Impact of Patents on Indian Pharma Industry's Growth and Competency: A Viewpoint of Pharmaceutical Companies in India

Abstract

Instruments of intellectual property rights (IPR) are considered to achieve economic, social and technological advancement for a country in all aspects. Of all the instruments of IPR, patent is the most contentious issue which is deliberated in several international fora. Patents are mostly debated for their role in pharmaceutical field. India signed General Agreement on Tariffs and Trade (GATT) in 1994 agreeing to implement the IPR in all fields of technology, including product patent, with effect from 1 January 1995. Taking into account India’s status as a developing country, India was granted a transition period of ten years from 1995 to 2005 to switch over from process patent to product patent. With this shift, it was imperative for Indian pharmaceutical companies to embrace product patents. This study was undertaken with the objective of identifying the situation in India after product patent regime was implemented. The role of Indian pharmaceutical companies in the era of product patent is crucial. The authors attempted to identify how Indian pharmaceutical companies view product patent regime, hindering the growth of industry or providing impetus to R&D, in this study. The measures taken by these companies to survive and grow in product patent regime have also been analysed

Full text

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Journal of Intellectual Property Rights
Vol 14, September 2009, pp 432-436






Impact of Patents on Indian Pharma Industry’s Growth and Competency: A
Viewpoint of Pharmaceutical Companies in India
Manthan D Janodia,† J Venkata Rao, Sureshwar Pandey, D Sreedhar, Virendra S Ligade and N Udupa
Manipal College of Pharmaceutical Sciences, Manipal University, Manipal 576 104
Received 8 April 2009, revised 11 August 2009
Instruments of intellectual property rights (IPR) are considered to achieve economic, social and technological
advancement for a country in all aspects. Of all the instruments of IPR, patent is the most contentious issue which is
deliberated in several international fora. Patents are mostly debated for their role in pharmaceutical field. India signed
General Agreement on Tariffs and Trade (GATT) in 1994 agreeing to implement the IPR in all fields of technology,
including product patent, with effect from 1 January 1995. Taking into account India’s status as a developing country, India
was granted a transition period of ten years from 1995 to 2005 to switch over from process patent to product patent. With
this shift, it was imperative for Indian pharmaceutical companies to embrace product patents. This study was undertaken
with the objective of identifying the situation in India after product patent regime was implemented. The role of Indian
pharmaceutical companies in the era of product patent is crucial. The authors attempted to identify how Indian
pharmaceutical companies view product patent regime, hindering the growth of industry or providing impetus to R&D, in
this study. The measures taken by these companies to survive and grow in product patent regime have also been analysed.
Keywords: Pharmaceutical industry, TRIPS, product patent, R&D, IPR department
India’s accession to World Trade Organization
(WTO) and obligation to implement Trade Related
Aspects of Intellectual Property Rights (TRIPS)
Agreement has seen the change in Indian
pharmaceutical industry. The industry had to adopt
product patent in all fields of technology from 2005,
which was restricted to process patent and a term of
5-7 years under Indian Patents Act, 1970. The generic
pharmaceutical industry in India that thrived on
process patent and ‘reverse engineering’ was no
longer allowed to do so. On one hand, the
implementation of TRIPS put restrictions on Indian
pharmaceutical industry in terms of producing generic
drugs; on the other hand, it opened up opportunities
for the industry in terms of investment in Research
and Development (R&D) of new molecules. Many
Indian pharmaceutical companies viewed patent
system with a positive attitude and started gearing up
for the same. A few of them viewed it as an
opportunity and earmarked budgets for basic R&D. It
is in the recent years that Indian companies started
charting their growth path. Some big companies on
the one hand are involved in the basic research while
on the other hand they manufacture generic versions
of ‘off patent’ molecules. It would be interesting to
see how Indian pharmaceutical companies sustain
their momentum of growth and develop new
competencies to overcome the challenges posed by
product patents regime.

