The Pharmaceutical Industry in India after TRIPS

Sudip Chaudhuri

The Indian pharmaceutical industry occupies a special position among developing countries.1 It has demonstrated strong innovation capabilities, tremendous strength in developing cost-efficient processes and significant capacity in setting up manufacturing plants for drugs satisfying international quality norms. India supplies medicines not only to other developing countries but also to developed countries such as the US. One of the most important factors contributing to this remarkable development was the abolition of product patent protection for pharmaceuticals in 1972. After independence, wanting to develop a pharmaceutical industry, India had invited multinational corporations (MNCs) to help develop the industry. Before 1972, although not keen to manufacture pharmaceuticals in India, they had used their patent rights to prevent Indian companies from doing so. As a result, in this period the industry remained underdeveloped, while at the same time multinationals' monopolies led to high prices. The abolition of product patents eliminated the multinationals' monopoly power, and the cost-efficient processes developed by the indigenous sector—often in collaboration with government laboratories—were then used for manufacturing the latest drugs. These cost a fraction of international prices, dislodging the multinationals from their position of dominance in the domestic market.2

From 1 January 2005, however, drug product patent protection was reintroduced, to comply with the requirements of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). A key question is how multinational pharmaceutical companies and Indian generics companies are responding to the new policy environment. It might be assumed that, as in the pre-1972 situation, India is experiencing monopolization of the industry and high prices. It has, however, also been argued that strong patent protection will be beneficial for India. The TRIPS negotiations were driven by specific claims that TRIPS-compliant patent protection would prompt companies in developing countries to conduct more research and development (R&D) for new drugs more suited to local needs. Are Indian


H. Lofgren (eds.), The New Political Economy of Pharmaceuticals © Hans Lofgren and Owain David Williams 2013

generics companies mature enough to take advantage of stronger patent protection? Might India's experience suggest a rethinking of the relationship between patents, R&D and innovation in developing countries? In this chapter I examine these questions to gauge the impact of TRIPS on India's pharmaceutical industry.

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