The Hindu Business Line : Indian pharma industry

The Indian Patents Act of 1972 that granted independence to the Indian pharmaceutical industry was undone by the draconic amendment of March 2005, which back-dated product patenting to January 1995. The 1972 legislation was prompted by national interest; 2005 by international pressure. Each country has its own specific need-based patent laws, and has to decide its own destiny, says Y. K. HAMIED.

I was 11 when India had its “tryst with destiny”. I remember it was a day of great celebration at Cipla, the company my father, Dr K. A. Hamied, had set up. The company was just a year older than me. I believe, in retrospect, that all three — the country, the company and the little boy — shared a great optimism about the future.

Sixty up-and-down years later, I seem to be the only one growing old. At 60, our country is a purposeful young man, who the strong are eager to befriend and the weak look up to with hope and trust. It is a matter of great pride to read about Indians doing so well globally. Some 20 years ago, an Indian company taking over an international company would have made headlines. Now India seems to have developed a global reach. and the pharmaceutical industry is no exception.

The country may have gained independence in 1947 but the Indian pharmaceutical industry was still very dependent on imports. There was hardly any domestic industry to talk about. Most of the drugs we needed were controlled by multi-nationals. Today, the Indian pharmaceutical industry ranks fourth in the world in terms of volume, with a 12 per cent share. In terms of value, the domestic industry alone is 13th, with a 1 per cent share. The total worth of the Indian pharmaceutical industry is estimated at $10 billion.

In the early days of independence, India had no say in the availability and affordability of drugs. Today, we are in the happy state of being able to produce most of the drugs and active pharmaceutical ingredients (API). From abject dependence on imports, India has grown to be one of the top four producers of API.

As much as 55 per cent of formulations and 45 per cent of API produced in India are exported. The industry is indeed booming, and 15 of the 20 largest pharmaceutical companies in the world have a presence in India. The Indian domestic industry is expected to touch a market size of $10 billion by 2007 from $6.5 billion last year. From a position of dependency, when and how did this transformation happen?

‘Patenting’ Independence: 1972

I was too young to understand the significance of the nation gaining Independence. But I was overjoyed when the Indian Patents Act of 1972 granted independence to the Indian pharmaceutical industry. I had joined Cipla in 1960 as a fresh employee in the research department. It did not take me long to realise that there was nothing much that Cipla or any other Indian pharmaceutical company could do.

Our hands were tied by the then patent law that put the interest of foreign monopolies before the health of millions of suffering Indians. April 20, 1972 was a red-letter day for India. It was the day when the Patents Act (Act 39 of 1970) came into force, replacing the Indian Patents and Designs Act of 1911. The new Patents Act abolished product patents and allowed process patents for seven years only.

Come to think of it, the rationale behind the patent amendment of 1972 was not very different from the rationale behind the Independence movement. Our freedom-fighters essentially fought for the right to decide what was best for our country rather than be dictated to by foreign powers.

The Indian Patents Act of 1972 granted the pharmaceutical sector the right to produce any drugs the country needed. It did away with the shackles imposed by monopoly. It refused to let multinational corporations (MNCs) wear the noble garb of intellectual rights.

Recently, I was trying to explain the significance of this old law to a group of young IT professionals. I asked them to imagine the plight of the Indian IT industry if Microsoft and other software giants were to prevent any Indian from doing any developmental work on their software platforms.

The students rightly thought this would be a catastrophic scenario. What the 1972 amendment to the patent law did was avoid a healthcare catastrophe. The industry then converted it into an opportunity. It was the best thing that ever happened to safeguard the country’s health.

In 1971, MNCs had an over 70 per cent share of the Indian pharmaceutical industry. In 2007, in a reversal of roles, Indian companies commanded 83 per cent. In 1971, Alembic was the only Indian among the top 12 companies in the Indian pharmaceutical market. In 2007, there are only three MNCs in the top-12 list.

It is one thing to import formulations in a ready-for-sale state and another to indigenously produce the APIs required for making these formulations. The capacity of the industry to produce APIs for its own consumption and for exports is a good measure of its strength and maturity. In 1974-75, 24 years after Independence, the industry produced APIs worth Rs 900 million. In 1996-97, 24 years after the Patents Act of 1972, API production was worth Rs 21,860 million and in 2006-2007 it was Rs 98,900 million, approximately.

The story is the same with drug formulations. In 1974-75, total domestic sales of formulations was worth Rs 4,000 million. In 1996-97, the figure had jumped to about Rs 20,000 million, and it crossed Rs 65,000 million in 2006-2007.

Some of India’s leading pharmaceutical companies are acquiring companies in Europe, the US and other countries. Many more are getting into marketing and technological tie-ups. Pharmaceutical mergers and acquisitions fail to surprise us any longer.

Pharmaceutical business models are changing. The world is now discovering India as a preferred place for clinical research. In more ways than one, the industry appears set to keep up its growth and progress, but for the 2005 Act.

Patents and the national interest

The pragmatic Patents Act of 1972, that led to tremendous growth, was undone by the draconic amendment to the Act in March 2005, which back-dated product patenting to January 1995.

If 1972 was motivated by national interest, 2005 was prompted by international pressure, by an ill-perceived need to “belong” to the international community. The Patents Act 1972 resurrected a flagging domestic pharmaceutical industry. This Act had a much wider purpose; to help the Indian who had to fight TB, diabetes and a multitude of diseases with affordable medicines.

Every country has its own specific need-based patent laws, which are national laws. There is no harmonisation in patent laws of different countries. Each country has to decide for itself its own destiny.

Today we have a population of over 1,100 million. The diseases that used to worry us the most are still around. There is the additional scourge of HIV/AIDS. Millions of Indians need medicines. Most of them cannot afford to pay high prices.

Going by global experience, product patents that are now again enforced, can only lead to monopolies and these, in turn, to high prices. Africa and the AIDS issue of 1990-2000 is a clear example.

I sincerely believe that an inventor holding a valid patent should be suitably rewarded. In recent years, India itself has embarked towards increasing and protecting intellectual property and the science that is being developed by our scientists. India must protect its traditional knowledge base and see to it that frivolous patenting is not done — examples of these are innovations in turmeric, basmati and even yoga.

India needs to build in enough safeguards even in our current patent law. Perhaps in our haste to join WTO, we neglected many important issues — for instance, the real meaning of the 10-year transition period given to India and as to why India, specifically for the purpose of patents, was not included in the list of least developed countries.

The Indian pharmaceutical industry has come of age. It has taken its time to reach where it is today. But it has lost no time to realise and act on its responsibilities to the less fortunate. We claim no halo; we are in business too. But we have a conscience, and we are proud of it.

(The author is Chairman and Managing Director, Cipla.)