reactors, vessels, and other equipment) may also be lower.

2. Cheaper labor:
The cost of an Indian based laboratory analyst/chemist is one-fifth to one-eighth of the US

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 cost. Higher-level Indian scientists are well trained yet earn about a third of their Western
counterparts’ salaries. Plant employees cost $120–$150 per month.

3. Chemistry/process expertise and development costs:

More than three decades of reverse engineering ‘on-patent’ drugs (process engineering) has
made Indian companies extremely proficient in speedy generic drug development, therefore
more productive per unit of cost21. Lower development costs result in lower regulatory filing
costs, and this, combined with the increasing admissibility of Indian bio-equivalence studies
to the FDA, puts India at an advantage. On the manufacturing side, continuous process
improvement has also resulted in a highly efficient cost structure for India’s bulk actives

4. Clinical study costs:

A large population of treatment naive patients facilitates rapid trial recruitment into large
clinical studies. Cost per patient enrolled is approximately one-tenth of the cost in the US.
However, neither Indian companies nor international companies have leveraged this cost
advantage in any material sense, Indian companies due to nascent drug discovery research
and pharmaceutical MNCs due to concerns over intellectual property confidentiality.
5. Cost of sales force:
The average salary (including all benefits) of a typical drug representative for the Indian
market is $4,000 per year.”.
India’s competitive advantage characteristics:
The key characterstics are22 :
• Products enjoy low limit margins compared with patented prescription drug. It is high
volume market with low profit margins.
• Products are at a constant disadvantage against those of Innovator Company.
• Process development skills are of critical importance.
• The emphasis is on a lean cost structure that is dominated by manufacturing costs.

21
Ramanna, Anitha. "Interest groups and patent reform in India." (2012).
22
Chandran, S., Roy, A., & Jain, L. (2005). Implications of new patent regime on indian
pharmaceutical Industry: challenges and opportunities.

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 CHAPTER 5:
RISK AND OPPORTUNITIES IN THE IPI

• Indian companies are well positioned to exploit the generic market. Their competitive
advantages arise from the areas like high process development skills. This ability enables
company to develop cost effective and non infringing processes for products going generics.
India has a history of developing such processes due to the prevalence of product patents.

• Low manufacturing cost base – the best of manufacturing is lower in India due to low
labor costs and lower equipment costs.( especially reactors, boilers etc)

• India is having largest number of USFDA approved manufacturing plants outside USA.

• Indian companies are consolidating their position in supply of generic pharmaceuticals

in USA market as well as in least developed countries LDC) in supply of active
pharmaceutical ingredients as well as generic formulation.

• Mergers and acquisition of manufacturing facilities by Indian companies in foreign

countries is helping in creating manufacturing base in Europe and USA.

Clinical trials opportunities in India:

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 “It has been estimated that the pharmaceutical industry spends up to $800 million to bring
a new molecule to market. Perhaps a third of the total goes towards clinical trials, and much
of that is spent on Phase III trials that use a lot of human subjects. The life of a patent begins
to ebb away from the moment it is filed; each day saved on testing can bring millions of
dollars in extra revenues to the patent holders23.

Clinical trials in India ought to be cheaper and faster than those in developed markets.
Contract research organizations can hire researchers, nurses and computer staff at less than
a third of Western wages. The Indian population is large, ethnically diverse and suffers
from both tropical diseases as well as ailments such as cancer, diabetes and heart disease
that also affect rich countries.

Overall clinical development costs in India are estimated to be 40–60% lower than those in
the West. Specialist contract research organizations such as Quintiles have set up shop in
India”.

Risks faced by Indian firms:

“
Despite their existing competitive advantages and promising opportunities on the horizon,
Indian firms have certain weaknesses and therefore face certain competitive threats, which
can be summarised as follows:
1. Indian companies are relatively new to the generics business in regulated markets
and there are concerns regarding their ability to manage large product portfolios, entailing
numerous regulatory filings, scaling up manufacturing, forging alliances, and legal skills to
win on patent litigations.

2. The US based generic industry may be able to glean the same cost advantages as
Indian firms through developing partnerships or green field sites in India. US based generics
companies such as Watson, Ivax, and Apotex have already secured manufacturing
agreements with Indian bulk active/dosage form manufacturers and in the medium term,

23
Chandran, S., Roy, A., & Jain, L. (2005). Implications of new patent regime on indian
pharmaceutical Industry: challenges and opportunities.

IPR PROJECT 22
 this may mitigate some of the cost advantages enjoyed by the fully integrated Indian
companies like Dr Reddy’s, Ranbaxy and Sun.

