Impact of TRIPS on Pharmaceutical Industries in India

By Aditya Balaji

Introduction

 The economy that we live in is that of a highly globalized economy, interdependent on each other for various purposes. And for this reason, various laws across the world are slowly transformed in order to accommodate one another by slowly having similar standards of laws and procedures in various aspects. One such field of law is the field of Intellectual Property or IP laws. Intellectual Property is extremely important when we consider the rate at which our world is growing where various technologies are being invented and implemented. These Intellectual Property rights ensure that the creator of said commodities are protected from it being stolen or copied by others. It ensures that the creator has rights over it and recognizes them as the founder of such inventions. Intellectual Property rights are not just restricted to technology but any original creation that has come out of the human mind whether its science, medicine, technology, art, and literature. It applies to all. One such agreement for Intellectual Property Rights is the TRIPS Agreement which is followed by all the signatory countries of the World Trade Organization (WTO).   The Pharmaceutical Industries is one example of an industry that was impacted by these rights which allowed for a change in how they functioned in India as a result of this agreement.

What is a TRIPS Agreement?

The TRIPS Agreement stands for Trade-Related Aspects of Intellectual Property Rights Agreement. This agreement was put forward by the World Trade Organization (WTO) in order to ensure a minimum uniform standard that needs to be applied by its member countries to facilitate the smooth functioning of trade and other functions of a trade by protecting intellectual property. The agreement applies to the member countries of the WTO and was passed in the year 1995. The TRIPS agreement focuses on various Intellectual Property rights such as copyright, trademark, geographical Indicators, and patents. The agreement proposes a structure or a framework of intellectual property laws that countries can adopt within their framework in order to make it easier to enable trade and also make it much safer for creators and inventors by providing them more protection. The agreement mentions various standards that need to be upheld in the field of intellectual property, states the procedures for enforcement, and provides adequate solutions for dispute resolutions in the event they arise. They also focus on ensuring in promoting competition in the market and preventing anti-competitiveness.

The objectives of the agreement are clearly highlighted by article 7 of the agreement which states as follows:

“The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.”

Impact on India

India, a few decades ago followed the Indian Patent Act, 1970 until the TRIPS Agreement. However, once passed India amended the act multiple times to accommodate the agreement into its own legal framework from 1995 to 2005. The main feature of the amendments was to change how patents functioned in India. Earlier, India facilitated process patents. What this means is that the process of manufacturing for a certain commodity or product was patented and not the end result or the product itself. This in turn gave a lot of flexibility for manufacturers to reverse-engineer products and find alternative methods of producing the same product and also at a cheaper rate. However, being part of the agreement meant that this had to change. Product patents are one of the standards that had to be upheld, resulting in the end product also being patented apart from the process. The consequence of this was expected to make it much harder for manufacturers to find alternate ways of creating a product and thus making it better for bigger corporations to produce said commodities.  Furthermore, the agreement required patents to have a lifespan of 20 years.

TRIPS and Pharmaceutical Industries

The pharmaceutical sector in India took advantage of the process patent framework that was followed earlier. It allowed for alternative methods of manufacturing the same products which were also easier to cut costs and effectively reduce the price of the medicines. This also meant that products or drugs in this case could be reverse-engineered and accordingly manufactured in different ways. These features of the patent laws in India helped sell drugs at a very low cost and were very beneficial to consumers considering how many of them were looking for affordable drugs. Indian pharmaceutical companies grew from the 1970s as a result of this. However, the amendment to introduce product patents as a result of the TRIPS agreement meant that pharmaceutical industries had to come up with new products. The direct consequence of this is that the rate of Research & Development increased multiple folds which also meant that more costs to incur. More cost meant a rise in prices of the drugs sold in the market in order for manufacturers to make a good profit margin. This would make it harder for people to procure medicines and therefore was expected to be a worry amongst various groups. The general consensus held globally was that this would adversely impact the developing countries and would likely give the advantage to developed countries. 

Article 8 (1) of the  agreement is as follows:

“1. Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.”

The article exists in order to ensure that the standards mentioned in the agreement are not misused in the case of public necessity goods. And the same thus applies to the pharmaceutical industries as medicines are an absolute necessity and are required to maintain public health. However, the policies seemed to be very supportive of the developed countries and were raising concern amongst developing countries and resulted in the agreements being questioned. There were questions regarding the costs of the drugs, and how patenting and licensing will drastically impact the production and supply of medicines. 