Objective of the Study
The basic objective behind this study was to
analyse the product patent implications and its impact
on Indian pharmaceutical industry in terms of growth
and competencies in India in post-TRIPS era.

Research Methodology

Research Design
A good research design ensures that research
project is conducted effectively and efficiently.1 The
research design used in this work is an exploratory
research as qualitative analysis derived from the
study.

Data Source
Data sources are an important tool to identify the
source of information. Secondary data for this study
was collected from available literature. However, the
primary data was collected with the help of a well
framed questionnaire. Primary data was also collected
from experts in the field of intellectual property by
having discussions with them.
______________
†Email: mdjanodia1978@yahoo.co.in

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Types of Data
The types of data used in this study were based on
categorical variables, such as, ordinal and nominal.

Data Collection
The relevant data was collected by sending
questionnaire to the selected sample unit within the
population. Since non-personal form of data
collection method is used, the researcher and the
respondent did not come in contact with each other,
eliminating any bias.

Questionnaire Design
The objective of using a questionnaire was to
access decision makers in various pharmaceutical
companies selected on the basis of different
geographical locations in India.

Type of Questionnaire
The questionnaire framed for this study was
disguised in order to reduce respondent bias. The
questionnaire included dichotomous, multiple choice
questions along with open and close ended questions.2

Sampling Design3

Sample Frame
As this study did not involve probability sampling,
sampling frame was not required.

Sample Unit
Sampling unit included managers working in
pharmaceutical industry in intellectual property
management department.

Sampling Method
Since, this is an exploratory study; the sampling
method used was non-probability convenience
sampling.

Sample Size
The method used to decide the sample size was an
unaided judgment. The questionnaire was mailed and
communicated to the probable respondents in the
pharmaceutical industry. The samples selected were
from top 25 companies listed by ORG MARG and
who are actively pursuing the path of R&D in India.
Out of 25 respondents, 10 respondents denied to
answer citing confidentiality reasons. So, the sample
size for this study included 15 respondents.

Analysis and Interpretation of Data
Data collected from questionnaire were tabulated.
The tabulation included deducing information from
433
open ended, multiple choice and dichotomous
questions. The responses to open ended, close ended
and dichotomous questions were coded in order to
analyse the responses objectively. The responses were
analysed in the context of problem at hand.4

Results and Discussion
The study included the responses from big-,
medium- and small-scale companies in India. This
study did not include any response from MNCs as
comparison with MNC could lead to a bias in
analysis.

Existence of IPR Department in the Company
The first question posed to respondents was
whether their company has an IPR department or IPR
division. All the respondents answered in affirmative.
Not a single company had said that they do not have
an IPR cell. This shows the commitment on the part
of Indian pharmaceutical companies to adhere to
TRIPS requirements. This does not mean that all the
companies have devoted their resources for basic
R&D. Respondents were further asked the number of
years since the patent cell was established in these
companies. It was surprising to see that out of 15
responses only one response stated that IPR cell was
established in the year 1995, the year from which
India was given transition period of ten years. The
majority of the companies started IPR cell after 2000.
By the end of year 2004, the majority of companies
started a separate department to look after the issues
related to patents. The reason for asking the year of
establishment was to understand where these
companies stand in terms of understanding issues of
patent in a short span of time. It can be safely
presumed that the patents that are granted to Indian
pharma companies or applied by these companies are
for either new processes or new drug delivery
systems. Additionally, information provided by
Ranbaxy to Mashelkar Committee suggests that
patents have been obtained in the US, primarily, for
generics.5

Industry Institute Collaboration
Regarding collaboration with academic institutes
for developing and patenting a technology, roughly
half of the companies (eight out of a total fifteen
responses) responded in negative. This question was
specifically asked as the intensity of industry
academia interaction is dismal in India. The
multinational companies in western countries

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collaborate with academic institutes in order to focus
on research. Only a few Indian pharmaceutical
companies (seven out of a total fifteen responses)
have collaborated with academic institutes for
carrying out basic research. Companies having
collaboration with more number of academic
institutions imply that these companies have
diversified their research interest. Companies that
responded in negative for collaborative research were
further asked whether they would be interested to
collaborate with academic institutes. Half of them
responded in negative (four out of a total eight
responses). Three companies responded in affirmative
that they were interested in having collaboration with
academic institutes but did not provide the time frame
for collaboration.

