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Patenting and R&D in Indian pharmaceutical industry: Post-TRIPS scenario

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Abstract

This paper studies the impact of a restructured patent regime on the R&D expenditure and the patenting activity of Indian pharmaceutical companies. The results indicate that there is an increase in both R&D investment and measured inventive output in the form of patents. The firms, which have paid very little attention to research and innovation in the past, are responding to the restructured IPR regime in novel ways. However, this effect appears to be highly concentrated in the technologically progressive large scale pharmaceuticals while SMEs are yet to develop or acquire resources in order to survive in this competitive era.
Journal of Intellectual Property Rights
Vol 18, March 2013, pp 105-110
Patenting and R&D in Indian Pharmaceutical Industry: Post-TRIPS Scenario
Neena Bedi†, P M S Bedi
Department of Pharmaceutical Sciences, Guru Nanak Dev University, Amritsar 143 005, Punjab
and
Balwinder S Sooch
Department of Biotechnology, Punjabi University, Patiala 147 002, Punjab
Received 26 July 2012, revised 21 January 2013
This paper studies the impact of a restructured patent regime on the R&D expenditure and the patenting activity of
Indian pharmaceutical companies. The results indicate that there is an increase in both R&D investment and measured
inventive output in the form of patents. The firms, which have paid very little attention to research and innovation in the
past, are responding to the restructured IPR regime in novel ways. However, this effect appears to be highly concentrated in
the technologically progressive large scale pharmaceuticals while SMEs are yet to develop or acquire resources in order to
survive in this competitive era.
Keywords: Pharmaceutical industry, TRIPS, patents, R&D
Patent protection is the cornerstone of a healthy and
dynamic research environment of any country.
Product patents protect the newly developed products
from exploitation without permission of the patent
holder in a wholesome manner, whereas, process
patents protect the method of production of a product.
Patent protection provides incentive and
encouragement to the inventor or the company, which
is involved in R&D, to develop new and innovative
processes and products by providing monopoly rights
and making them free from competition.1 India’s
accession to WTO and its obligation to implement the
TRIPS Agreement has resulted in a drastic change in
the Indian pharmaceutical industry. The Indian Patent
Act was revised three times in 1999, 2002 and 2005 to
implement various provisions of TRIPS including a
product patent regime for chemicals, pharmaceuticals
and food products.
Background
The technology for the production of essential
drugs was not available to India before independence
and India was fully dependent on other nations for the
supply of vital drugs. At the time of independence, the
Patents and Designs Act, 1911 provided product
patents for all the inventions, including foreign
inventions, for a period of 16 years from the date of
application. The independent government in 1947
emphasized rapid industrialization and invested
heavily in pharmaceuticals, yet did not discourage
foreign companies from competing in India. In the
first decade of independent India i.e. between
1947-1957, 99 per cent of the 1704 drug and
pharmaceutical patents in India were held by foreign
national enterprises which controlled 80 per cent of
the market.2 The US Senate Committee headed by
Kefauver in 1962 had observed that drug prices in
India were the highest in the world.3 During this time,
the government took a major step to make the
pharmaceutical industry self reliant with the
establishment of two giant public sector enterprises,
namely the Hindustan Antibiotics Limited in 1954
followed by Indian Drug and Pharmaceuticals Ltd.4
These two companies played an important role in
starting the domestic production of key bulk drugs,
although these initiatives taken by the government
were not enough to start the local production of
pharmaceuticals. Further, two expert committees i.e.
the Patent Enquiry Committee (1948-50) and the
Ayyangar Committee (1957-59) were established to
provide suggestions on the type of patent system that
India should implement.5 The committees suggested
that a patent system which focused on the access to
resources at lesser prices, fighting back the monopoly
in the pharma sector by multinationals and promoting
growth in the domestic pharma industry, would be
beneficial to India.6 The Patent Act of 1970, which
came into effect in 1972, was finally enacted on the
_
________
†Corresponding author: Email: neenagndu@yahoo.com
J INTELLEC PROP RIGHTS, MARCH 2013
106
recommendations of these committees and only
process patents were allowed for pharma products
under this Act.
