D - S M N R U L: R Hakuntala Isra Ational Ehabilitation Niversity, Ucknow

ASSIGNMENT ON COMPETITION ACT 2019-20
Dr. SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY, LUCKNOW
AN ASSIGNMENT
ON
IMPACT OF TRIPS AGREEMENT ON COMPETITION IN PHARMACEUTICAL INDUSTRY IN INDIA
UNDER THE SUPERVISION OF
SUSHMITA RAJPUT MA’AM
SUBMITTED TO SUBMITTED BY
SUSHMITA RAJPUT SHUBHAM PATHAK
GUEST FACULTY B.COM.LLB (Hons.)

th
FACULTY OF LAW 6 SEMESTER (2019-20)
D.S.M.N.R.U D.S.M.N.R.U
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ACKNOWLEDGMENT
The research methodology adopted to complete this paper is doctrinal. The primary source of
research is treaties and conventions. Existing secondary data has been analyzed and no new
data has been created. The paper follows majorly inductive reasoning, beginning with
specific observations and measures, to detect patterns and regularities, formulating some
tentative hypotheses that can be explored, and finally end up developing some general
conclusions or theories.
The completion of this Assignment could not have been possible without the participation
and assistance of so many people whose names may not all the be enumerated. Their
contributions are sincerely appreciated and gratefully acknowledged. However, I would like
to express my deep appreciation and indebtedness particularly to the following Miss
Sushmita Rajput (Guest Faculty) for his endless support, kind and understanding spirit during
making of this assignment.
To all relatives, friends and others who in one way or another shared their support, either
morally, financially and physically, my father, who provided me with case materials and his
invaluable blessings thank you Above all, to the Great Almighty, the author of knowledge
and wisdom, for his countless love.
I thank you all.
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TABLE OF CONTENTS
1) INTRODUCTION……………………………………………………………………………4
2) INDIAN PHARMACEUTICAL INDUSTRY………………………………...……5
3) TRIPS AGREEMENT……………………..............................................................................6
4) IMPACT OF TRIPS ON INDIAN PHARMACEUTICAL SECTOR………….…9
5) CONCLUSION…………………………………………………………………..………….11
6) BIBLIOGRAPHY…………………………………………………………………………..13
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1. INTRODUCTION
Adam Smith described self-interest and competition in a market economy as the “invisible
1
hand” that guides the economy. Competition, the procedure of rivalry between firms
striving to increase deals and make benefits, is the main impetus behind businesses. Proficient
and reasonable markets are crucial for catalyzing private sector advancement and monetary
development.2 The principle thought behind any competition policy is to protect and promote
competition, to empower effective assignment of assets in the economy. It is obvious that
competition would bring about lower costs, better quality items and would empower
innovation and development − all of which amplifies social welfare. Therefore, in simpler
words, it can be stated that the ultimate objective of competition is to safeguard consumer
interests as increased competition in any market leads to reduced cost and improved quality
3
which in turn results in benefits to the consumer.
The Preamble to the Competition Act provides that the objective of the Act is the
establishment of a Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers and to
ensure freedom of trade carried on by other participants in markets, in India, and for matters
connected therewith or incidental thereto. 4 Prior to the Competition Act, 2002, MRTP Act,
1969 was the legislation governing anti-competitive activities in India. However, the
objective behind the enactment of the 2002 legislation was to shift the focus from curbing the
monopolies to promoting competition. Acting in furtherance of the objective provided in the
preamble, The Competition Commission of India (CCI) was established on October 14, 2003
and it became functional from May 2009. The Competition Act prohibits anti-competitive
5 6 7
agreements , abuse of dominant position by enterprise , and regulates combination
whenever such agreements cause or is likely to cause appreciable adverse effect on
competition. Combination mainly includes acquisition of controls, shares, voting rights or
assets. Terms like “dominant position”, “predatory pricing” have been explained in the
relevant provision of the Act itself.
1 Available at, http://www.stlouisfed.org/education_resources/economic-lowdown-podcast-series/the-