Impact on Pharmaceutical Industry after Product Patent
Regime
The next question was with respect to product
patent regime and growth of pharmaceutical industry.
The companies were asked whether the product patent
regime would impede the growth of Indian
pharmaceutical industry. Companies are optimistic as
there would be alternatives available to them to
market generic version of medicines that are going off
patent in near future (2008-2012). Ten companies
responded that the product patent will not impede the
growth of Indian pharmaceutical industry. However,
three companies showed concern that the product
patent regime would be detrimental for the growth of
the industry.
The companies that opined that product patent
regime would be detrimental were further probed as
to what factors they consider would impede the
growth of the industry. The first factor cited was
competition from MNC’s. With product patent in
place ‘reverse engineering’ would no longer be the
case as Indian generic manufacturers will compete
with multinational companies. Another factor was
chances of increase in patent litigation cases.
However, monopoly; price rise of medicines; and
survival of small- and medium- scale companies were
other factors which will have direct impact of product
patent in force, as observed by the members of the
companies. As generics business formed the backbone
of Indian industry, transformation to product patent
regime does not seem smooth. Many roadblocks exist
in transformation from process to product patent.
Some respondents stated that with implementation of
product patent, with an apprehension that the situation
would revert back to that existed before 1970, when
MNC pharmaceutical companies had more than 75%
of market share. Concerns regarding imbalance in
market and setback for Indian companies were also
expressed by the respondents. The optimistic
responses in relation to growth of Indian pharma
industry in product patent regime were overwhelming.
The respondents cited that with implementation of
product patents in India, more resources would be
devoted to basic research. The industry does not have
resources to commercialize the products. One of the
options suggested was licensing of molecules during
different stages of
pharmaceutical industry would become a part of
global research industry and a lot of work would be
outsourced to India. The respondents also expressed
that India would emerge as an intellectual hub
protected by national IP laws. A highly optimistic
response stated that Indian industry would be able to
produce around 2-3 NCE (New Chemical Entities) by
the end of 2015.
Overall people expressed the view that Indian
pharmaceutical industry will continue on its growth
trajectory without having to worry about product
patent. Many other opportunities exist for the industry
where companies can take advantage without
violating the IP laws.

Survival and Growth of Indian Pharmaceutical Industry
Respondents were asked what they feel regarding
the chances of survival and growth of the industry in
product patent regime, and to rate their opinion on a
five point scale where five means strongly agree and
one mean strongly disagree. Except one respondent,
all agreed that the industry would not only withstand
the pressure imposed by product patent in terms of
survival but would have fair chances of growth.
Moreover, the survival and growth of companies
would be governed by maneuvering with the business
strategy to withstand competition form multinational
pharmaceutical companies.
Next question was to explore the reasons for not
establishing a patent cell or IPR cell by the
companies. Four options were given to the
respondents; ‘lack of infrastructure’, ‘procedural
difficulties’, ‘financial incapability’; and ‘did not feel
the need to have an IPR cell’. The majority of
respondents stated that the major reason for not
establishing an IPR cell by many companies was due
to lack of infrastructure. Lack of infrastructure within
a company is related to knowledge regarding the
development. Indian

