TRIPS: India - Patent Protection for Pharmaceuticals

Ashwini R. Madgulkar

The first round of trade negotiations took place while the Preparatory Committee was still working on drafting the Charter because the participants were anxious to begin the process of trade liberalization as soon as possible. Their results were incorporated into the General Agreement (GATT), which was signed in 1947.

Having agreed that in implementing their commitments on market access, developed country Members would take fully into account the particular needs and conditions of developing country Members by providing for a greater improvement of opportunities and terms of access for agricultural products of particular interest to these Members, including the fullest liberalization of trade in tropical agricultural products as agreed at the Mid-Term Review, and products of particular importance to the diversification of production from the growing of illicit narcotic crops;

Noting that commitments under the reform programme should be made in an equitable way among all Members, having regard to non-trade concerns, including food security and the need to protect the environment; having regard to the agreement that special and differential treatment to developing countries is an integral element of the negotiations, and taking into account the possible negative effects of the implementation of the reform programme on least- developed and net food-importing developing countries.

The GATT completed 8 rounds of multilateral trade negotiations (MTNs). The Uruguay Round (the 8 ^th round) first multilateral agreement dedicated to the sector. It was a significant first step towards order, fair competition and a less distorted sector,( Understanding The WTO: The Agreements) Concluded with the signing of the Final Act on April 15, 1994 , in Marrakesh , and produced the World Trade Agreement (WTO) and its annexes

As of January 2000, all developed and developing countries who are members of the World Trade Organization (WTO)were obligated to have domestic laws and enforcement mechanisms that comply with the international standards set forth under the Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPs), is the most comprehensive multilateral agreement on intellectual property.

The agreement covers five broad issues:

• how basic principles of the trading system and other international intellectual property   agreements should be applied
• how to give adequate protection to intellectual property rights
• how countries should enforce those rights adequately in their own territories
• how to settle disputes on intellectual property between members of the WTO
• special transitional arrangements during the period when the new system is being introduced. Intellectual property: protection and enforcement

During post independence and pre 1970, the cost of the drug in India was very high with low availability and high import dependency. Export initiative was very less and R&D activities were practically non-existence due to lack of patent protection. During this period 80% of the ownership and 90% of the market share was with MNC‘s.

Enactment Indian Patents Act of 1970 serves as the basis for patent protection in India . It explicitly disallows product patents for "substances intended for use, or capable of being used, as food or as medicine or drug." ¹ Only method or process of manufacture patents are allowed for such substances under the 1970 Act. The first major transition in the patents scenario in India took place with the Indian Patents Act 1970 which came into force on 20th April 1972 \i9 replacing the Indian patents and Designs Act of 1911.

It ought to be appreciated that the Indian Patents and Designs Act 1911 in force until 20th April 1972, was fairly liberal as patenting of products related to foods, pharmaceutical, chemicals, etc. was available with a full term of 16 years in India. 

Protected patent regime provided a safe platform on which pharmaceutical and chemical industries could strike roots and grow in India and also meet the need for increased production rather than relying on imports, which was then critical for the infant Indian national economy. Expertise in institutions, R&D capabilities, S&T infrastructure and industry during the last five decades has selectively developed to extraordinary levels as compared to that in most developing nations. However the Indian pharmaceutical industry has built its structure along traditional lines of manufacturing molecules that have been invented in other countries and not having patent protection in India as per the Indian Patent Act 1970, developing cost effective processes, formulations, and drug delivery systems. 

Period Between 1970 to 1995

Government takes two important steps

1) Introduced ‘DPCO’ to protect the Consumers against high price

2) Indian Patent Act 1970 to ‘ Process Patent’- patenting the process use to make the particular drug formulation but not the product patent (patenting the process itself)

Effects:

1. India did not provide product patents in pharmaceutical and agricultural chemicals allowed local pharmaceutical companies to replicate drugs by adopting a different manufacturing process (reverse engineer products). These reforms made new drug available cheaply and promoted import substitution by encouraging the local firms to make copies of the drugs by developing their own process followed by bulk drug production.

2. The share of pharmaceuticals in national exports has increased from 0.55 per cent in 1970-71 to over 4 per cent by the 1999/00.

3. India ’s share in world exports of pharmaceuticals has risen by 2.5 times over the 1970 to 1998 period making India , the second largest exporter of pharmaceuticals after China among developing countries by exporting products to country like Russia , Africa , China , and South America .

4. Further more Indian companies were free to ship reverse engineered drugs to patent recognizing countries on or after the day of expiry. Such a liberal patent environment benefited Indian firms at the expense of MNC’s; causing some MNC’s to opt for minimal presence in India . As a result, foreign ownership in Indian drug industry decreases to 39% in 1993 as compared to 80% in 1970 before the introduction of this act.

5. The characteristics of patenting between 1978 and 1996 are reviewed, based primarily on applications published by European patent office. Numbers of pharmaceutical applications have increased steadily, and there are now approximately 6000 published each year, or 10% of total.

Period Between 1995 to 2005

1. Exclusive Marketing Rights- This new provision has been incorporated in the Patents Act, 1970 as amended by The Patents (Amendment) Act, 1999 with effect from 1st January, 1995 . EMR will be valid for a period of five years or till the date of grant of the patent or date of rejection of the application for the grant of patent whichever is earlier. (book)

2. It is now possible to make an application for patent claiming for a substance itself intended for use or capable of being used as Medicine or Drug, excepting the intermediate for the preparation of drug.