role-of-self-interest-and-competition/.
2 Available at, http://www.oecd.org/investment/globalforum/40315399.pdf.
3 Available at, http://cci.gov.in/images/media/presentations/5ahmed_20sep04_20080410185941.pdf.
4 Competition Act, 2002
5 Section 3, Competition Act, 2002
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INDIAN PHARMACEUTICAL INDUSTRY
The Indian pharmaceutical industry has indicated consistent development amid the most
recent three decades and has also developed as one of the main worldwide players in
generics. India is one of the major medication creating nations on the planet, being the fourth-
biggest maker by volume and the thirteen-biggest by quality, with around a 20-22
contribution in global generic production. The Indian pharmaceutical industry, which had
minimal innovative capacity to produce tranquilizers indigenously in the 1950s,
accomplished independence in pharmaceutical creation and has raised as one of the biggest
medication exporters on the planet in the late 1980s. Behind the advancement of the business
are the feeble patent administration under the Patent Act of 1970 and the Drug Policy of
1978.
The Patent Act of 1970 and the Drug Policy of 1978 prepared for the advancement of
indigenous R&D. The capacity to create non specific medications was obtained and enhanced
amid the mid-1970s to 1990s. Furthermore, other modern arrangement measures, for
example, the Foreign Exchange Regulation Act of 1974 (FERA) and the Drug Price Control
Order of 1970 (DPCO 1970), which were disincentives to outside organizations, likewise
assumed imperative parts in the improvement of the industry.
The Indian pharmaceutical industry, which chipped away at the premise of reverse
engineering and process innovation, accomplished independence in technology, and has been
fortifying export orientation on the tide of financial liberalization since the early 1980s. The
business began to indicate great guarantee of worldwide aggressiveness, and today keeps on
extending its vicinity around the world. Exchange surplus of pharmaceutical items has been
expanding since 1987. In the late 1990s, India accomplished ideal pharmaceutical exchange
balance throughout the world. The industry has developed as the seventeenth-biggest
medication exporter on the planet and fares around 40 percent of its generation. The local and
fare markets have been developing consistently. While the business has been developing at a
yearly development rate of 10 percent, fares have been developing at around 20 percent.
Fares are the main impetus behind the business. The Indian industry has emerged as a world
leader in production of drugs like Ciprofloxacin, Dextropropoxyphene, Ibuprofen,
8
Ethambutol, Norfloxacin etc.
8
Available at, https://src-h.slav.hokudai.ac.jp/rp/publications/no11/11-07_Kamiike&Sato.pdf.
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TRIPS AGREEMENT:
The 1970 Patent Act basically gave an upper hand to Indian pharmaceutical manufacturers.
Moreover, the high tariff rates for drugs ultimately made Indian companies cost efficient with
time resulting in an advantage over their foreign counterparts. In the nineties the capital cost
for establishing an Indian firm was one third that of a foreign firm and thus Indian
pharmaceutical sectors enjoyed a sufficient amount of cost advantage.
Trade Related Aspects of Intellectual Property Rights (TRIPS) were brought in with the
prospects purpose of universalising the standards of Intellectual Property Rights and frame
the rules of the game of the developing countries on par with the developed countries. Several
factors like the continuous advancement in science, new breakthroughs in bio-technology, the
growing participation of the private sector in the cost intensive research and development in
the knowledge based pharmaceutical sector and the relative strength demonstrated by the
developing nations in adapting the results of the scientific innovations to the local
environment have prompted the industrialised nations to seek stronger protection for their
innovations in all the countries.
As per the minimum standards mentioned in the TRIPS agreement, patent shall be granted for
any inventions, whether products or processes, in all fields of technology provided they are
new, involve an inventive step and are capable of industrial application without any
discrimination to the place of invention or to the fact that products are locally produced or
imported. Accordingly, now patents will have to be granted in all areas including
pharmaceuticals and the effective period of protection is for twenty years from the date of
filing the application. With the implementation of TRIPS agreement by most of the
developing countries by 2005, a stronger patent regime or product patents will be uniformly
applicable on the pharmaceutical innovations among the member countries of the World
Trade Organisation. The implications of TRIPS for the pharmaceutical sector are that:
patents will be granted both for products and processes for all the inventions in all fields
of technology; the patent term will be twenty years from the date of the application
(compared to the seven years under the 1970 Act), which is applicable to all the member
countries and thus rules out all the differences in the protection terms prevailed in different
countries; patents will be granted irrespective of the fact whether the drugs were produced
locally or imported from another country; though the grant of the patent excludes
unauthorized use, sale or manufacture of the patented item, yet there are clauses which
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provide manufacturing or other such rights of the patented item to a person other than the
patent holder. In the case of a dispute on infringement the responsibility (to prove that a
process other than the one used in the patented product has actually been used in the disputed
product) lies with the accused rather than with the patent holder (in the 1970 Act, the
responsibility is with the patent holder). This is the broad framework, which will guide the
pharmaceutical industry of India in the WTO regime.
Countries with different developmental status have been given a transitional period to bring
in reforms in the desired areas and make the laws comparable with other countries. Thus
developed countries had one year to make the suitable amendments and for the developing
and least developed countries, the time provided was 10 and 15 years respectively. As per
this even US had to amend its patent law since, the effective term of protection was for a
period of 17 years from the date of grant. India has to enforce the system of stronger patents
from January 2005. During the transitional period of 1995-2005, India has to start accepting
applications for product patents from 1995 and provide exclusive marketing rights (EMR) for
the products that were granted patent protection elsewhere.
According to Article 28, a patent shall confer on its owner exclusive rights:
• Where the subject matter of patent is a product, to prevent third parties to either make, use,
offer for sale, or import without the owner’s consent.
• Where the subject matter of a patent is a process, third parties are not allowed to use the
process, or offer the process for sale without the owner’s consent.
Article 33 discusses the terms of protection which states that the protection will expire in
twenty years from the date of filling the application. Also under TRIPS, the provision of
compulsory licensing and parallel imports can be implemented only under emergency
situations. Unlike in the Indian Patent Act 1970, Government had very limited scope to use