The generic pharma industry in India thrived on the
process patent regime and the capacity of domestic
pharma steadily advanced in the conducive
atmosphere.7 Well developed chemical infrastructure
and process skills enabled Indian companies to
develop new and innovative methods by expanding
their R&D base, which was later leveraged by them to
move up the R&D value chain. Some firms like
Ranbaxy, Dr Reddy’s Laboratories (DRL) and Sun
Pharma started focusing on novel drug delivery
systems, thus adding their own inputs and values to
existing products. The products produced this way
were better tailored for the Indian market than the
drugs manufactured by the MNCs.8 Pharmaceutical
companies like Cipla, Cadila, Lupin, Torrent,
Wockhardt and Dabur also established large
production facilities in India and started improving
their manufacturing efficiency and technology.9 The
negative impact of Indian Patent Act, 1970 was that
too many small and medium players entered the
pharma industry as there were no intellectual barriers.
The TRIPS Agreement provided a transition period
till 1 January 2005 for developing countries like India
to implement the Agreement and to introduce product
patent regime in pharmaceuticals, food and
chemicals.10 The adoption of a product patent regime
made survival for SMEs and generic companies,
which earlier managed to exist on generic drugs or
drugs in high demand manufactured by alternative,
non-patented processes, difficult in this competitive
market. In view of the above background, the present
study was conducted to analyse the effect of TRIPS
implementation on the patenting activity and R&D
expenditure of Indian pharmaceutical industries.
Effect of TRIPS on the Patenting Activity of Indian
Pharmaceutical Industries
The number of patent applications filed and patents
granted in a particular research area indicates the level
of inventive activity in that particular area. The
present analysis was carried out by using databases
like Ekaswa (TIFAC) and official websites of the
European Patent Office11 and Indian Patent Office.12
The results clearly showed that there has been a
significant increase in the patent applications filed in
India after TRIPS was implemented. The
number of patent applications filed has been steadily
increasing after TRIPS came into existence in 1995 as
pharmaceutical companies realized the need for
serious R&D in new drugs and formulations and
patenting them.
A comparison of the top eleven large pharma
companies in 2010, on the basis of their turnover
between 1999 and 2009 indicates that Ranbaxy has the
largest contribution and the maximum number of
patent applications filed followed by Glaxo Smithkline
(GSK), Cadila and Dr Reddy’s Labs (Fig. 1). More
number of applications is related to inventions in the
field of new or improved processes for products than
for the products themselves. The product related
applications are concerned with intermediates and
formulations with maximum contribution in modified
release dosage forms. It was also observed in the present
study that more firms have marked their presence in
patent filed and granted in the post-TRIPS era.
As can be seen from Fig. 2, there has been an
increase in the product patent applications filed
by large pharma companies especially after 2005. The
number of patent applications filed by Indian majors
Fig. 1 Patent applications filed in India (1999-2004)
Fig. 2 Patent applications filed in India (2005-2009)
BEDI et al: PATENTING AND R&D IN INDIAN PHARMACEUTICAL INDUSTRY: POST-TRIPS
107
i.e. Ranbaxy, DRL and Cipla are quite consistent
since 1995. There was no significant change in filing
of patent applications in case of these companies
because by 2005 they had already initiated measures
like increased patent filing to encounter the post-
TRIPS competition. There was a significant increase
in filing of patent applications by other pharma
companies e.g. Cadila, Nicholas Piramal, Sun Pharma
and Lupin Limited which reflects the increased
importance these companies attached to product
patents. A large number of product patents by large
scale pharmaceuticals have also been approved
(Fig. 3). Mankind Pharma, though ranking five on the
basis of its turnover in 2010, has not filed any patent,
but has started investing in R&D recently.
Many applicants among the top companies
(except Alkem) had started using the PCT route for
filing of applications in multi-countries after India
joined the Patent Cooperation Treaty in 1999 (Fig. 4).