3. The research-based industry has also been increasingly interested in marketing

their own generic alternatives to their patented products, spurred by the impending flurry of
patent expirations and the knowledge that the majority of the profits of a generic drug are
earned in the first six months post patent-expiry.

4. The impending deceleration in patent expiries post 2007 presents another risk to
Indian firms.

5. There is a moral hazard/ tragedy of the commons problem – being the reputation
risk that the entire industry will face if one player cuts corners with regard to GLP or GMP.

6. Pursuing the NCE strategy is risky, not least because Indian firms have a skills
shortage in the area of patent writing. It has been suggested that many existing patents
written by Indian professionals can be easily circumvented; so even where an Indian
company has produced an innovation; it may not be protected in international settings.

7. Indian firms are strong in chemistry, but they are relatively weak in biology and
clinical research and development skills, and these are essential to compete in the
innovative, NCE drug category.

8. There is a risk that the co-operative strategies employed by some firms could get
in the way of the competitive strategies of these firms, especially if Indian firms do not
negotiate reasonable contract terms with MNCs and/or fail to ring-fence their competitive
advantages.

9. Lastly, there is a risk of protectionism in developed markets, since jobs lost from
US and EU will not only be those in manufacturing but also in the more skill intensive
research sectors”.

IPR PROJECT 23
 CHAPTER 6:
BENEFITS TO INDIA FROM MODERNISING THE IPI

“This section discusses some of these benefits, as social, economical and political issues
relating to Patent and Indian pharmaceutical company24,

A. Social benefits:-
1. “ The development of the Indian pharmaceutical company would create new jobs, but
mainly it would provide access both to modern technology in the field of medicines and to
medicines developed indigenously. As a result, it will be able to provide new drug
formulations and improved healthcare treatments to Indian patients.

2. In particular, new medicines would be available to treat diabetes, cardiovascular

diseases, cancer, and psychological disorders. But even during the drug discovery and
development phases, significant funds would be invested in local communities. For
example, during Phases I to IV, normal volunteers or patients would participate in clinical
trials during which they receive free medicines and are paid to participate. In Phase IV trials,
patients who cannot afford expensive medicine will have the opportunity to receive modern
medicines.

As a result of changes in the culture and in the social environment, new types of diseases
are invading India. India must have a concrete plan to protect itself from these diseases, and
the development of the pharmaceutical sector is the first step”.

B. Economic benefits:

24
Mehralian, Gholamhossein, et al. "Intellectual capital and corporate performance in Iranian
pharmaceutical industry." Journal of Intellectual Capital 13.1 (2012): 138-158.

IPR PROJECT 24
 1. “The development of the pharmaceutical industry would help the Indian economy
produce more national wealth.

2. Foreign investment would increase, and Indian companies would have the opportunity
to collaborate with many companies from around the world. Indirectly, developing the
pharmaceutical industry would also help other industries.

3. The related employment opportunities in various fields are no less important. If good
jobs were available locally, citizens would not feel the economic pressure to migrate to the
United States, Europe, or Japan.

4. Development of clinical trial centers would provide funding from private

pharmaceutical industries to local hospitals. In return, a staff of nurses and doctors would
be maintained, which would benefit local communities.

According to economics historian Walt Rostow, five stages of economic development exist.
The stages are
• Traditional society
• The preconditions for takeoff.
• Economic takeoff,
• Which is then matures in the fourth stage.
• High mass consumption.

Increased spending for the protection of the environment would produce more-hygienic
conditions for the population, and protecting the environment from the beginning would
avoid the potential for future cleanup costs”.

C. Political benefits:

1. Economic growth will bring political stability to India. It will improve international
credibility and create a visionary rather than a reactionary political regime.

IPR PROJECT 25
 2. The poverty level in India stands at 27%, which is very high compared with China’s
5% level.
3. Making medicines affordable to all Indian citizens is a noble goal, but one must
strive for a fair distribution of low-priced medicines to the masses and high priced modern
medicines to wealthier people.
4. The economic development that would result from growth in the pharmaceutical
and computer sectors could trigger development of other sectors and indirectly lower the
poverty level.

5. India can then achieve macroeconomic growth through education, infrastructure

development, improved sanitation, and enhanced public health. In a political sense, these
developments will forge a win–win situation for Indian citizens and politicians.

A committee of representative physicians from various internal states, government officials,

and key executives from various pharmaceutical companies could likely muster the clout
required to meet the health requirements of Indian citizens as well as promote the country’s
pharmaceutical
industry. Changing disease patterns must be understood, and policies must be prioritized for
the treatment of diseases”.

CHAPTER 7:
DRAWBACKS IN THE IPI25

• Parent patent holder files additional process patent for products to retain patent claim
producing barriers for generic marketers.