patented innovation.
Within India, the opinion on stronger patents on the pharmaceutical industry is divided, some
emanating from the country’s prior experience with product patents and others from
countries, which have recently adopted product patents. These evidences suggest that a
country’s level of IPR influences a variety of social and economic factors which range from
common peoples access to medicine to the functioning of the domestic industry, investment
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in R&D, technology etc. Developing countries particularly, India, Argentina and Brazil were
the strongest opponents of the TRIPS agreement and India was more vocal in voicing her
views on issues raised by the developed countries. Now due to pressures from various
quarters, all the three countries have accepted the TRIPS agreement and India currently looks
for flexibility within the TRIPS framework that would have positive impact on the people,
industry and economy.
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IMPACT OF TRIPS ON INDIAN PHARMACEUTICAL SECTOR
The most adverse impact of the TRIPs Agreement is going to be on the health sector of the
developing countries. The role of patent in maintaining monopoly and restrictive practices in
Pharmaceutical industries was identified by the UN Agency like UNCTAD in the 70’s itself.
It was this realisation which prompted the developed and developing countries to deny or
limit Pharmaceutical patents till recently. India is a glaring example in this regard. After
denying product patent under the 1970 Act, the Indian domestic Pharmaceutical industry
became an export surplus industry. The 40000 crore domestic industry fears that increased
competition, import surges and MNCs would lead to a non level playing field.
Much of the debate on the impact of product patents on the pharmaceutical industry in India
has centred on the issues of price of the patented product and their accessibility. While it is
true that a positive association is observed between stronger protection and prices of drugs, it
is also true that prices decline with the expiry of patent. Though more competition among
generic drug producers results in substantial price reductions for those drugs, yet increased
competition from generics does not result in aggressive response in price behaviour by
established brand name products. In India when amoxicillin was first introduced by a
multinational the price of the drug was very high. However, with the local manufacturers
stepping in to produce the indigenous version of the amoxicillin, the price of the same
declined rapidly. It should be admitted that adoption of the process patents along with the
domestic regulations that restricted the role of the multinationals resulted in the growth of the
domestic industry. In the late ‘90s the pharmaceutical industry of India has reached a position
of near self-sufficiency in formulations.
So far, the pharmaceutical industry was covered only by process patent, which allowed them
to reverse engineer drugs and market them at very low prices. Now with a product patent in
9
place this will no longer be possible. With the very low purchasing power of the people in
India, the government of India has brought certain essential drugs under the price control. The
price control along with the amendment of patent laws in early ‘70s resulted in a declining
impact on prices. Three factors have contributed to the lower costs of production viz :
(1) The process development capacity of the units;
9 Chaudhuri Sudip,TRIPS Agreement and Amendment of Patents Act in India, EPW VOL 37 No. 32
Aug 10-16, 2002.
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(2) Severe competition among the firms and
(3) Relatively lower costs of production.
Based on India’s own experience and on a selective comparison of prices of a few drugs in
countries where product patents is in force, intellectuals forewarn that the stronger protection
would result in increase in the prices of the drugs and thus medicines will be inaccessible to
common people. Their comparison of patented drugs introduced elsewhere in the world
shows that prices of the drugs had increased manifold after the protection. This fear about the
rise in the prices and the probable exploitation by the multinationals among the developing
world grew high when the vested multinationals tried to prevail on the South African
government to stop the passing of the bill to permit parallel import of the HIV-AIDS drugs
which would ensure the availability of those drugs at a lower rate.
However, introduction of product patent and hence increase in price of drugs may not affect
much of Indian population. A large part of the Indian population falls below the poverty line
(37%) and is never in the capacity of affording any drugs. Moreover, in India less than 4
percent people have medical insurance which indicate that most people have their health
expenditure from their own money. Consumers in India are much more price sensitive
because of low income and less provision of health insurance. So the majority of the
population will have a preference for generic drugs, though information asymmetry plays a
huge distortion in this market. India can have regulations mandating doctors prescribe for
both patented drugs and generic drugs, similar to practices in many European countries. The
post Patent Regime opens up vast opportunities for Indian pharmaceutical firms. India will
emerge as a leading country in the world pharmaceutical market. Presently, many Indian
companies have begun international operations as well as acquisitions which will make a
significant contribution to their turn over. Export will be the major thrust of the industry, in
10
the post Product Patent regime.
10 Shahani Ranjit, Leveraging IPR for growth.,Indian Patent Law-Legal and Business implications,editors
Ajit
Parulkar and Sarita D’souza,MACMILLAN India Publication,p.63
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CONCLUSION:
Introduction of TRIPS Agreement, which mainly concerns product patent in all sectors and
increased the length of patent to twenty years is bound to affect India’s pharmaceutical sector.
Under Indian Patent Act, 1970, product patent was not allowed for pharmaceutical products,
agricultural products, food products and any kind of chemical products. It seems from the
preceding sections that grant of intellectual property right for an invention is absolutely
necessary in the domain of pharmaceutical sector. Though it creates a short term monopoly
and loss in social welfare, but the long term benefits are enormous. Also, pharmaceutical
sector needs to be a highly regulated sector not only in terms of price and quantity, but also in
the way it functions. India being a 1.2 billion population country with a large chunk of people
living below the poverty line, the Government should look into the abuse of patent rights and
monopoly rights in this sector, because this sector is a vital priority sector. Another factor
which can hinder growth is that small companies which were mainly benefited from the
protective regime before 2005 may eventually close up or may be forced to become
contracting units. The main function of CCI is to check all possible anti-competitive practices
going on in this sector like ever-greening of patents, patent pooling, not letting in
manufacturers of generic drugs for marketing, right to licenses, patent infringement etc. The
main motive is basically to boost competitiveness in the economy. Few suggestions that
might boost up competitiveness are discussed as follows:
· To provide subsidies for investment in R & D so that it might boost up inventions

