– Ms. Neha Sharma1


India’s Patents (Amendment) Act, 2005, introduced patent protection for pharmaceuticaland agriculturalchemical products, in accordance with the TRIPS Agreement. However, implications of the new patent law for industrialdevelopment and public health are stillunclear. Many observers worry about the consequences of product patent protection, on drug prices in particular. It is also apprehended that patents would hurt domestic firms, and promote only R&D on those drugs which are suited mainly for developed country diseases.

The paper is an endeavour to demystify the myth that the product patent system is especially unfair to developing countries, which face difficult social and economic circumstances and should be exempt from international intellectualproperty requirements, especially in the case of patent protection for certain drugs.Also that the problems in access to health care and the availability of lifesaving drugs are primarily due to the patent system.


The 2005 amendment to the PatentsAct 1970has changed the scenario and has extended product patent protection to all fields of technology (i.e., drugs, food and chemicals).2 It has also introduced a provision for enabling grant of compulsory licence for export of medicines to countries which have insufficient or no manufacturing capacity,to meet emergent public health situations (in accordance with the Doha Declaration on TRIPS and Public Health).

The Indian government, considering the slow rate of innovation in the country, has designed a product patent system that preserves, as much as possible, the competitiveness of Indian firms in the global generic pharmaceutical industry.


The new patent regime has become a subject matter of polemics over thepast couple of years. Prediction are being madethat the new regime will lead to steep rise in prices of necessary drugs and would be a nightmare for the poor nations. However the reality is far different. There are various factors which tend to minimize any steep increase in prices.

Firstly,the introduction of patent protection forpharmaceuticalproducts as spelled-out in the TRIPS Agreement does not extend to drugs which are already on the market. This implies that such drugs indeed will never receive patent protection in India. It is worth emphasizing that the introduction ofpharmaceuticalproductpatent protection as required by the TRIPS Agreement will lead neither to actual price increases nor to the directdisplacement of Indian imitators.For any newly developed chemicalentity, protection applies from the first day on the market.

Secondly, theavailability of close,off-patent therapeutic substitutes can restrain prices and limit potentialwelfare losses. To put it differently, if future drug discoveries are mainly new varieties of already existing therapeutic treatments,the impactis likely to berelatively small. If newly discovered drugs are medicinal breakthroughs, however, prices may be significantly above competitive levels and static welfare losses relatively large.

Thirdly, in India, 32487 applications for the grant of patent were filed out of which 3488 applications were granted for the products patents of pharmaceuticals and medicines in the year 2005-6 to 2009-103 97 per cent of drugs are off patent and are manufactured by a vast number of companies These drugs are no longer protected by patents, which generally last for 20 years counted from the time that an application is filed. Because of the time taken to process patent applications, the actual period of protection is often several years shorter. The key therapeutic segments include anti-infectives,cardio vascularand central nervous system drugs. Anti-infectives comprise thelargest therapeutic segment in India, accounting for about 26 per cent of the market.4 Moreover, most of the large global producers of AIDS treatments have dramatically lowered the prices of their drugs in developing countries.

Fourthly, drugs constitute only less than 15% of the total healthcare costs even in developing countries where these costs are the highest as a percentage of total costs. In addition, the availability of new, better and safer drugs has considerably reduced the need for hospitalization fortreatment orsurgery, thereby providing indirectbenefits to the patients and the healthcare system.


The following aspects of the patent legislation are expected to shorten the exclusivity period of drug products, allow early entry by Indian firms, and maintain the competitiveness of Indian firms in the global generics industry.

First of all, a more narrow interpretation of patent scope combined with “normal”patentability requirements may encourage more Indian firms to compete in product R&D. In addition to benefiting innovating domestic firms, the increased competition between pioneer drugs and structurally similardrugs in the Indian market willlower pharmaceutical prices without relying on generic competition or price control. Even in the US, structurally similar situation have been known to create price- lowering competition in markets with price-sensitive buyers.5

Secondly, linkingcompulsory licensingto R&Dby domesticfirms would be a reasonable way to stimulate innovation and encourage voluntary cross-licensing.Currently, the issuance ofcompulsory licensingin India is independentof R&Deffort by Indian firms.