Similar findings were also reported by various
researchers. Kiran and Mishra deduced that prior to
1995, except Ranbaxy, a majority of the Indian
pharmaceutical firms did not have US patents.6
However, in the post-TRIPS period, especially after
2000, a larger number of firms marked their presence.
Chaudhuri, in his working paper emphasized that
patenting by major Indian pharmaceutical R&D
spenders started in US in 1990 when Ranbaxy
obtained two patents.13 Since then, particularly after
the late 1990s, there has been increasing trend in
patent application filing. Before 1995, only seven
patents were obtained and all of them were by
Ranbaxy. As India revised its Patent Act in 1999,
2002 and 2005, patent applications by Indian as well
as foreign companies increased significantly. However,
as compared to large pharma companies, the number of
patent applications filed by SMEs were found to be
negligible. The reason was possibly the limited
knowledge of the intellectual property system and
limited access to the expert advice on patent filing.
SMEs also have limited resources unlike large scale
pharmaceutical industries and relative inability to
absorb the cost and risk associated with enforcement
and infringement issues. SMEs prefer to use alternate
means of protection like trade secrets, etc.14
R&D in Indian Pharmaceutical Industries: Effect
of TRIPS
Research and development is the key to the future
of the pharmaceutical industry. The considerable
improvement in the life expectancy and health all
over the world can be attributed to a steady increase
in research investment. The strength of Indian R&D
comes from the abundance of excellent scientific
talent in combinatorial chemistry, in developing new
synthetic molecules and plant derived candidates for
drugs. The R&D conducted by Indian pharmaceutical
industries has different objectives e.g. development of
new chemical entities (NCEs), modification of
existing chemical entities to develop new dosage
forms (incrementally modified drugs), development
of processes for manufacturing active pharmaceutical
ingredients (APIs) and development of formulations
for regulatory requirements and quality. Traditionally,
the majority of India’s pharmaceutical spending was
concentrated on reverse engineering and adaptation of
patented foreign drugs to the Indian market. The
Indian pharmaceutical industry spent very little on
innovative R&D and most of the industry’s funding
went into incremental improvement in established
Fig. 3 Product patents approved (2005-2010)
Fig. 4 National phase applications filed under PCT (1999-2010)
J INTELLEC PROP RIGHTS, MARCH 2013
108
processes rather than new drug discovery and
development. In the early 1990s, the Indian pharma
industry set aside less than 2 per cent of its annual
turnover to R&D compared to the 15-30 per cent
allocated by western innovative counterparts.15 Even
Indian majors e.g. Ranbaxy and Dr Reddy’s spent
only 2.35 per cent of their sales on R&D in 1992-93
(ref. 16). However with the implementation of TRIPS,
the R&D profile of the Indian pharmaceutical firms
has undergone major changes. The period after 1995
has seen all round consolidation of the leading firms
in Indian industry. India’s leading drug companies
recognized that they could not survive as global
players without significant R&D capabilities.
In the present studies, the expenditure on R&D by
the firms has been taken as an indicator of their
activeness in new research and development. The
expenditure data has been taken from the annual
reports of respective companies for different years.
The data has been presented in Fig. 5. The two largest
among the Indian pharmaceutical firms are Ranbaxy
and Dr Reddy’s Labs. Ranbaxy was the largest R&D
spender in the Indian pharma industry and spent Rs 36
crores (4.61 per cent of its sales) on R&D in 1994-95,
the year when TRIPS came into effect.13 There was a
moderate increase in the R&D expenditure in early
2000 but it shot to Rs 486 crores in 2005 and Rs 498
crores in 2010 which is the highest expenditure among
the top 11 firms in 2010 (Fig. 5). For Dr Reddy’s Labs,
the second largest R&D spender, expenditure
increased sharply from Rs 13.27 crores (4.78 per cent
of total turnover) in 1999 to the highest ever Rs 437
crores (12.91 per cent of total turnover) in 2008 and
Rs 389 crores in 2010 (Fig. 6). Among the other
major consistent spenders, expenditure between 1999
and 2010 has increased for Sun Pharma from Rs 18
crores to Rs 225 crores and from Rs 21.27 crores to
Rs 215 crores for Cadila.