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JANODIA et al.: IMPACT OF PATENTS ON INDIAN PHARMA INDUSTRIES GROWTH AND COMPENTENCY


patents, the use of resources to acquire patents, filing of
patents, insufficient or non qualified staff and lack of
competent people that can be entrusted with the
activities of acquiring, defending and challenging
patents. Respondents also stated that Indian companies
did not feel the need to have a patent or IPR cell
because some of the companies hired the services of
consultants such as a patent attorney or a patent agent.
Financial incapability was considered as one of the
barriers for the establishment of a patent cell. These
responses were given by people working in small- and
medium- size enterprises. Financial incapability not
only relates to filing and acquiring patent, it also
implies that finances are to be reserved in case a
litigation or dispute arose with the competitor. It is not
surprising to see that lack of infrastructure was cited as
one of the major reasons for not taking initiative with
respect to establishment of a patent cell.

Indian Scientific Community
A question was asked with respect to the
respondents’ view on the strength of Indian scientific
community and their capability to get patents. Out of
total 15 responses, 12 respondents stated that they rate
Indian scientific brilliance to be good or excellent in
terms of developing and patenting a technology. It is
again reiterated by the fact that Indian scientists are
renowned globally for their technical and scientific
prowess.

Lucrative Market for Filing Patents
The respondents were asked whether they consider
US, EU, Japanese or Indian patent to be more
beneficial. The majority of respondents consider that
the US market provides them with more and better
opportunity followed by European market. Japanese
market and Indian market were not considered to be
lucrative for filing a patent. According to IMS data,
sales through retail pharmacy have increased by 3%
in North America which is estimated to be US$ 224.6
billions, out of which the US accounts for US$ 207.4
billions. In Europe the sales through retail pharmacies
have gone up by 3% and are estimated at US$ 116.8
billions.6 Thus, it is not surprising when respondents
believe filing patents in US and EU is advantageous
in terms of business opportunities. It is evident from
the data that many Indian pharma companies have
increased patent filing in US in recent years.

Use of Patent Cooperation Treaty to File Patents
Patent Cooperation Treaty (PCT) basically aims at
simplifying procedure to file in multiple countries
435
simultaneously without losing rights to priority date.
The respondents were asked whether PCT would be
beneficial for filing patent applications for companies
in developing countries. It is important to note that
PCT does not grant or reject a patent application. It
merely facilitates or provides a mechanism through
which a company can file for patent application in
several countries. All the respondents agreed that PCT
will be beneficial to companies in developing
countries as it tries to reduce bottlenecks with
multiple filing, save time and money for the
companies. It also provides 30 months time to
applicant to decide the countries in which an
application for patent to be filed without losing
priority to an invention.

Limitations of the Study
The following limitations had been observed while
conducting the present study:

(i)
The sample size is very small and is just an
indicative of opinion of people working in
pharmaceutical industry. Since, the perception
with respect to IP is subjective, the opinion of
the respondents should not be generalised as
opinion of the entire Indian pharmaceutical
industry.
(ii)
The responses from some companies could not
be collected as managers in these companies
cited confidentiality reasons and company
policy of not revealing such confidential
information.
(iii)
This is an indicative study to assess impact of
Patents (Amended) Act, 2005 and should not be
construed as a conclusive study with impact of
product patents on Indian pharmaceutical sector.
(iv)
The responses are not segregated on the basis of
large-, small- or medium- scale enterprises.

Conclusion
It is observed that the people working in IP
Management Department of various pharmaceutical
companies are confident that India would be a big
player in pharmaceutical sector in coming years. They
are confident that Indian scientists have capabilities to
develop and protect intellectual property. The
companies that responded have all been late entrants in
the field of IPR. Nonetheless, these companies have
attained remarkable progress. Increased awareness
regarding patents has helped companies file patents in
lucrative markets. International treaties like PCT could

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be helpful to Indian companies with respect to filing
multiple applications.

Acknowledgement
Authors are thankful to Dr. N Gopalan Kutty,
Additional Professor, Department of Pharmacology,
Manipal College of Pharmaceutical Sciences, Manipal
University, India, for the review of draft.

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