Thirdly, there are various Publicinterest provisions under theAct which seek to strike a balance between the rights of the patentee and public health. These Public Interest Provisions are: –

• Conditional grant of patent (Section 47): This empowers the Government to import, make or use any patent for its own purpose. For drugs, it also empowers import for public health distribution.

• Revocation ofpatent in public interest (Section 66): This empowers the Government to revoke a patent where it is found to be mischievous to the State or prejudicial to the public.

• Grant of compulsory licence (Sections 82 to 94) : Chapter XVI deals with the generalprinciples and circumstances for grant of compulsory licenses in order to protect public interest particularly public health and nutrition. These provisions check the abuse of patent rights. They can be invoked if thereasonable requirements of the public with respect to patented inventions have not been satisfied, and the patented invention is notavailable for public at a reasonably affordable price, and if thepatented invention is not worked in the territory of India. Theoretically, compulsory licensing, as provided forunder theTRIPS Agreement, or merely the threat ofits use,could beused as a price leveraging instrument in developing countries and also to protect the public interest or to remedy anti-competitive behavior.

•(Section 92):  This provides for action in case of national emergency, extreme urgency and public non-commercial use, and can be invoked without the grace period of 3 years from grant of patent.

• Use of invention for the purpose of Government (Sections 100 & 101): complementing section 47.

• Acquisition of invention and patent for public purpose (Section 102) : This empowers the Government to acquire a patent to meetnational requirements.

• Bolar provision (Section 107 (A) (a)) : This facilitates production and marketing of patented products immediately after expiry of term of patent protection by permitting preparatory action by non-patentees during life of patent.

• Parallel import (Section 107(A) (b)) : This provides for import so that patented product can become available at the lowest internationalprice.


Immense R&D prospects

Whileprocess patenthelped to flourish (Indian PharmaceuticalIndustry) IPIinto a world-class generics industry, product patent regimewillfilter  the best from the pack and would be favorable to players with built-in scientific and technical resources.

R&D in Neglected diseases

There are many serious diseases for which little research takes place, because they mainly affect people who cannot even afford drugs. Examples of these ‘neglected diseases’ include human trypsomaniasis, leishmaniasis and Chagas disease mainly spread in African Countries. Pharmaceutical companies argue for strong patent protection on the basis that it protects the profits which provide incentives for research and drug development. For many neglected diseases, stronger patent protection will induce increased research and development for drugs.

Improvements in Drug Quality

Currently, drug quality is being taken up as the most pressing issue within Indian drug regulatory policy. As the new regime will induce more and more investment and competition the quality of drugs will necessarily improve.


At present, it seems that the only way for governments of developing countries such as India to keep pharmaceuticalprices low,while ensuring that new drugs are introduced, is to use the threat of price control and compulsory licensing.6 These measures are not only difficult to implement,but createregulatory uncertaintywhich diminishes the returns to innovation. The Government has to ensurethe possibility of attaining thedualgoals of productintroduction and drug priceattenuation without discouraginginnovation by domestic firms.

The patent system is blamed for non-accessibility ofthe drugs to poorer sections of the society. But after close observation of the provisions it seems that there are enough provisions which can potentially control the steep rise in price of drugs. The problem of non-accessibility of drugs was even there before the amendment and today even many of the “off-patent” drugs remain unavailable or unaffordable to most of those suffering from various diseases. Access has been a problem in India for much of the past 50 years. Nothing illustrates this more than the fact that 60% to 80% of patients seek remedies from traditional medical practitioners or alternative medicines.7 The reasons are not to be found in the patent system. The reasons are due to socio-economic factors and flaws in government policies.