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TRIPS – Is it a healthy prescription for Indian Pharma Industry.

Pharmaceutical industry of India

Pharmaceuticals is one of India’s most successful industries. The industry’s contribution to the economy of the country is not only mammoth but it also provide drugs at affordable prices to the different classes of our society. Almost the entire domestic demand is met by the industry’s’ indigenous production. Today India is amongst the top 15 pharmaceutical manufacturing countries in the world. The industry began when the Bengal Chemical and Pharmaceutical Works was established in Calcutta. Subsequently and in quick succession Institutes like Kings Institute of Preventive Medicine, Chennai, Pastures Institute Coonor, Central drug Research Institute, Kasauli and other institutes were set up. Post Independence saw setting up of public sector firms like the Hindustan Antibiotics Ltd, IDPL (Indian Drugs and Pharmaceuticals Ltd.,) etc were set up to reduce the imports of important antibiotics and also to meet the country’s demand by indigenous production. The Industry was given its due by the successive governments in Indian Five year plans, and the industry was promoted through direct investment, intellectual property, price regulation and above all the support for scientific research. Public investment in R&D, education and direct production have been more successful

The Pharmaceutical industry enjoys a special place since it’s a knowledge based and research oriented industry. Scientific knowledge, research and innovations are considered as quintessential to public good. Pharmaceutical inventions are built upon and integrate discoveries in biology, chemistry, medicine, botany, etc. Pharmaceuticals have provided opportunity for India, since Indian has a strong base in related scientific field. Added to this India is also a cheapest producer of drugs since its labour cost is 50% to 55% less than the west, infrastructure cost lower by at least 40%, it has vast pool of talents, and the Indian Patent Act, 1970, accepts only process patent. Thus overall, with these benefits, the industry was able to develop every drug at a fraction of cost that was being incurred by innovative Company.

Ancient India – fore runner in medcine.

India, since times in memorial has been the forerunner in fields of science, technology, medicine, dance, arts, literature etc. Our ancient books and manuscripts, like Vedas and Upanishads, not only provided spiritual solace but also have had source of science which gave information about healing of various diseases, mathematics, astronomy , etymology, science of chronology, science of elements, treatises in geometry etc. These various sciences have developed over a period of hundreds of years and during the time when the other civilization in the world were in their rudimentary stages. Though India had been a hub of human wonders in ancient days, today our technology in most of the fields does not compare with the best in the world. We cannot be oblivious to the facts that this ancient knowledge at some point of time has not been passed on or fully passed to the future generations by our ancestors. Added to this what ever scientific and technological knowledge was in our possession was occupied and stolen by the Western Countries. This information was exploited by these countries. Our ancestors while being generous in propagating such vital information for benefit of mankind did not have the forethought of protecting their inventions and innovations, which in the course of later years proved fatal.

History of IPR in India

The concept of intellectual property started seeping in India during the British rule when enactments like the Trade Mark Act of 1940, the Copy Right Act of 1709, which was later amended by the Acts of 1775, 1814, 1842, 1914 and the 1957 Act. the designs Act came into being in the year 1911 and was prevalent since then.

The Indian Patent Act.

The first Indian Patent Act was enacted in 1856 . The act granted exclusive rights and privileges for the inventor. This act was reenacted and replaced by an another act in 1859 and involved plugging of certain loop holes in the previous enactment. Then came the Designs Act V in 1888 which was again repealed by the Designs Act, II of 1911. The subsequent Designs Act in essence adopted the provisions and structure of the Patents and Designs Act, 1907 of United Kingdom. The Act was also called the Indian Patents and Designs Act. The said act prevailed till 1970 when the word Indian Patents was dropped and the Patents Act, 1970 was enacted. The 1970 act formed the basis of Patent law in India and it came into effect from 20th April, 1972. The Indian patent Act, 1970 is modeled to promote the industrial process development and sought to achieve a fair balance between private and public interest and in way promoted a healthy competition and innovative attitude amongst the Indian Industry. The philosophy behind the grant of patent under the Act was to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay. Patents are not granted merely to enable patentee to enjoy the monopoly of the importation of the patented articles. An obligation is, therefore, imposed on the patentee to work the patent in India on a commercial scale and to fullest extent. Failure to fulfill this obligation entailed in the granting of compulsory licenses or the revocation of the patent itself by the Government of India