under the new patent regime in this sector;
· To rationalize Drug Price Control Order: It is extremely important to have liberalized
price control regime. Price control is mainly done to ensure availability and quality
medicines at affordable prices. But price control should not be to such an extent that it
makes firms unprofitable to invest in R & D. Moreover, under WTO regime, without
this investment, the nation can never come to the forefront and become a global
leader;
· An academic cum industrial relationship can further be explored. The R & D can be
encouraged in different universities or academic institutions, while industries can take
up the commercialization part. In this case the IPR will be owned by the academic
institutions and they can share only a part of the total profit. This will not only
improve academic excellence in India, but help in better inventions.
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· Exemptions in tax: Income tax exemptions should be given for clinical trials in order
to boost up profits and encourage research.
· The procedure for procurement of licenses should be made more stringent, including
extensive disclosure of exhaustive personal, financial and business information and a
detailed background check. This would tackle the problem of spurious drugs.
Moreover, most of the cases relating to spurious drugs remain undecided for years
and there is strong need for mechanisms which would result in faster trials.
Intellectual property right in the pharmaceutical sector is an important issue. Given that
India is still a developing country, and hence is vulnerable to global shocks, regulation
policies in this sector should be seriously taken into account. Given the bright future of
India’s pharmacy sector, India needs to give special attention to exim policies, so as to get
the maximum return out of it. Also, it needs to look into the issues of R & D investment
which will boost up this sector. India should adopt a balanced approach in making
regulations and policies for this sector. Policies should be made taking into consideration
India’s strength. One of the strengths of India from long has been its know-how in herbal
medicines. Intellectual property right in these traditional medicines are very important.
There is a renewed interest in the modern world to shift from the modern medicines to
traditional medicines. India is working hard to retrieve its past knowledge in an organized
fashion by the formation of Traditional Knowledge Digital Library (TKDL). Since these
herbal medicines does not come under the purview of TRIPS Agreement and research in
new chemical products involve huge investment expenditure, Indian companies should
work in herbal medicines. Moreover, the Government should help in the set up
laboratories for research and development in herbal medicines. Hence India should
encourage healthy competitive practices. In the long run, due to the introduction of
patents researchers in India and abroad, there will be renewed opportunities in India and
the consumers will be benefited. Without this opportunity, India will face nothing but
brain-drain.
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6. BIBLIOGRAPHY
PRIMARY SOURCES
STATUTES
1. COMPETITION ACT, 2002
SECONDARY SOURCES
BOOKS
1. KRISHNA KESHAV, INVESTMENT AND COMPETITION LAW, (SINGHAL LAW