The increase in R&D activity can be attributed to
global changes in IP system in various countries,
especially in India and changes in the domestic
policies. The increased expenditure can also be related
to Indian Drug Policy Control Order under which the
production and development of innovative drugs and
processes were exempted from price control for five
years while new drugs were exempted for 10 years.
Dhar and Gopakumar have observed that R&D
spending by pharmaceutical industry in India was
significantly higher than that recorded by other
industries i.e. food and beverages, machinery and
textile.16 They also emphasized that pharma industry
was the only one among the leading industries to have
consistently improved its R&D spending. Though
more money is being pumped into R&D after signing
of the TRIPS Agreement, this investment is still
meager when compared to the spending of established
global firms. Indian firms have the potential to extract
discernible output even with a relatively low level of
R&D spending because of the lower costs of
development in India; yet they face other problems
such as lack of necessary expertise in basic areas and
new tools to smoothly switch over from reverse
engineering. Reverse engineering and generics R&D
requires less communication across the disciplines or
therapeutic areas as compared to innovative R&D.17
Product development research, on the contrary is time
consuming, requires huge funds as well as out of the
box thinking. Industry estimates reveal that most of
Source: Annual reports of respective organizations
Fig. 5 R&D expenditure of leading pharmaceuticals
Source: Annual Reports of respective organizations
Fig. 6 R & D spending as a percentage of total turnover
BEDI et al: PATENTING AND R&D IN INDIAN PHARMACEUTICAL INDUSTRY: POST-TRIPS
109
the R&D budget of the major companies is invested in
the different stages of clinical evaluation of new
products; still only two - thirds of the drugs that enter
phase III are ultimately marketed.18 This suggests that
attrition rate is very high in earlier research stages.
Similar results came out from a study conducted by
the consulting firm Oliver Wyman, which looked at
450 new chemical entities approved by USFDA
between 1996 and 2010 (ref. 19). The report refers to
1996-2004 as an ‘era of abundance’ and 2005-2010 as
an ‘era of scarcity’ where very few drugs (22 NMEs)
were approved as compared to 36 NMEs in the era of
abundance. In spite of this decline, the R&D
expenditure almost doubled over the study period and
most of the pharma companies continued to maintain
strong net income levels. In such an environment, drug
firms opt to orient their R&D towards preparing and
producing generic copies rather than developing or
discovering NCEs. Therefore, the short term focus of
an Indian firm with expertise in reverse engineering is
likely to be on improved dosage forms of the drugs and
combination drugs. It has also been emphasized that
though Indian pharmaceutical companies like Ranbaxy,
DRL and Lupin began investing in R&D for NCEs
when TRIPS came into effect, none of these companies
is engaged in the entire process of drug development
because they are not ready for a start-to-finish model in
NCEs research and do not have the skills and funds
required for development and marketing of a drug. The
model adopted by Indian companies is to develop new
molecule up to a certain stage and then license it out to
partners from developed countries, primarily to
MNCs.20
As far as the R&D intensity of smaller
pharmaceutical firms is concerned, these lag behind
their larger counterparts in undertaking innovative
activities. A study by Pradhan also suggested that a
large number of SMEs do not engage in any R&D
activity and a majority of those engaged spend only a
very small proportion of their turnover on it.21 The
low and declining R&D intensity seems to suggest
that small firms are falling behind larger companies in
upgradation of technological capabilities, since the
larger ones are consistently increasing their R&D
investments. SMEs require strong technology support
because they do not have huge resources for
upgradation and expansion of their internal R&D
facilities. However this drawback can be countered by
linking the innovative activities of SMEs with
resources of research institutions and universities.
