India has built a large pharmaceutical industry through an array of measures in support of domestic firms. The absence of product patents enabled Indian companies to become world leading producers of generic versions of patented drugs. Low costs and a strong engineering tradition continue to sustain competitive strength. The implementation of the World Trade Organization patent regime in 2005 is driving a transformation of the industry. Key elements of the present shake-up include the return of 'big pharma' companies on a large scale and the emergence of several Indian firms that aim to become fullyfledged research-based multinationals. This article provides a description of the development and structure of the Indian pharmaceutical industry and explores questions and challenges arising from its integration into global markets.
Aust Health Rev 2004: 28(2): 182-193
THE INDIAN PHARMACEUTICAL INDUSTRY is the largest and most advanced in the developing world, accounting for 8% of global production by volume and 1.5% by value and employing over 2 million people (Government of India 2002b). Almost every type of medicine is produced indigenously, from headache pills to sophisticated antibiotics and complex cardiac compounds. Drugs are exported to more than 65 countries including the US and other highly regulated markets. A small group of firms spearheaded by Ranbaxy and Dr Reddy's Laboratories engage in research to discover new medicines, but the production and export of generics remain the lifeblood of the industry.
After several decades of autonomous development behind high tariffs and other protectionist measures, India's pharmaceutical industry is now reintegrating into global markets and production systems. This transformation is driven by the Trade Related Intellectual Property Rights (TRIPS) agreement which India will implement in 2005. TRIPS is one of the three pillars of the World Trade Organization (WTO), the others being trade in goods and services. This agreement has implications for drug access and pharmaceutical industry development, particularly in developing countries. The new patent regime disallows the 'reverse engineering' model which underpinned the industry's expansion in the past three decades. The industry is 'understandably ... jittery and on edge ... anyone remotely connected with the sector has only one question in mind. What after 2005?' (Indian Pharmaceutical Reference Guide 2003, section 1, p. 7).
The rapid growth of pharmaceutical production and exports in the past decade has generated articles in the domestic and international business media citing pharmaceuticals along with the IT and the 'business process outsourcing' sector as evidence of the rise of an Indian high tech economy. Yet the technological sophistication, entrepreneurial flair and export success of a section of the domestic industry stand in glanng contrast to the state of Indian health services. At 0.9% of gross domestic product (in 2003) India's public health expenditure is very low even by developing country standards. Only some 35% of Indians can access essential drugs (Swain et al 2002). The market is not effectively regulated; there are major problems of irrational prescribing and ready availability of fake and substandard drugs. The benefits of the high tech industry expansion in the past decade have not been widely shared. It is a moot question whether further growth and internationalisation of the pharmaceutical industry will benefit India's hundreds of millions of poor people.
The aim in this article is to provide a broad and introductory description of the development and structure of the Indian pharmaceutical industry and to explore questions and challenges arising from its integration into global markets. Some figures presented in this paper are somewhat tentative due to a lack of precise and reliable data on the composition of the industry, prices and price variability, drug quality and accessibility, and so on. …