Role of government and judiciary in Generic Drug Industry

Today, India is one of the leading players in the global generic drug market with Indian pharmaceutical companies ranked third in terms of volume of drugs sold globally. Though it has a modest 1-2% market share in global pharmaceutical market, the industry is growing at a remarkable rate of 10% annually. Until 2005, the Indian Patent Act 1970 has facilitated the growth of domestic pharmaceutical sector as it provided only process patent, that too for a period of five years, and didn’t give the more demanded product patent on pharmaceuticals. Thus MNC pharma companies couldn’t patent their drugs in India.

This protection provided a favourable climate to Indian pharma companies which used their reverse-engineering skills to copy expensive drugs of multinational companies and manufacture generics at cheaper costs. The government has also provided support to the bio-pharma subsector by giving tax incentives, and grants to start-ups and existing companies for expansion.

The higher judiciary has helped indirectly by revoking patents of multinational companies in India which try to evergreen them. It has also upheld the grant of compulsory license to Indian generic makers for manufacturing life-saving drugs at cheaper costs which were exorbitantly priced by the MNCs. These decisions of the judiciary have helped Indian pharma to earn higher revenues from their Indian business.

However, in the field of clinical research trials, the current policy and regulatory environment in India has led to a flight of clinical trials from the country. In fact, India is witnessing a reversal in the number of clinical trials that are carried out within the country. Until recently, India was a natural choice because of low costs as compared to developed countries like US and EU, and availability of a vast pool and diverse population that was afflicted by the particular disease. But due to recent changes in the Drug and Cosmetics Act, 1940 which regulates clinical trials in the country, companies that conduct them are facing delays in receiving approvals for clinical trials. Many companies like Biocon, Lupin, Cadila Healthcare, etc. have thus moved their trials outside the country.