TH
PUBLICATION, 4 Edn.)
WEBSITES
1. http://www.stlouisfed.org/education_resources/economic-lowdown-podcast-series/the-role-of-self-
interest-and-competition/.
2. https://src-h.slav.hokudai.ac.jp/rp/publications/no11/11-07_Kamiike&Sato.pdf .
13 | P a g e

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ASSIGNMENT ON COMPETITION ACT 2019-20

Dr. SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY, LUCKNOW

IMPACT OF TRIPS AGREEMENT ON COMPETITION IN PHARMACEUTICAL INDUSTRY IN INDIA

UNDER THE SUPERVISION OF

SUSHMITA RAJPUT MA’AM

SUSHMITA RAJPUT SHUBHAM PATHAK

GUEST FACULTY B.COM.LLB (Hons.)

2) INDIAN PHARMACEUTICAL INDUSTRY………………………………...……5

4) IMPACT OF TRIPS ON INDIAN PHARMACEUTICAL SECTOR………….…9

1 Available at, http://www.stlouisfed.org/education_resources/economic-lowdown-podcast-series/the-

INDIAN PHARMACEUTICAL INDUSTRY

IMPACT OF TRIPS ON INDIAN PHARMACEUTICAL SECTOR

(1) The process development capacity of the units;

(2) Severe competition among the firms and

(3) Relatively lower costs of production.

· To provide subsidies for investment in R & D so that it might boost up inventions

1. COMPETITION ACT, 2002

1. KRISHNA KESHAV, INVESTMENT AND COMPETITION LAW, (SINGHAL LAW

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