• Establishing USFDA plant cost 5 times more than Indian standards.

• Legal aspects in India are also costly affaire. For each drug, patent holders are figuring
out innovative ways for extending their patent rights.

25
Ramanna, Anitha. "Interest groups and patent reform in India." (2012).

IPR PROJECT 26
 • Litigation Costs
• Indian pharmaceutical companies are lagging in cumulative efforts at national and
international levels to persuade many policy matters.

• Many firms are devoid of pragmatic clear vision about their role in total future industrial
set up.
• Due to macroeconomic policies development of market in sluggish.

• There is extreme competition in domestic sector.

• Multinational generic majors like Santoz and Teva are setting their manufacturing and
research and development plants in India. This will gradually neutralize cost advantage
enjoyed by Indian companies.

• Profile margins are subject to wide variations due to exclusivity loss of drugs and
competition from generic to drugs.

• Market penetration of generic in European market is not yet establish”?

CHAPTER 8:
CONCLUSION
“The patent system has the unique feature to encourage research and inventions and induce
the inventor to disclose his new invented medicines instead of keeping them a secret. It is
undeniable that the inventor’s contributions should be recognized by grant of a reward. But
while considering the public health and nutrition, the patented medical products should be
available at affordable or we can say reasonable price. Because the generic version of the
same drugs are available at very low costs and it is possible for the inventors to sell them at
such prices in the least developed countries. India, having large number of people below
poverty line, is not in a position to give a complete importance and full protection to the
inventors in order to save the life of thousands of poor people. Further in India, the largest

IPR PROJECT 27
 medical sector is service oriented under government’s control and for providing good
medical facility to the people it needs to spend crores and crores in drugs.26

The government is also framing policies often to recognize the need to ensure abundant
availability of essential quality medicines at reasonable price. Right to health and medical
care is one of the basic and well recognized human rights. Indian patent law though not in
consonance with the TRIPS agreement in the developed front’s point of view, it was very
well formulated subject to article 7 and 8 of the agreement after following the standards
given in the Doha declaration to provide access to medicine to all. In all, the Indian Patent
Act maintains a proper balance between the interest of the inventor of a drug and public
health. In addition, my opinion is that the developing and the least developed nations should
be given priority in negotiating WTO agreements27.

The obligations imposed on India under the TRIPS Agreement are going to have a
significant impact on India’s successful bulk and formulation-oriented pharmaceutical
industry. Indian companies will have to compete with the multinationals by focusing on
drug development and thereby producing their own patented products. On the other hand,
Indian companies could focus on producing patented drugs under license from foreign
companies or concentrate on generating revenues from producing generic drugs. Currently,
conflicting views exist within the Indian drug companies with regard to India’s transition
into the product patent regime. Some of the existing pharmaceutical companies believe that
product patents will pave the way for innovation in India, while others hold the view that
the high cost of R&D will suppress the growth of the Indian pharmaceutical”company28.

“The key to survival for Indian pharmaceutical companies would be the exponential growth
of R&D expenditure. Indian companies need product patent protection to encourage
research in developing inexpensive drugs that suit the Indian disease profile. The larger
firms are increasing their total R&D expenditure as a percentage of sales and they are
beginning to move in the direction of new molecule discovery rather than concentrating

26
Ramanna, Anitha. "Interest groups and patent reform in India." (2012).
27
Guennif, Samira, and Shyama V. Ramani. "Explaining divergence in catching-up in pharma between India
and Brazil using the NSI framework." Research Policy 41.2 (2012): 430-441.
28
Chandran, S., Roy, A., & Jain, L. (2005). Implications of new patent regime on indian pharmaceutical
Industry: challenges and opportunities.

IPR PROJECT 28
 solely on development research. The advent of product patents is bound to be a boost for
multinational companies that have previously been reluctant to invest in India in the absence
of product patent protection, and it will increase competition in the domestic market29.

The process of liberalization initiated in 1991 has helped develop policies that are focused
on attracting capital from overseas and making India a global industrial base. The resultant
inflows of foreign direct investment and technology transfers have created an environment
for dynamic growth and increased competitiveness of Indian industry. India is slowly
moving into global markets and competing with international quality standards and prices.
Although R&D is an important factor to ensure a competitive boundary in the international
arena, the future of the Indian pharmaceutical company hinges on patent protection”.

29
Khanna, Ish. "Drug discovery in pharmaceutical industry: productivity challenges and trends." Drug
discovery today 17.19-20 (2012): 1088-1102.

