Patents in pharma industry in India

Tarun Bansal

Intellectual property (IP) filings worldwide grew significantly in 2010 after experiencing a considerable drop in 2009. The growth of IP filings was stronger than overall economic growth. After this drop, patent and trademark filings worldwide grew by 7.2 per cent and 11.8 per cent. China and the US, the two offices accounted for the majority of worldwide growth. In the case of China, IP growth rates were more than double its GDP.

The upsurge witnessed is led by China, with a growth rate of over 29 per cent. The same figure stands at little over 11 per cent for India. Patent applications growth rate of India, though being higher than that of the whole world, i.e. just over 7.5 per cent, India accounts to only two per cent of the total number of patent applications made globally. This when compared to other countries with high growth rate is very nominal. China takes over approximately a full quarter of the total patent applications in 2011 where as the US stands next to China with ~23 per cent and Europe at ~16 per cent.

In India, most of the patent filings are made by non-residents. On the contrary, the indigenous patent filings of rest of the world and China account to a majority chunk in patent filings.

The graphs show the ratio of residents filing patents vs non-residents filing patents: globally, in China and in India. On comparing the graphs, it reveals that over 60 per cent of the patent filings are done by residents. This shows the development and the growth of the indigenous units. When it comes to China, the same number grows up to 79 per cent in 2011. In China, the patent filings by residents have grown from ~54 per cent in 2005 to ~79 per cent in 2011.

The scenario seems completely opposite in India. Out of total patent filings that happen in India, residents filing patents account to just ~20 per cent whereas non-residents who file patents in India account to ~80 per cent. This figure has been merely changing to India’s favour in recent times. From 19 per cent in 2005, the Indian residents have filed up to ~21 per cent in 2011.

The current figures accrue to a high number of filings from non-residents, this portrays that the indigenous units are yet to come up to a level where they can compete globally. The non-residents look towards harnessing the Indian markets for their beneficiaries. This shall also impact the Indian economy adversely by way of slow GDP growth and the growth being overtly attributed to overwhelming rise of non-resident filings in India. This may lead to initial inflow of FDI, but in the long term, it may result in capital outflows as well. To help the Indian economy be self-competitive, innovation and inventions amongst the domestic units should play a vital role. The ratio of domestic filings to non-residential filings needs to be reversed in coming time. Though the number of filings by domestic units has been growing constantly, the pace is not sufficient to beat the overt filings by non-residents.

Total patent filings (2005-2011; X-axis: years, Y-axis: Number of patents filed)

(Source: WIPO-IP Statistics)

Summary of pharma patenting statistics in India

In Indian pharmaceutical sector, the number of patents filed have increased from little over 3500 in 2004-2005 to over 5000 in 2010-11, thus the compounded annual growth of patents being filed in this industry in India was found to be around five per cent for the period 2004 -11.

However, there has been a significant change in the number of patents granted. It has risen manifold from 263 in 2004-05 to 2364 in 2008-9 to approximately 1000 in the recent times. Thus it not only indicates a significant improvement in quality of patents being filed but also a seriousness among players about their IP.

Another important statistic that might be worth looking at is how pharma patenting has increased vis-à-vis overall growth in the total number of patent filed in India. The graph below demonstrates that growth in pharma industry has been slower as compared to overall growth of patenting in India. Further, it is to be noted that patent filing in pharma sector in India is being led by MNCs rather that indigenous companies, which is a serious threat to the interests of Indian companies.

Patent filings: Residents vs Non-residents

(Source: WIPO-IP Statistics)

History of pharma patent law and trade practices in India

During the last two decades, Indian patent regime has undergone humongous changes, complying with the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement to move hand in hand with the global patent scenario.

The 1970’s Patent Act was made with an objective to encourage the development of an indigenous Indian pharma industry and to guarantee that the Indian public had access to low-cost drugs.

Growth of total number of patents filed in pharma industry (Includes drugs and bio-tech)

(Source: IPO)

As per Indian Patents Act 1970 only process patents were allowed for chemical entities while pharma product patents were not entertained or admissible. The term of patent protection for even the pharma process patents was intentionally kept short so as to develop and test new drugs. This allowed Indian companies to practice reverse engineering. Such a patent act groomed the domestic industry to build up considerable competencies and offer a large number of cheaper generic versions of patented pharma products at lower cost as long as they used a production process that differed from that used by the patent owner.

India signed the GATT on April 15, 1994, thereby making it mandatory to comply with the requirements of GATT, including the agreement on TRIPS. The Patent (Amendment) Act 2005, implemented the product patent regime in India. The Amendment granted new patent holders a 20-year monopoly starting from the date the patent was filed. Product patent regime encouraged significant numbers of foreign pharma companies to participate in the Indian market and, in 2005, foreign drug producers filed approximately 8,926 patent applications to cover their patented drugs sold as generics in the Indian market.

However, patentability still remains lower in India than in other markets such as Brazil, Russia, the US, Europe. This is mainly because Indian patent law does not allow patenting of different forms such as salts, esters, ethers, polymorphs and isomers. These decisions are taken on a case by case basis.

Predicting the future

Looking at the statistics in section one of this article, the number of patent filings are not still very high and CAGR growth is just ~5 per cent. This indicates that generic products shall continue to dominate the Indian market. While the patent law will encourage the launch of new and more patent protected products, the effort on innovation will still be led by the foreign players rather than indigenous companies. According to a prediction by McKinsey, the innovative products can capture up to a 10 per cent share of total market by 2015. These statistics can go in favour of Indian players only if they understand the value of R&D and innovation, else if they just keep going behind generics they will start losing their market shares slowly to innovators.

A graph of similar prediction for some other developing countries shows that looking at Brazil’s case, we can definitely relate to what we predicted above as you can see that 14-15 per cent share is attributed to innovative products and out of that 65-70 per cent is the share of MNCs. Accordingly, if we do not groom indigenous innovation, Indian companies are going to lose the market to MNCs as innovative products capture more and more market. The good thing is that we can see that leading Indian companies are thinking in the same direction and are spending more on research and development of new molecules.

Growing investments in R&D by major companies (In Rs Crs – Y axis)

(Source: Product Patent Regime Posed Indian Pharma Companies to Change Their Marketing Strategies : A Systematic Review, Prashant B. Kalaskar and P.N.)

Rising R&D can be attributed to rising number of patents in pharma sector

R&D in pharma has been increasing significantly, from approximately $120 billion in 2007 to approximately a little over $135 billion in the recent times. With the kind of investment going into R&D by the key players, they would want to maximise their earning by patenting their process and products.

We hope that even the small and mid-sized pharma companies start thinking in this direction so that Indian pharma industry as a whole can emerge as leader to the worldwide pharma industry. And with the stronger yet highly economic patent regime in India, they can be sure of protecting their interests at least in their domestic segment. For markets outside India and to share the costs of clinical trials, etc – they can get in to a JV with other companies and can out-license their patented molecules to MNC’s on their own terms.

References:

• WIPO: IP Statistics
• Annual Report of The Office of The Controller General of Patents, Designs,Trade Marks 2010-11.
• India Pharma 2015: Unlocking the potential of Indian Pharmaceuticals Market, McKinsey & Co.
• Competition Law & Indian Pharma Industry, CENTAD
• Product Patent Regime Posed Indian Pharma Companies to Change Their Marketing Strategies : A Systematic Review, Prashant B. Kalaskar and P.N. Sagar
• Current Status of Pharmaceutical Patenting in India, Rau. B. S, Dr. Nair G.G. and Dr. Appaji P. V