Conclusion
Patent graph activity of any pharmaceutical firm
indicates the intensity of their innovative activities in
R&D. There has been a growth in patent activities in
India after TRIPS came into existence. Most of the
patenting activity is carried out by large
pharmaceutical companies in India and abroad, and
further, a greater number of applications is related to
new or improved processes for products rather than
products themselves. The product related applications
are concerned with intermediates and formulations
with maximum contribution in modified-release
dosage forms. Research and development is the key to
the success of any pharmaceutical industry, however,
very few companies were involved in innovative
R&D in India till 1995 due to lack of product patent
regime. The period after 1995 has seen all round
development of the leading firms in Indian
pharmaceutical industry. India’s leading drug
companies recognized that they could not survive as
global players without significant R&D capabilities.
Hence, considerable improvement in the research
investment has been observed after the
implementation of TRIPS in the pharmaceutical
industry. The present studies has established that there
is a growth in the patent applications filed in India
after TRIPS came into existence in 1995 because of
the fact that pharmaceutical companies have realized
the need for outcome based R&D and legal protection
of output. However, R&D intensity of SME
pharmaceutical firms is too insignificant in
comparison to large firms because of lack of
technology support and resources for upgradation and
expansion of their internal R&D facilities. Thus, there
is an urgent need for SMEs to develop a collaborative
research culture with public and privately funded
research organizations for their survival.
Acknowledgement
The authors are extremely grateful to Patent
Information Centre, PSCST, Chandigarh, for
providing patent search facilities.
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... See Table 1 Chemistry-driven research processes leading to non-infringing processes for active pharmaceutical ingredients (APIs);the identification and characterization of impurity profiling pertaining to APIs;the reduction of impurity levels; acceptable dosage forms and formulations have come to be pursued by the domestic firms as their main priority in the sphere of pharmaceutical innovation during the post-TRIPS period. Bedi and Bedi (2015), using databases like Ekaswa(TIFAC) and theofficial websites of the European Patent Office and Indian Patent ...
... While Bedi and Bedi (2015) indicate that there has been a small increase in the number of product patent applications filed by the top 11 large pharmaceutical companies, especially after 2005, our own analysis,which covers a longer period, shows that this type of inventive activity has neither been sustained, nor has it led to a significant increase in NCE patenting. In fact, Table 1 shows that NCE activity does not even figure in the trends list after 2010. ...
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Introduction Catching-up requires the Indian pharmaceutical industry to catch up in the creation of knowledge for drug discovery and process innovations (Jiasu, Lin and Sha, 2016). During the post-TRIPS (Trade Related Intellectual Property Rights) era, in January 2000, India's policymakers laid down explicitly for the first time a policy for the promotion of drug discovery and development efforts. It was with the announcement of this policy that India's policymakers declared their ambition of not only developing contemporary therapeutics to help reduce the rates of morbidity and mortality for the country, but also of becoming a significant global player on the strength of domestic firms’ investments in drug discovery research and development (R&D). In India, the process of creation and accumulation of firm-specific advantages by domestic firms began under the new patent regime with the passing of FERA regulations and the New Drug Policy 1978 to reduce activities of multinational corporations (MNCs) in the sector. Although the pioneering domestic pharmaceutical firms took some time to export to the highly regulated markets of the US and Europe, but what is really important is that the route taken was one of developing in-house capabilities for generic manufacturing and R&D with the help of the capabilities of the public-sector industry and R&D institutions in place in India. The entry of domestic firms into the US market started when Ranbaxy developed an alternative process for manufacturing Eli Lilly's patented drug Cefaclor. The American company sensed that it would lose its markets to Ranbaxy's low-cost substitute in countries that did not recognize product patents. To make the best of a bad situation, Eli Lilly offered a manufacturing contract to Ranbaxy for producing 7 ACCA, intermediate for Cefaclor. In 1993, Ranbaxy laboratories signed a contract manufacturing agreement with Eli Lilly (Pradhan, 2006). This chapter examines the contribution of domestic pharmaceutical firms to the drug discovery efforts undertaken after the implementation of the TRIPS Agreement in India. It assesses their contribution towards system-building activities. The policy impact is tracked in terms of the progress made in the strengthening of in-house capabilities and the development of system-wide links and relations for the creation of knowledge for drug discovery.