IPR PROJECT 29
 BIBLIOGRAPHY

REFERENCES:

• ARTICLES:

• Guennif, Samira, and Shyama V. Ramani. "Explaining divergence in catching-up in pharma

between India and Brazil using the NSI framework." Research Policy 41.2 (2012): 430-441.

• Janodia, Manthan D., et al. "Impact of Patents on Indian Pharma Industry’s Growth and
Competency: A Viewpoint of Pharmaceutical Companies in India." (2009).

• Sampath, P. G. (2006). Indian pharma within global reach?.

• Ramani, Shyama V., and Augustin Maria. "TRIPS: Its possible impact on biotech segment
of the Indian pharmaceutical industry." Economic and Political Weekly (2005): 675-683.

• Chandran, S., Roy, A., & Jain, L. (2005). Implications of new patent regime on indian
pharmaceutical Industry: challenges and opportunities.

• Kale, Dinar, and Steve Little. "From imitation to innovation: The evolution of R&D
capabilities and learning processes in the Indian pharmaceutical industry." Technology
Analysis & Strategic Management 19.5 (2007): 589-609.

• Abrol, D. (2004). Post-TRIPS technological behaviour of the pharmaceutical industry in

India. Science, Technology and Society, 9(2), 243-271.

• Tyagi, Shilpi, Varun Mahajan, and D. K. Nauriyal. "Innovations in Indian drug and
pharmaceutical industry: have they impacted exports?." (2014).

• Ramanna, Anitha. "Interest groups and patent reform in India." (2012).

• Khanna, Ish. "Drug discovery in pharmaceutical industry: productivity challenges and

trends." Drug discovery today 17.19-20 (2012): 1088-1102.

• Mehralian, Gholamhossein, et al. "Intellectual capital and corporate performance in Iranian

pharmaceutical industry." Journal of Intellectual Capital 13.1 (2012): 138-158.

IPR PROJECT 30
•
• Lalitha, N. "Indian pharmaceutical industry in WTO regime: a SWOT analysis." Economic
and political weekly (2002): 3542-3555.
• Books:
• Feroz Ali Khadher, The Law of Patents- with a special focus on pharmaceuticals in India 716
(Lexis Nexis, New Delhi, 2007).
• S.K. Verma and Raman Mittal, Intellectual Property Rights: A Global Vision 121 (Indian
Law Institute, New Delhi, 2004).

• ICRA Industry Watch Series, The Indian Pharmaceutical Industry 25 (ICRA Limited, New
Delhi, 1999). Prankrishna Pal(ed.),

• Intellectual Property Rights in India: General Issues and Implications 95 (Regal Publications,
New Delhi, 2008).

• JOURNALS / WEBSITE:

• Draft manual of patent practice and procedure. Controller General of Patents, Designs
& Trade Marks, Mumbai, India 2008. Available from:
http://ipindia.nic.in/ipr/patent/DraftPatent_Manu al_2008.pdf

• Mukherjee S. The new Indian patent law: a challenge for India. Int J Prop Manage 2006;
1(1/2): 131-149.

IPR PROJECT 31
 ANNEXURE:

Project Evaluation Sheet

Name of the Student: Denny K Alexander Course: B.A. LL.B.,
Reg. No: BA0150011 Year & Section: III – A
Subject: INTELLECTUAL PROPERTY LAW
Project Topic: Role of IPR in Indian pharma and Generics in India

TO BE FILLED BY THE COURSE FACULTY:

Whether the Synopsis / Abstract is approved: Yes / No

Scheduled Date of Submission of completed project:
Actual Date of Submission: Delay, if any: Yes / No
Marks deducted for late submission / Redo:

Plagiarism detected (URKUND Analysis Report): %

Sl. P Tot Marks

No: a al Award
r Mar ed
t ks
i
c
u
l
a
r
s
A. PROJECT

1. Cognitive Content

a. Review of Literature
6
b. Research Objective / Problem / Questions

c. Research Methodology

d. Foot Notes / End Notes / Bibliography /

References

e. Relevant Cases / Statutes etc.

2 Data Analysis, Reasoning & Presentation Style 6

IPR PROJECT 32
 .

3 Originality 5
.

4 Conclusion / Suggestions / Recommendations 3

.

Total Marks (A) 2

(-) Marks for late submission 0

B. VIVA-VOCE / PROJECT PRESENTATION

1 Subject Knowledge 2
.

2 Analysis / Articulation / Presentation 2

.

3 General Assessment 1
.

Total Marks (B) 5

(-) Marks for failure to appear on scheduled date & time

Grand Total (A+B) 2

5

Signature of the Course Faculty

Remarks: (if any)

IPR PROJECT 33
IPR PROJECT 34