3. India joined the Paris Convention and the Patent Cooperation Treaty in 1999.

4. India has a ten years transition to provide product patents viz. till the end of 2004. It is by now widely recognized that the abolition of product patents in chemicals and pharmaceuticals has facilitated the development of local technological capability in chemicals and pharmaceutical industry by enabling the domestic firms in their process innovative activity.

5. Patent amendment act 2005

• Provision related to black box application- if filled before 1Jan. 2005 under the transition provision of TRIPS, any manufacturer who has made significant investment for the manufacturer of product and has produced and marketed the product before 1 Jan. 2005 will able to continue the production after 1jan. 2005 with out infringing the patent.
• Parallel import, grey imports, ”Exhaustion” of rights- parallel or grey market imports are not imports of counterfeit products or illegal copies these are the products sold by a patent holder in one country is exported by a buyer to another country where the price for the same patented drug is higher. This effectively reduces the profits of the patent holder as the phenomenon of parallel import usually reduces the price of the product in the country to which it is exported.
• Compulsory licenses- such licenses can be granted for manufacture and export to "any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems, provided that compulsory license has been granted by such country." Only it limits the amount they can export when the drug is made under compulsory licenses. All WTO member countries are eligible to import under this decision, but 23 developed countries are listed in the decision as announcing voluntarily that they will not use the system to import to various countries.
• Herbal preparations - Those having medicinal values can be patented under the new amended law.

6. In the period between 1995-2005 and there after, status quo has been seen with respect to cost of the drug and it is expected to continue that way till 2007. But after 2007 particularly after 2010 as MNC’s and research based companies start launching their patented molecules, the cost of drug is going to increase.

7. The availability of drugs in antibiotic segment & other agents for topical infection may not be affected but the availability of life style drugs will be affected as most of the MNC’s are engaged in new drug development in this area only but imports will remain constant.

Impact on Pharmaceutical Industry

-IMPACTS ON SOCIAL POLICY

The GATT-TRIPs rules prohibit member countries from discriminating, in granting patents, "as to the place of invention" and the "field of technology." These criteria will constrain

Countries in their use of IPRs as tools for development.(notepad)

-COLLABRATION:-

Many companies are collaborating in joint R&D and product and process development to synergise their knowledge-base and effectively exploit available human resources and infrastructure. Recently, Orchid Chemicals Pfizer International, Glaxo as well as critical Ranbaxy’s. Cipla formed a partnership with Avesthagen, a biotechnology company based in Bangalore , to develop biopharmaceuticals and targeted therapies

The facilities and infrastructure of Indian pharmaceutical companies have been upgraded and there are now more than 70 US Food and Drug Administration (FDA)-approved plants and over 200  good manufacturing practice (GMP)-compliant facilities in India . Several Indian companies, including Dishman Pharma, Shasun Chemicals, Suven Pharma and Jubiliant Organosys, are actively engaged in making quality bulk drugs and APIs for companies such as Bayer, Pfizer, Aventis and Novartis. Several companies have set up dedicated manufacturing facilities for making bulk drugs for export. Indian companies have also been serving global generic companies.    

FIGURE I - Indian Growth Industry                    

-Some of the significant changes in the Indian economy in recent years are:

• Indian GDP growth was 6.9% in 2004–2005 with the expectation of clocking an annual growth at 5.5% between 2006 and 2020;
• Consumer spending in India grew at an average rate of 11.5% per annum, with a consumer confidence index of 72% in 2005, compared with 63.5% in 2004 as per MasterCard’s international survey;
• Growth of the global pharmaceutical market in 2004 was 7%, and turnover was US$518 billion; the Indian pharmaceutical industry grew at 6.4% in 2004 with a compound annual growth rate(CAGR) of 8.7% during the period 2000–2004. It may be noted that price-led growth has been negative, indicating growing pressure on the industry.
• In 1996 six of the top ten firms in the industry are Indian firms. By 1991, domestic firms accounted for 7 per cent of the bulk drugs production and 80 per cent of formulations produced in the country (Lanjouw 1998).

India currently holds U.S. $6 billion of the $550 billion global pharmaceutical industry but its share is increasing at 10 % a year. When compared to 7 % annual growth for the world markets overall, this speaks of a very promisig scenario.

TABLE II - Top 10 Pharmaceuticals in India

FIGURE II – India 2 ^nd Globally

-Institutions

The technological capabilities of Indian companies and institutions have attracted leading MNCs to start R&D joint ventures, commission contract research and set up R&D centers.

- India ’s string synthetic skills, business instincts, & fiercely cost competitive domestic market add up to a terrific advantages for global bulk market.

-Indian companies are setting up research centers and conducting trials to counter disease that are specific to Indian subcontinent.

-Prices and quality of drugs are to become internationally competitive.

Conclusion:-

Significant amendments in Indian intellectual property rights (IPR) since 1994 continue to Impact the business dynamics in the Indian drug, pharmaceutical and healthcare industries. With pharmaceuticals being a knowledge-driven sector, competitive positions, among other Considerations, are decided on the ability of companies to continually innovate and rapidly diffuse proprietary innovations into the marketplace under a protective and enforceable national canopy provided by IPR. This article presents the growth and future of the Indian pharmaceutical industry from such a perspective.