... Despite more money being spent of pharmaceutical R and D in India post signing of the TRIPS agreement; it is significantly less in comparison to the global MNCs. 6 Pingle, 2016 reported that Sun Pharmaceuticals had highest R and D expenditure during 2015-16 followed by Dr. Reddy's Laboratories, Lupin Pharmaceuticals, Cipla and Cadila. R and D to sales ratio of Indian pharmaceutical industry has been ever increasing with approximately 6 to 7 % of sales being utilized for R and D. 7 Indian pharmaceutical industry leveraged its strength in reverse engineering and manufacturing of generic drugs for the developed markets like US and Europe. ...
... Product related applications were concerned with incremental work on formulations with modified release systems and novel drug delivery systems. 6 Most of the patenting activity by Indian Pharmaceutical companies had been revolving around incremental research and majority budget is being spent on reverse engineering to expand ANDA, FTF/Para IV pipeline. ...
... Porém, a literatura não trata das políticas implementadas após a adaptação ao TRIPS em 2005, onde, como será mostrado neste trabalho, o Estado manteve, mesmo com as pressões externas, o objetivo de priorizar o desenvolvimento das empresas nacionais e ampliação da participação da IFI em nível global, buscando contornar os obstáculos postos no plano internacional. Os estudos mais recentes recaem fundamentalmente sobre a desempenho da indústria e análise da evolução das taxas de P&D, de patenteamento e estratégias tomadas por parte das empresas para inovar, como, por exemplo, Dhar, Joseph (2019); Kamiike (2019); Bedi, Bedi, Sooch (2013); Kiran, Mishra (2009) ...
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... In the context of the Indian pharmaceutical industry, mixed results were observed after the implementation of TRIPS and patent protection; for example, various studies observed changes in output, productivity, R&D, and technological capabilities, [18][19][20] whereas another study found an increased sales and export performance of the companies after the scenario. 21 However, the impact of patent protection on Indian pharmaceuticals increases the prices and the welfare losses of the economy. ...
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... Compulsory licensing is only part of this since "other use" includes use by governments for their own purposes. (8) They agreed that the TRIPS Agreement does not prevent members from taking measures to protect public health. They underdetermine continent' ability to utilize known relax able that here build into specified TRIPZ Agreement, along compulsory protection clause level importing. ...
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The CDSCO prescribes standards and measures for ensuring the safety, efficacy and quality of drugs, diagnostics, cosmetics and devices in the country. Pharmaceutical research and development is an expensive, time consuming and uncertain process that may take 8-10 years to complete. Patent clock starts much before a new drug is approved for marketing and significant amount of time may be lost in the review and approval process by regulatory bodies. So in order to recoup the considerable time and resources invested in the drug development and approval process, the pharmaceutical companies depend on exclusivity provisions granted by the regulatory bodies. Patent strategy provides a check list for developing comprehensive patent strategies for the company.
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The Indian pharmaceutical industry has experienced rapid growth, becoming the world’s largest provider of generic drugs, based on product and process innovation. The industry has undergone dynamic changes in recent decades, operating in a rapidly evolving environment affected by domestic and global policies; a key example of the latter is the TRIPS agreement. Taking an intellectual property perspective, we describe how changes in the innovation ecosystem have affected companies’ strategies related to international activity and accessing knowledge from both internal and external knowledge sources, during the transitional- and post-TRIPS periods (1995-2004 and 2005-2014, respectively). Combining intellectual property arguments with contextual aspects of the innovation ecosystem, we conjecture that, in the post-TRIPS period, externally-sourced knowledge will be more important than internally-sourced knowledge, for Indian pharmaceutical firms’ international business activity.