Patent Statistics

However in so far as statistics go, the scene had not been encouraging. The industry seemed to have not taken advantage of the Act. The number of Patents in force dwindled from approximately 30,000 in 1970 to less than 9500 in 1996. The number touched its lowest in and around 1995 when the numbers were estimated at less than 4000. The reason attributed to this is that the Patents were not being kept alive and in force by payment of the yearly fees. However between 1995 to 1996 there was a quantum jump and the filings increased to 9500. It is also surprising to note that almost about 75% of in the Patent applications filed in India are by foreigners.

Ratification of TRIPS by India.

India signed and ratified in the year 1996, the TRIPS Agreement. The Component of TRIPS – Trade related Intellectual Property Rights - was included in the WTO Agreement of 1995 against the active opposition of the developing countries to include IPR in the new GATT Treaty. With the signing of this agreement the developing member countries, Including India, have to now make their IPR laws TRIPS compliant. Under this agreement norms and standards are provided in respect of seven categories of Intellectual Property Rights which also includes product patent in all areas of technological development. As per the agreement all member countries are expected to comply with the provisions of TRIPS from January 1, 1995. A transition period of 10 years from 1995 to 2005 for developing countries including India is provided to enact bills incorporate product patent protection. As a result of this the Copyright Act has been amended in 1999 and the Trade and Merchandise Marks Act was amended as the Trade Marks Act, 1999. The Patent (Amendment) Act, 1999 was also brought in amidst apprehensions and doubts.

TRIPS and Indian Pharmaceutical industry.

Clouds of gloom and despondency descended on over the Indian Pharmaceutical Industry when it was announced that the entire world Pharmaceutical industry would be subjected to the contents of the new WTO agreement and that process patent would be replaced by product patent. The date of implementation as of today is January 1st 2005. The worst impact of TRIPS that the Pharma Industry foresees will be the end of the reverse engineering , incidentally this is the core competence of the industry. The industry now has to emphasize and concentrate on basic research. The companies without patents for new products will be unable to offer newer drugs to customers. It is also feared that number of units in the industry may close down and only few hundreds may survive this onslaught of imposition of conditions by the TRIPS.

The prescription by TRIPS for product patent implies the following for the industry:

  1. The industry has to now emphasis on basic research. The days of core competence of the industry in reverse engineering are over. The units in the industry now have to offer newer drugs to the customers in order to survive.
  2. The Companies have to start afresh on research. They need to add the necessary wherewithal’s to conduct research in their units.
  3. The units have to now necessary have a policy for innovation for the purpose of survival.
  4. To exploit commercially such innovations over a period of time to the exclusion of the competition, the IPR strategy needs to be developed and implemented.
  5. The novel drug delivery system (NDDS) assumes more significance.

Apprehensions of the Pharma Industry:

The introduction of TRIPS and its compliance has posed some challenges to the Pharma industry:

  1. The industry feels that the TRIPS in its present form, is tipped in favor of developed nations and multination pharmaceutical firms and that there is nothing trade related about TRIPS and that the right to trade is being exploited by developed countries.
  2. Indian sovereignty and the Public health policy should not be compromised at huge costs to the Indian Public. It is opined that RIPS in fact violates he human rights of people.
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  4. TRIPS would strike at the industry’s ability to engage in sustainable development in self reliant way.
  5. TRIPS would also hinder the preservation and infact would become a threat to innovation and practices of indigenous medicines, especially alternate medicines like Ayuveda and Unani.
  6. It is feared that in this big shake up number of medium and small Pharma companies forced to pull down their shutters. This would mean few thousands of employee going with out jobs.
  7. Companies which do not have enough R&D competence and orientation and who want to be in the race and survive may be forced to go in for mergers, joint ventures etc.
  8. Companies may have to increase their R&D spending and allocations to almost double.
  9. Overall growth rate of the industry may slow down considerably or may be even stagnant for some time.
  10. Above all drugs could become expensive and beyond the reach of common man.

