[Ip-health] New Indian Patent Law to shake up drug industry

[Ram]

New patent law to shake up drug industry

REUTERS

The Indian drug industry enters a new era in 2005 when laws
recognising foreign patents take effect, ending a copycat trade that
has fostered local pharma firms for three decades and helped bring
cheaper medicines to the poor.

By presidential decree this week, India met a World Trade Organisation
commitment to recognise foreign patents from Jan 1, the culmination of
a 10-year process. The change will become law if ratified by
parliament at its next session in February.

India has allowed its pharmaceutical makers to copy drugs patented
abroad since the early 1970s, as long as they used different
manufacturing processes.

The allowance helped a few, such as Ranbaxy Laboratories Ltd, grow
into global challengers and made medications cheaper for the poorer
masses who often need them most.

Multinationals such as GlaxoSmithKline Plc, Pfizer Inc, Novartis AG
and Aventis, who have been forced to watch Indian firms eat into their
market share, await the new environment with cautious optimism.

"It is certainly a milestone that product patents will be recognised
in India," said S. Ramkrishna, senior director, corporate affairs at
Pfizer India. "There is already a mindset change in the industry in
India and also the global industry's perception of India."

"This will definitely encourage multinationals to invest in India,
provided the product patent law is implemented and policed well," said
Ranjit Shahani, president of the Organisation of Pharmaceutical
Producers of India and the head of Novartis India.

OLD PATENTS EXEMPT

The new rules do not apply to drugs patented before 1995, so Cipla Ltd
can continue selling its widely distributed version of the HIV
treatment AZT. Even copies of drugs patented between 1995 and the
introduction of the law are unlikely to be withdrawn.

Nor are foreign companies expected to introduce a flood of new
products they have so far kept off the Indian market. Most are still
grappling with the nitty-gritty of the proposed law and fear that
questions about what is or isn't patentable will ultimately be
answered in the courts.

"There is unlikely to be a steep change in the market dynamics
immediately after the introduction of product patents," said a
GlaxoSmithKline Pharmaceuticals Ltd spokesman.

Still, big pharma firms see India as a lucrative new market.

"There could easily be 70 to 80 million people who can afford
expensive medicines, just as they go out and buy expensive cars,
branded clothes and consumer goods," said an executive at one drug
manufacturer. "That is equal to the size of a UK or a Germany."

The government and foreign companies say medicine prices are unlikely
to shoot up, because 95 per cent of the drugs sold in India are older
molecules. Supply of generic drugs would continue and be adequate to
treat most needs.

Last year, more than 60,000 generic brands in 60 therapeutic areas
were available in India, which accounts for 1 per cent of the value
and 8 per cent of the volume of the world pharma market.

The new law has provisions allowing the government to force
patent-holders to grant licences to local firms in case of national
emergencies or for exporting medicine to countries facing public
health emergencies.

NO DEATH KNELL FOR LOCAL FIRMS

To adapt, domestic firms such as Ranbaxy, Dr Reddy's Laboratories Ltd,
Cipla, Wockhardt Ltd and Sun Pharmaceutical Industries Ltd have been
seeking new revenue streams.

The larger companies are looking overseas as drugs worth billions of
dollars go off patent, or aim to become suppliers of drug ingredients
for pharmaceutical majors, besides doing contract research such as
complex chemical synthesis.

India has more than 70 US-approved manufacturing plants -- the most in
the world outside the United States -- and could become a production
hub because of its cheap, skilled labour.

Shahani of Novartis said Indian firms had developed skills for
're-engineering' drugs which can be used to forge partnerships with
global companies for research.

GlaxoSmithKline has already signed a drug research partnership with
Ranbaxy, India's top drug maker by sales, and Novartis has hooked up
with Biocon arm Syngene.

The freedom to copy patented drugs resulted in a mushrooming of Indian
pharmaceutical firms. They number some 5,000 today, and the new regime
should trigger more mergers and takeovers.

"Our industry is fragmented. Consolidation will happen over a period
of time," said Malvinder Singh, president of pharmaceuticals at
Ranbaxy.