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Marketing always starts with the customer and ends with the customer as they are the valuable assets for any country, and all marketers are very much inclined to deal with them. Marketing is basically a set of business activities by which the goods and products flow of from the manufacturer to the customer (end user), in the light of pharmaceutical marketing, medicines flow from factory to pharmacy.
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We examine the impact of a stronger intellectual property rights (IPR) regime through the adoption of Trade-Related Aspects of Intellectual Property Rights (TRIPS) on innovation by Indian firms in the bio-pharmaceutical industry. We find that differences in the IPR regime at the time a firm was founded led to subsequent differences in firms' propensity to innovate and their nature of innovations. Building on institutional change theory, we argue that firms created under the pre-TRIPS regime, which we refer to as de alio firms, have a lower propensity to innovate and have a focus on process innovations. De novo firms, which are firms created under TRIPS, have a greater propensity to innovate and have a focus on product innovations. Further, we study how international technology alliances have helped Indian bio-pharmaceutical firms to overcome their limitations arising due to institutional imprints and to improve their innovation capabilities. Data on 164 Indian bio-pharmaceutical firms from 1995-2018 is used to empirically test our hypotheses.
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The growth of industry, especially pharmaceutical industry, calls for intensive and innovative research. The chapter attempts to capture these in the growth of Indian Pharma over the years beginning from Acharya’s foray in 1901 and traces the entry of Indian and multinational companies into manufacturing activities, the latter hedged by protective measures like MRTP ACT and Patent ACT of 1970. Sales turnovers were modest but a small number of Indian companies and even a very few multinationals started new drug discovery research (NDDR). The Government on the other hand, as a measure of self-sufficiency, built national institutions like Central Drug Research Institute with multidisciplinary facilities for NDDR and process development of drugs. In the meantime, Indian Pharma grew strongly under the umbrella of the Indian Patent Act 1970 and established itself as suppliers of affordable generics of quality medicines. The Hatch-Waxman Act 1984 of the USA leading to the promise of obtaining approval for abbreviated new drug applications (ANDA) opened the gates for the lucrative US generics market which India was well set to exploit with its established skills in manufacture of APIs and formulations. Many Indian companies now had the means to venture into NDDR which became a necessity following the implementation of product patent regime since 2005.
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With the much awaited amendment in the Patents Act in March 2005, retroactive to Jan. 1, 2005, India has finally met its obligations under the TRIPS agreement. However, this has set a new debate not only in India but also in other developing countries, especially from the African subcontinent, regarding its fallout on the affordability of drugs to poor nations. Within India, the opinions are divided regarding its implications for the survival and growth of the pharmaceutical industry. This article traces the history and the current profile of the Indian pharmaceutical industry, taking note of the prominent changes in the new Act over the last Patents Act of 1970 and presents an analysis on the impact of such changes on the Indian pharmaceutical sector in terms of strategy choices and R&D directions. The study concludes that most dynamic Indian pharmaceutical players are likely to adopt a combination of ‘cooperate and compete’ strategies to ensure a smooth transition from reverse engineering based to research-based pharmaceutical firms. The analyses also suggest that there may be considerable inflow of outsourcing business to India in the realms of clinical trials, contract research and manufacturing.
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The full scale compliance of TRIPS Agreement essentially represents a big step in the opposite direction as it effectively ended more than three decades of protection for Indian companies and terminated legal 'reverse engineering'. The new patent regime throws a new challenge to the Indian pharmaceutical industry to maintain its competitiveness and profitability. This study investigates emerging firm strategies of the Indian pharmaceutical companies to overcome the challenge posed by new patent regime. The study concludes that the industry is witnessing a transition phase, and is undergoing consolidation and restructuring. The industry is adopting a mix of competitive and collaborative business and R&D strategies in the emerging business environment.
