On December 26, 2004, India issued a presidential decree to recognize pharmaceutical product patents from January 1, 2005, bringing its patent laws into closer compliance with its commitment under the World Trade Organization (WTO) agreement. The change will become permanent law if ratified by parliament at its next session in February. India's drug industry enters a new era in 2005 with the new patent law being enforced.
For more than 30 years, India's 1970 Patent Act recognized patents for processes, but not for products or chemical compounds, allowing local firms to copy drugs and other high-tech products patented in the West as long as they used a different process, even if the difference was insignificant.
The law helped thousands of Indian firms flourish and even a few, such as Ranbaxy Laboratories, grew into global challengers. Today, India is the world's fourth-largest drug market in terms of volume, and the largest producer of generic drugs. Its legendary pharmaceutical industry employs more than half a million people, and its drugs often cost 7 to 10 percent of the price charged in the West. Heavy employment and low pharmaceutical cost have benefited the country’s poor, but have also deterred many global pharmaceutical companies from investing in new medicines here because of inadequate patent protection.
Over time, Indian pharmaceutical companies adopted a production strategy characterized by selling locally and then moving aggressively into global markets immediately after the patent’s expiration. Multinationals such as GlaxoSmithKline Plc., Pfizer Inc., Novartis AG and Aventis, are cautiously optimistic about the new possibility of patent protection.
The new rules do not apply to drugs patented before 1995. Cipla Ltd. can continue selling its widely distributed version of the HIV treatment AZT. Copies of drugs patented between 1995 and the introduction of the law are even unlikely to be withdrawn.
Foreign companies are not expected to introduce a flood of new products into the Indian market. Most companies are still hesitant about the details of the proposed law and fear that questions regarding what is or isn't patentable will ultimately be answered in the courts.
The new law includes provisions allowing the government to force patent-holders to grant licenses to local firms in case of national emergencies or for exporting medicine to countries facing public health emergencies.
Indian manufacturers want patents issued only for basic molecular structures. This would give a company just 20 years to make its profits before the initial drug and any spinoff could be legally copied. Indian drug firms also want the new law to allow the challenging of patents even before they are granted. Multinationals strongly oppose this idea.
With a population of 70 to 80 million people in India who can afford expensive medicine, global pharmaceutical firms still see India as a lucrative new market. The Pharmaceutical Research and Manufacturers of America (PhRMA) welcomes the new patent protections in India. Its CEO BillyTauzin said “product patent protection encourages Indian companies to develop new drugs, encourages foreign companies to market their latest drugs in India, and increases the availability of cutting-edge treatments to Indian patients.”
By implementing the new law, Indian drug companies will have more incentive to search for new and better drugs. An the same time, they will be eligible to make generic drugs for booming export markets, where drugs worth billions of dollars are set to go off patent in the next few years. By participating in the international system of intellectual property protection, India unlocks for herself vast opportunities in both exports, as well as her potential to become a global hub in the area of research and development.
This article was written by Daqin Zhang who can be reached at dzhang@kmclaw.com. Please contact Conan Grames at cgrames@kmclaw.com for more information about pharmaceuticals.