Over the past three decades the Indian pharmaceutical industry has witnessed a rejuvenation that has helped achieve massive growth. In this article, we will examine the role patents have played in phenomena.
The Indian pharmaceutical sector is a vastly thriving, knowledge-driven industry that has been growing in leaps and bounds. India is currently the third-largest drug manufacturing country in the world and is growing at a consistent rate.
The major players in the Indian pharmaceutical industry are large, private companies that have successfully consolidated the market. So, how do these large pharmaceutical corporations sell their most profitable drugs? Do they have patents for all of their drugs? Continue reading to find out the answers to these and more!
Patent Law in India
India’s first use of patent rights can be traced back to 1856. However, the law that has made patent rights what they are today is the Patent Act of 1970. Additionally, India is a member of the Paris Convention that met regarding the protection of industrial properties back in the year1883.
The Patents Act of 1970 makes it possible for inventors to patent their ideas, products, services, and technology if they adhere to specific guidelines. In fact, only inventions that are novel, useful, have industrial applications and are non-obvious receive patent protection in India.
The Patent Act also specifies which ideas and inventions cannot be protected by a patent. This includes, for example, agricultural methods and processes used in surgical and medicinal treatment.
Patents and the Pharmaceutical Industry
When it comes to pharmaceuticals, India supports both process and product patents, making it easy for companies to completely protect their drugs. Initially, the Indian pharmaceutical industry suffered from a lack of a formal patenting system. Companies had little incentive to invest heavily in research because there were no patents in place to protect profitable drugs. As a result, rather than investing in R&D, most Indian companies discovered that producing generic drugs was more profitable. This is why even today, the Indian market is densely populated with generic drug manufacturers. Studies show that of all the medicines sold in India, over 70% are generic drugs. In fact, the most profitable drugs of 2019 in India, were generic drugs, due to their widespread accessibility.
Benefits of Patents to the Pharmaceutical Industry
- Patents support innovation, research, and development
- Additionally, patents improve healthcare by pushing companies to discover new drugs
- Patents allow large pharma companies to recoup the money spent on R&D
- Patents also help in monopolizing the market.
How does the Patented/Generic Drug Balance Works?
In India and abroad, governments try very hard to maintain the right branded-to-generic drugs balance. While branded drugs are required to give pharma companies the incentive to invest in R&D, generics make drugs affordable to the general public. Therefore, achieving the right balance of both is critical to any country’s healthcare sector.
This is why the concept of patents is critical in the pharmaceutical industry because it provides companies with exclusive protection with regard to a specific drug. As a result, it provides them with a strong incentive to conduct additional research and seek cures. This, in turn, can help them monopolise the market, which is seen as a direct payoff for the risk and expense of developing new drugs.
However, once the patent expires, other companies have the right to enter the market and sell the same drug at a lower price in order to break the monopoly. Because holding a patent requires the company to publicise the manufacturing process, other companies can replicate it. Since these companies have not invested in R&D, their production costs are significantly lower. Hence these companies can afford to sell the drug, which performs the same function at a much lower cost. As a result, the market would be flooded with low-cost, non-brand name versions of the same drug, allowing the poor and middle class to gain access to life-saving drugs.
Ways Patenting Can Go Wrong
While the patenting system looks foolproof on paper, that is far from the truth. In a bid to improve their profit margins, drug companies look for various ways to stop the production of generics and extend their patent life beyond the norm. Some of the ways they do so is as follows:
- Agreements – Large pharma companies and generic manufacturers enter into ‘pay for the delay’ contracts. By such a deal, generic manufacturers get paid by large companies to delay the release of their generic drugs. Some studies show that such transactions cost consumers over $3.5 billion annually.
- Citizen Petitions – In the US, such petitions help large drug manufacturers delay the approval of generics. The FDA had recently said that over 92% of such appeals come from branded drug manufacturers, who opt to petition near the date of their drug patent expiry, which helps them delay competition by over 150 days.
- Authorized generics – These are drugs that aren’t generic, but rather are sold under a generic name for higher costs. The first company to launch a generic gets an exclusivity period of 180 days, by using this loophole, large companies continue their monopoly.
Therefore, as you can see, all pharmaceutical companies hold patents for most of the profitable drugs they develop. A large number of drug manufacturers, however, wait for patent expiry to launch generic drugs. Hence, striking the right balance between both branded and generic drugs is what will help the healthcare system of a country develop and flourish.
It is unfortunate, however, that large pharma companies try different tactics to extend their monopoly and that generic manufacturers have to deal with a variety of issues, such as quality control and approval testing.