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The Pharmaceutical Industry witnessed a change after the formation of World Trade Organization (WTO) in 1995 when India, being a signatory member of WTO, adopted Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Indian pharmaceutical industry, being a highly fragmented one and dominated mostly by a large number of smaller enterprises, was also apprehensive when TRIPS was included in WTO. In the above backdrop, this paper examines the Impact of TRIPS on Research and Development, Exports and Patenting activity of The Pharmaceutical Industry of India. The results of the study highlight an increase in R & D Expenses, and R& D Intensity of leading Pharmaceutical companies in the Post-TRIPs period. Moreover, the Indian companies have been at the forefront, both in terms of Drug Master Filings (DMF) and abbreviated New Drug Applications (ANDA) filings in post TRIPS period.
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Trade liberalisation and changes in the Intellectual Property Rights (IPR) have fashioned new dynamics in the pharmaceutical industry across the globe. Firms are forced to bring changes to their research, innovation, technology and marketing practices by a reconfiguration of their competencies and resources. The most common strategic concern that Trade Related Aspects of Intellectual Property Rights (TRIPs) has raised for Indian firms is the perceived need for R&D and technological strength. For firms that have given little attention to research and innovation in the past, this transition is very difficult. Indian firms have responded to these changes in novel and complex ways. Employing firm-level case studies, this paper examines the contemporary strategic approaches adopted by Indian leaders for integrating new knowledge and capabilities in order to develop innovation competencies for tomorrow. Using empirical evidence from firm-level investigations, this paper shows how Indian firms are evolving from reverse engineering outfits catering to domestic market to technologically advanced and sophisticated organisations capable of catering to diverse markets.
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Very recently overseas acquisition and outward greenfield foreign investment have emerged as the two important modes of internationalization of the Indian pharmaceutical enterprises. This study examines the relative strengths and weaknesses of these strategies so as to suggest which between the two is a more effective internationalization strategy for the Indian pharmaceutical firms, given the nature of their ownership advantages. This analysis has been conducted in three stages. First, the nternationalization process of the Indian pharmaceutical industry has been embedded into a four stage theory emphasizing on the emergence of different modes of internationalization like inward foreign investment, imports, exports, outward greenfield investment, overseas acquisition and contract manufacturing including inter-firm strategic alliances. Second, theoretical perspectives have been developed with regard to the different ways in which greenfield investment and overseas acquisition can maximize the revenue productivity of pharmaceutical firms’ competitive advantages and/or to strengthen their competitive position. Third, case study of Ranbaxy Laboratories has been undertaken to empirically assess its experience with overseas acquisitions. The analysis indicates that the growth and internationalization of Indian pharmaceutical enterprises was critically dependent upon strategic government policies pursued in the past. The Indian experience offers a number of policy lessons to other developing countries wanting to build their domestic base in the pharmaceutical sector. Theoretical understandings indicate that acquisition is a more effective internationalization strategy than greenfield investment since the former not only provides all the benefits that the latter gives, but also several other competitive advantages important for firms’ performance in world market. The experience of Ranbaxy shows that overseas acquisitions have augmented its intangible asset bundle including distribution and market networks and have provided access to an existing market.
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Over the last decade the Indian pharmaceutical industry has emerged as a leading supplier of generic drugs to both developing and developed countries. The movement of the Indian pharmaceutical industry along the R&D value chain represents a remarkable shift from an importer to an innovator of drugs. The Indian government’s industrial and technology policies along with changes in Intellectual Property Rights regulation played a crucial role in shaping this development of R&D capability. Using the ‘capability creation model’ this paper discusses the learning processes and stages involved in this dramatic accumulation of technological capability. This analysis shows that the Indian pharmaceutical industry has followed a trajectory from duplicative imitation to creative imitation to move up the value chain of pharmaceutical R&D. Finally as a result of changes in patent law the industry is learning to develop capabilities in innovative R&D. The basic and intermediate technological capabilities gained from imitative learning gave these firms a solid base for development of competence in advanced innovative R&D. These finding have implications for government policies as well as firm strategies in other developing countries albeit with some limitations due to global harmonisation of patent laws being promoted by the World Trade Organisation