The growing worry amongst developing countries led to the Doha Declaration in 2001, where flexibilities regarding patents concerned with public health were introduced.  These flexibilities are in line and based on the article mentioned above and seek to make some of the restrictions easier. One of them was compulsory licensing, which meant that the government could directly allow the manufacturing of a patented drug by a third-party producer where the original owner’s permission is not required. This allowed for easier production of drugs which would effectively increase supply and also reduce costs to an extent. Another feature that was implemented was those relaxations on exports and imports. According to the agreement, importing or exporting was made harder as it focused a lot more on domestic products being used domestically. However, this was relaxed making it easier to allow companies to generate revenue through imports. The decision is not just pro-business but it also allows for the developing countries or countries unable to produce enough medicines to import it.

The various repercussions of the change in the function of intellectual property laws in India enabled for a far more Research and Development intensive approach by companies in order to procure new products. It indeed would increase the price as the Research and Development process is very expensive and often takes years in order to reach a definite conclusion. However, this in a way allowed for pharmaceutical industries to get creative and innovate, therefore expanding upon what is known and available to us. The sharp rise in cost was a fear in the Indian economy as several other countries had a higher rate for drugs compared to India. The United States and the United Kingdom produced drugs that were multiple times costlier than the ones sold in India. Furthermore, even Pakistan had a high rate of drugs which caused concern in the market. All these speculations expected a negative impact. However, there were many positive speculations too. The sheer amount of population and the requirement of drugs in India when coupled with unaffordable drugs would only make it harder for corporations to price their drugs high and this was seen as a plus point. Various new innovations were made because of this. Furthermore, the research led to many industries expanding and entering into new fields. Some work on new drug research, delivery systems and has even expanded to the development of the field of biopharmaceuticals in India.

India’s development in this field allowed it to compete and be involved in the global network of pharmaceutical industries. The amendments allowed foreign competitors to enter the market too without worrying about their product being reverse-engineered. This made it lucrative to outsource to India too. Furthermore, various pharmaceutical industries were able to grow and expand by entering into alliances with foreign companies. Indian Industries such as Zydila and Biocon were able to expand and innovate by strategically aligning themselves with foreign competitors and sharing resources with them which allowed them to innovate and their products.  Overall, it aided in the growth of companies and led to expanding of the market into new territories which was the result of the agreement and the various amendments undertaken by the Indian government.

Fast Forward nearly 3 decades and the Indian Pharmaceutical Industry is one of the best in the world. It is valued at around $42 Billion domestically currently and is the 3^rd largest producer and 14^th largest valued pharmaceutical industry in the world. A feat testament to the fact that the TRIPS agreement has definitely helped the Indian pharmaceutical Industry thrive effectively as the numbers speak for themselves. The effectiveness of the Indian pharmaceutical industries is clearly seen with the recent covid-19 pandemic crisis. Various pharmaceutical companies manufacture and provide various drugs and other supporting materials in order to combat it. Furthermore, safety equipment such as masks and PPE kits have also become more prominent in the market. Most importantly, the vaccines that were mass-produced in India show how far the capabilities of the pharmaceutical industries have come, indicating a strong Research and Development orientation of the companies and prove that these industries are on par with some of the best in the world. 

Conclusion

India is a country with its own problems like the rest of the world. It has various issues to tackle and overcome. Issues such as overpopulation coupled with overpopulation and still suffering from the consequences of colonialism are a few to mention. This makes it important to ensure that the public support system provided by the government is affordable and adequate especially in the field of medicine. Indian Pharmaceuticals have flourished since the 70s as a result of the then patent laws that made it easier for them to grow and develop. The world was also changing and advancing towards a more technological age that broke down barriers and was slowly unifying the world by connecting with one another. Trade is one important aspect that allowed for inter-dependency upon one another and thus led to the era of globalization that we live in today. The TRIPS agreement seeks to ensure uniformity in intellectual property laws and aims to make trade more efficient and secure amongst its member countries. However, the problems it posed on the Indian economy raised a huge question mark especially in the field of pharmaceuticals which could potentially break them. However, for the most part, various reforms and amendments were made that allowed these industries to generate positive results, one where research and innovation were given priority. This allowed for various innovations that made breakthroughs in this field. There are various issues that still have a hold in our country considering the current scenario such as rising costs of medicines in general but some of these issues can be tackled with better reforms. Despite all, the Indian pharmaceutical industry managed to break expectations and transform into a global leader in the field of medicine and is only projected to go upward which will definitely bring in more innovation and help millions, if not billions.