The Indian pharmaceutical industry is a successful, high-technology-based industry that has witnessed consistent growth over the past three decades. The current industry players comprise several privately owned Indian companies that have captured a substantial share in the domestic pharmaceutical market due to factors such as favourable government policies and limited competition from overseas.1 However, the liberalisation of the Indian economy is revolutionising Indian industries as they begin to emerge from domestic markets and gear up for international competition.
The Indian pharmaceutical industry is a prime example of an industry that is being forced to revisit its long-term strategies and business models as India opens its markets to global trade. Factors such as protection of intellectual property are increasing in significance due to the growing recognition of the need to ensure protection of valuable investments in research and development (R&D). Efforts are being made in India to curb problems of weak enforceability of existing intellectual property legislations, and the Indian government is moving towards establishing a patent regime that is conducive to technological advances and is in keeping with its global commitments.
Patent Law in India
Patent rights were introduced in India for the first time in 1856 and, in 1970, the Patent Act 1970 ("the Patents Act") was passed, repealing all previous legislations. India is also a signatory to the Paris Convention for the protection of industrial property, 1883, and the Patent Cooperation Treaty, 1970. The Patents Act provides that any invention that satisfies the criteria of newness, non-obviousness and usefulness can be the subject matter of a patent. Some of the non-patentable inventions under the Patents Act include methods of agriculture or horticulture, processes for the medicinal, surgical, curative, prophylactic or other treatment of human beings, animals or plants or substances obtained by a mere admixture, resulting only in the aggregation of the properties of the components, etc.
With regard to pharmaceuticals, in the case of substances intended for use or capable of being used as food, drugs or medicines or substances produced by chemical processes, patents are granted only for the processes of manufacture of such substances and not for the substances themselves. Hence, pharmaceutical products are currently not granted patent protection under Indian law.
India had a product patent regime for all inventions under the Patents and Designs Act 1911. However, in 1970, the government introduced the new Patents Act, which excluded pharmaceuticals and agrochemical products from eligibility for patents. This exclusion was introduced to break away India's dependence on imports for bulk drugs and formulations and provide for development of a self-reliant indigenous pharmaceutical industry.
"Thus, under our existing patent laws, molecules, which are products of chemical reactions, are as such non-patentable in India. This restriction, coupled with the restriction on mere admixtures resulting in aggregation of properties in which the components do not exhibit any synergistic behavior, severely limit the items, which can be patented in India. "Actives" prepared by chemical synthesis are as such non-patentable in India even if they exhibit functional properties. Likewise, standard drug formulations in which the ingredients behave as mere admixtures also do not qualify for patents in India. In such cases only the process, i.e. the method of making the product is patentable."2
The lack of protection for product patents in pharmaceuticals and agrochemicals had a significant impact on the Indian pharmaceutical industry and resulted in the development of considerable expertise in reverse engineering of drugs that are patentable as products throughout the industrialised world but unprotectable in India.3
As a result of this, the Indian pharmaceutical industry grew rapidly by developing cheaper versions of a number of drugs patented for the domestic market and eventually moved aggressively into the international market with generic drugs once the international patents expired. In addition, the Patents Act provides a number of safeguards to prevent abuse of patent rights and provide better access to drugs.
...the Indian government is moving towards establishing a patent regime that is conducive to technological advances and is in keeping with its global commitments.
The term of patents in the case of processes or methods of manufacture of a substance intended to be used or capable of being used as food or as a medicine or drug is for a period of seven years from the date of filing or five years from the date of sealing the patent, whichever is less. Patents relating to all other inventions are granted for a period of 14 years from the date of filing the patent, unless shown to be invalid.
The Patents Act also has provisions relating to compulsory licensing. On the completion of three years from the date of sealing the patent, any person interested in working the patented invention may apply for a compulsory licence with respect to the invention. The controller of patents may direct the patent holder to grant such a licence upon the terms as may be deemed fit, only if he or she is satisfied that the reasonable requirements of the public with respect to the patented invention have not been met or that the patented invention is not available to the public at a reasonable price.
In addition to compulsory licensing, the Patents Act includes a provision for "licences of right" where, in certain cases, the central government can, after the expiration of three years from the date of the sealing of the patent, apply for an order that the patent may be endorsed with the words "licences of right", on the grounds that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that the patented invention is not available to the public at a reasonable price.
Patents for certain substances that are not food items or drugs as such but that are capable of being used as food items or drugs are deemed to be endorsed with the words "licence of right" immediately on completion of three years from the date of the sealing of the patent. The effect of endorsing a patent with the words "licences of right" is that any person who is interested in working the patented invention in India may request the patentee to grant a licence. The granting of a licence would be on terms that have been mutually agreed upon, even if he/she is already the holder of a licence under the patent. In case the parties are unable to agree on the terms of the licence, they can apply to the controller of patents to arrive at a settlement of terms.
The Impact of the World Trade Organization on Pharmaceutical Patents
The establishment of the World Trade Organization (WTO) has led to a tremendous paradigm shift in world trade. The agreement on Trade-Related (Aspects of) Intellectual Property Rights (TRIPS) was negotiated during the Uruguay round trade negotiations of the General Agreement on Tariffs and Trade (GATT) and "one of the primary reasons for incorporating intellectual property issues into the GATT framework was the pharmaceutical industry".4 India signed the GATT on 15 April 1994, thereby making it mandatory to comply with the requirements of GATT, including the agreement on TRIPS.
India is thereby required to meet the minimum standards under the TRIPS Agreement in relation to patents and the pharmaceutical industry. India's patent legislation must now include provisions for availability of patents for both pharmaceutical products and processes inventions. Patents are to be granted for a minimum term of 20 years to any invention of a pharmaceutical product or process that fulfils established criteria.
1. Over 20,000 registered pharmaceutical manufacturers exist in the country. The market share of multinational companies has fallen from 75% in 1971 to around 35% in the Indian pharmaceuticals market, while the share of Indian companies has increased from 20% in 1971 to nearly 65%. http://www.indiapharmachem.com
2. Pradubuddha Ganguli, Gearing up for patents: The Indian scenario, p. 47.
3. "TRIPs and Pharmaceuticals: Implications for India", http://www.cuts-india.org/1997-8.htm#Pharmaceutical %20Industry%20in
4. Zafar Mirza, WTO/TRIPs, Pharmaceuticals and Health: Impacts and strategies, The Society for International Development, SAGE Publications.
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