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India is considered as the fourth largest pharmaceutical producer by volume and as the thirteenth largest by value. At the meantime, the country is also a major drug exporter and huge supplier across the globe in which its generic production is transported widely and is accounted for 20 to 22 percent of world production (Atusko & Takahiro, 2011). As a member of WTO India has amended the national Patent Act 1970, was known as a weak patent protection policy, in order to comply and fulfill with the requirement of Trade-related Aspect of Intellectual Property Rights (TRIPS) in 2005.
India has introduced a new patent regime, which transformed the process patent to product patent and increased the patent duration from seven-year term to twenty-year term (Atusko & Takahiro, 2011). This new trend has brought huge positive effects rather than negative effect that many firms have assumed before the new patent act was put into force. The new patent act enacted by the Indian government has posed considerably positive effects on pharmaceutical sector including on the improving the sale, value, profit of Pharmaceutical industry, paving way for increasing investment on Research and development, and the expanding of pharmaceutical outsourcing business.
Firstly, the patent act enables the Indian large pharmaceutical companies to produce higher quantity and quality of product and enjoy better profit with their monopoly market owing to the protection of patent law and policy. For instance, Ranbaxy Laboratories Ltd is a famous Indian pharmaceutical industry that stands as the top ten international pharmaceutical industry and operates in around 49 countries across the world (ASA & Associates LPP, 2015). In the compliance of TRIPS agreement by adopting new patent protection policy of Indian government, Ranbaxy has acquire quite large positive gains in the TRIPS period. The net worth of Ranbaxy was growing dramatically from 204.8 million dollar in 1995 to 523.8 million dollar in 2016. And the company growth in sale was 16.2 in year 1995 to 2000 and rose rapidly in period between 2000 and 2006 by 104. Moreover, the value of sale of the company was rank as the top by increase from 252.7 in 1995 to 933.9 in 2006. The profitability ratio across period also rose steadily from 10.2 in the period between 1995 and 2000 to 11.7 in the across period of 2000 and 2006.
Last but not least, the ratio of exports to total sales turnover of Ranbaxy was only 38.4% in 1995, yet the number kept increasing to 65.8% in 2006 (Biswajit & Gopakumar). Secondly, it pushing for high expenditure and larger investment on Research and development in pharmaceutical sector. Due to the strengthening of patent protection, many pharmaceutical producers and companies have put highly attention and made huge amount of investments on the research and development to develop new drugs and new technologies in order for them to hold competitive position in the global market. Based on the statistic data from CMIE showed that the amount of expense on Indian pharmaceutical research and development increased substantially from Rs 35.01 core to Rs 471.38 core in 2010 (India’s New Product Patent Regime, 2012).
The pharmaceutical industry has focused on three main aspects of research and development including novel drug delivery system (NDDS), research and development for the regulated market and non-infringing processes, and new drug development research (NDDR) (Atusko & Takahiro, n.d). Novel drug delivery system refers to the approaches, formulation, technologies, and systems for transporting a pharmaceutical compound in the body as needed to safely achieve its desired therapeutic effects (Tariq, 2015). NDDS is the most popular research and development aspect that many pharmaceutical industries have invested on. Ranbaxy Laboratories Ltd has gained a greatly successful result of developing ciprofloxacin from NDDS that then it licensed the formulation to Bayer in 1991 with 650 million dollar (India’s new product patent regime, 2012). Meanwhile, the research and development for regulated market and non-infringing process is also significant for Indian pharmaceutical companies.
Since the higher revenue that Indian companies can earn from the regulated market such as US and EU due to the relatively high price of drug in their markets, India drug producers have injected greater expense on research to urge the development of non-infringing process for filling the drug master files (DMFs) and abbreviated new drug applications (ANDAs), as well as to develop generic products that are qualified with the regulation and requirement of the regulated market in order to market the off-patent drugs. In addition, drug companies in India have also invested on new drug development research (NDDR).
In addition, The development of new drug is time-consuming, costly and complicated processes that need to spend around ten to eighteen years with approximately 800 millions dollar and goes through two development stage including pre-clinical and clinical. However, Some India drug manufacturers have also been successful from NDDR (Atusko & Takahiro, 2011).
Lastly, it leads to the expansion of outsource business of pharmaceutical industry India. Along with the product patent that TRIPS has adopted, India has acquired such a huge advantage by becoming the outsourcing business destination for foreign pharmaceutical to invest owing to the fact that it has great development and manufacturing skill, low research and development cost, low manufacturing cost, a great number of trained chemists and biologists, plenty of English-speaking population, and huge population for pharmaceutical testing (Atusko & Takahiro, 2011).
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