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The Indian Pharmaceutical Industry: Pride and Growth Lever of India

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Sudarshan Jain, Secretary General, IPA and Archana Jatkar, Associate Secretary General, IPA reminisce on five significant steps which changed the course of India’s pharma industry and outline five steps that the industry needs to take for sustained growth over the next 25 years

The Indian pharmaceutical industry has achieved tremendous growth over the years and has made massive impact on the global market. Today, India is the pharmacy of the world and supplies over 60 per cent of global demand for various vaccines and ARV drug supplies, 30 per cent of UNICEF’s annual supply globally and about 60 per cent-80 per cent UN purchases of drugs come from India. India also contributes approximately 57 per cent of APIs and 69 per cent Finished Pharma Products (FPP) to the Pre-Qualified list of WHO. The Indian pharma industry contributes nearly 40 per cent of generic drugs requirement in the US and 25 per cent in the UK.

Sudarshan Jain, Secretary General, IPA

From being almost non-existent in the 1970s, the Indian pharma industry has come a long way to being one of the largest and most advanced pharma industries in the world. This significant contribution of Indian pharma industry became possible due to several initiatives both at policy and business level. The five watershed moments in the growth of industry are as follows:

The Indian Patents Act, 1970
The Patent Act, 1970 was the first Patent Act in independent India. The Act had provision for only process patent and did not allow for patenting of the end product which enabled manufacturers to develop alternative processes for proprietary products that were already in the market. Another important feature of the Act was that it provided for a shorter term for patent protection. Both these features helped Indian pharma industries to flourish.

The Drug Policy, 1978
The Drug Policy of 1978, along with the Price Control Order of 1979, were landmark events for Indian pharma industry. The policy not only set up a National Drug Authority but was also drafted to give a ‘Directional Thrust’ to the Indian pharma sector. It aimed at maximising production of bulk drugs locally, providing leadership to the public sector undertakings (PSUs), reduction of imports of bulk drugs, encouragement for growth of local industry, reduction in selling prices of essential drugs and their formulations. The Policy had a stimulating feature which emphasised on ‘production of bulk drugs by high technology’. This compelled multinational companies and large Indian companies to produce newer bulk drugs with the
objective of marketing formulations thereof from the ‘basic’ starting materials. The basic starting materials were either available locally or could be produced utilising local materials. The Policy fuelled the growth of pharma Industry in India.

Archana Jatkar, Associate Secretary General, IPA

Hatch-Waxman Act, 1984
The enactment of Drug Price Competition and Patent Term Restoration Act – better known as the Hatch-Waxman Act, by the US Congress in 1984 was also very significant. Even though it was enacted in the US, it paved the way for spread of generic medicines over last two decades and is crucial for Indian generic industry. The Act seeks to streamline the process for generic pharma approvals and preserve incentives for innovation, including the creation of a procedure for patient litigation involving generic pharma. The Hatch-Waxman Act established the legal and economic foundation for today’s generic pharma industry.

Economic Reform in India, 1991
In 1991, India launched giant economic reforms and stepped into globalisation. These economic reforms propelled market liberalisation, synergising Indian industry with the world economy. This also marked the end of the ‘License-Raj’, thereby allowing industry more freedom in the Indian market, creating leverage for domestic players and allowing market competition to drive product excellence. The Indian pharma industry benefitted from these reforms as this period of liberalisation allowed Indian industries to launch operations in foreign countries. Ever since these reforms took place, the Indian pharma industry has grown exponentially and today exports medicines worth $19 billion across the world.

The economic reforms in India also coincided with establishment of World Trade Organisation and its Agreement on Trade Related Aspects of Intellectual Property (TRIPS). India’s accession to the TRIPS Agreement led to fundamental changes in the country’s patent regime. However, the Government of India was able to utilise the flexibilities of the TRIPS Agreement to its advantage in public interest. India introduced two provisions in the amended Patents Act – i) Section 3(d) that does not allow patents on minor modifications of existing products and ii) possibility for the granting of compulsory license in certain circumstances. Both these provisions have stood scrutiny, including by the highest court of the land. The amended Patent Act, which is TRIPS compliant, has sought to balance between pharmaceutical innovation and affordability of access to medicines in public interest.

Furthermore, the pharma industries in its entirety and some of the leading companies have demonstrated significant improvement in R&D intensity since previous decade. An indicator of better performance of the industry has been the increase in its patenting activity. Also, the leading companies continue to expand their presence both in domestic and international markets, notwithstanding the uncertainties they faced following the introduction of TRIPS compliant patent regime.

Entrepreneurship which helped leverage local manufacturing
In 1991, the government of India liberalised the economy and this changed the competitive landscape. The business opportunities in India increased manifold. While the existing entrepreneurs/business families adapted to new economic policy to not only survive but compete against the MNCs, a good number of new entrepreneurs seized the opportunities and grew from small-scale to a big company. The businesses, today, have increased access to venture and growth capital and hence are able to create wealth for the company. The pharma sector also thrived in this entrepreneurial era to produce many well-known companies that continue to grow.

The Indian pharma indust