However some of the major Pharma industries see new opportunities and bright prospects under the new patent legislation. They argue that though the new legislation poses challenges to the Pharma Industry, they would provide several opportunities for rapid growth and would encourage the Companies to develop a innovation strategy.

Following are some of the new opportunities for growth the Pharma industry foresees after 1-1-2005.

  1. It is predicated that by the time the legislation comes into force on 1 January, 2005, drugs worth around US $ 30 billion would be going off the patent. This would mean a very good opportunity for the industry to sell formulations and bulk drugs through out the world. A very healthy growth is predicted to the industry even in spite of competition on the ground that most of the companies posesses strong process re-engineering skills and lower cost of development.
  2. Out sourcing by MNC in areas of bulk drugs, formulations, for patented and of-patent products. This would mean serious strategic alliances and bringing in of foreign exchange
  3. Apart from outsourcing, the infrastructure could be used by foreign manufacturers for contract manufacturing of Pharma products.
  4. Indian Pharma could also be a important sourcing platform for many multinational in research of new drugs.
  5. The industry would use its technical and man power skills for research and innovation. However the Industry would still be able to market older drugs which is not included in the patents list.
  6. Once a new product is developed the inventor would secure monopolistic rights of production and marketing for a period of 20 years, which is very substantial.

DOHA Declaration – Concession to developing nations.

The first significant achievement of the World Trade Organization’s Doha ministerial Conference came on the morning of 13 November 2000 when a compromise on the ‘declaration on the TRIPS Agreement and Public Health’ was reached. It was as a result of staunch effort by India Brazil and about 55 other African nations. This is one of the areas where there is an assurance that the restrictive clause under the TRIPS agreement on drug patents will not over ride public health concerns. It is a positive development that in TRIPS, a public health crises has been included as an exception for granting compulsory license (CL).

What is new in the Doha Declaration is that it recognizes the fact which was implicit under Articles 7 and 8 of TRIPS, that considerations of Public Good which includes Public Health could be the over riding factor while offering IPR protection for medicines for specified diseases and ‘epidemics’ , particularly for DCs and LDCs . The one hundred and forty two countries who came together at the 4th WTO MINISTERIAL CONDERENCE at Doha clearly affirmed that governments are free to take all necessary measures to protect public health. The declaration gave primacy to public health over intellectual property rights.

It is viewed that this declaration on public health is trophy for India since WTO had accepted , unequivocally, that patents will not stand in way of Public health . This is a very important aspect for India because, now national governments can decide if a particular situation or crisis is an emergency and that whether it would warrant sidelining of patents. How far this declaration would help India would be seen in future

It is inevitable that the industry now has to face these challenges and the opportunities that the new regime would throw open. To overcome the resource crunch and scarcity of resources the industry may have to consider many options like mergers with other Pharma firms, collaborations with foreign firms, joining an R&D consortia. The industry would learn to change its axis of expertise from re-engineering to innovation. Aggressive marketing, good branding, better products, R&D and a patent protection would be their tools of success. The past has shown that Indian appears to have the technological and the commercial capability to adopt to more competitive environment. It has often caught up with world technological frontiers in other sectors, though some times a little late. It can do so in again in future, though with traumatic adjustments, if the industry wants to be an important pharmaceutical development center on world map.

Ram Kumar *The author is practicing lawyer with a standing of 16 years in the filed of Information technology, Intellectual Property Rights & Corporate law and can be contacted at ashokramkumar@gmail.com [This Paper was First Presented as a background paper at “international Conference on Innovation and Intellectual Property Rights Strategy – 12th & 13th September, 2000. Venue was ITC Kakatiya]