India changed its patent Act in 1970 and before that its patent law was crafted by the British purely with the profit motive. In 2005, India made a major amendment to its patent Act by changing the duration of the patent period to 20 years, which was earlier seven years as per the Indian Patent Act, 1970.
In addition, India made another important amendment apart from several others. It changed from ‘process patent’ to ‘product patent’. In the former, another process can be used to manufacture the same product -- let’s a drug -- but not in product patent. Both these changes along with a host of others were done at the behest of the WTO (World Trade Organisation). The period of 35 years from 1970 to 2005, equipped with a shorter patent period (seven years) and process patent, Indian drug companies have achieved a phenomenal global success. Just before 1970, India depended on much of its drug need on multinational drug companies, which are mostly based in Europe and America.
Major contributor
According to the ministry of commerce and industry’s ‘Report of the Task Force of December 12, 2008’, “The Indian pharmaceutical sector is emerging as one of the major contributors to Indian exports with export earnings rising from a negligible amount in early 1990s to Rs.29,139.57 crore ($7.24 billion) by 2007-08. The export of drugs, pharmaceuticals and fine chemicals of India have grown at a compounded annual growth rate (CAGR) of 17.8 per cent during the five-year period 2003-04 to 2007-08. The Indian domestic pharmaceutical market size is estimated at 10.76 billion in the year 2008 and is expected to grow at a high CAGR of 9.9 per cent till 2010 and thereafter at a CAGR of 9.5 per cent till 2015”.
This huge success in the manufacturing capacity of pharmaceutical companies has been a unique achievement, as many other developing countries which came out of the yoke of colonial rule failed to change their patent laws as India did during 1970.
Currently, the Indian pharmaceutical industry is one of the world’s largest and most developed, ranking fourth in volume terms and thirteenth in value terms. The country accounted for 8 per cent of global production and 2 per cent of world markets in pharmaceuticals. Most of the country’s pharmaceutical drug requirements are met by the domestic industry. India has the largest number of American Federal Drug Aadministration-inspected plants (119) outside the US.
With these changes many Indian domestic drug companies took giants leaps and achieved global success. Many of these companies supply medicines to around 200 developing countries all over the world at affordable price. And hence India is aptly described as the ‘pharmacy of the developing world’.
The health minister announces this accomplishment with great degree of jubilation at both national and global meets. But the country’s foreign direct investment (FDI) policy allows for 100 per cent foreign investment in the field of pharmaceuticals. This particular policy has jeopardised and likely to upset all the success that has been achieved since 1970. Many of the Indian domestic companies have been taken over by multinational drug firms. Between the years 2006 and 2010, six major Indian companies were taken over, including Matrix Lab by Mylan (US), DaburPharma by Fresenius Kabi of Germany, Ranbaxy Labs by Dailchi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France, Orchid Chemicals by Hospira of the US and Piramal Healthcare by Abbott of the US.
All these companies had major capacities to manufacture essential medicines and vaccines at affordable prices. The top ten domestic companies have a 30 per cent market share. With many of these major players at the dictates of MNCs, it is obvious that their focus will shift to the long run which will likely impact what they have been doing. The acquisition of Indian companies may lead to a pre-1970 situation when India depended much on MNCs for its drug requirement.
In his book ‘Recolonisation’, Charkravarthy Raghavan aptly explains that “the clock is not simply being put back. It is to be remade to move only backward.” With Indian companies having lost the capacity to manufacture drugs by ‘process patent’ and having, in addition, lost major domestic manufacturing capabilities to MNCs, the preidiction of Raghavan might just come true.
But the health ministry has woken up and has sent strong notices that there is a grave threat to the domestic drug manufacturing industry which will in turn jeopardise access to medicines at affordable price to millions not only in India but all over the world. A high-level committee has been looking into aspects of the FDI policy.