Strengthening the Export Competitiveness of firms in the Indian Pharmaceutical Industry

The Indian pharmaceutical industry is one of the most vibrant knowledge driven industries in India that has witnessed consistent growth over the past three decades. The industry accounts for 8% of world's production by volume and 1.5% by value. Much of the country's pharmaceutical consumption was met by imports until the early 1970s. Between 1947-57, 99% of the 1704 drugs and pharmaceutical patents in India were held by foreign MNEs which controlled 80% of the market. Patent law protection, hold on technology, financial resources and foreign brand names gave them distinct monopolistic advantages in India (Nayar 1983 ). During the early 1970s, the government put into place a series of policies aimed at breaking away India’s dependence on MNEs for the production of bulk drugs and formulations and moving the country towards self-sufficiency in medicines. The introduction of the Patent act 1970 was perhaps the single most significant policy initiative taken by the government that laid the foundation of the modern pharmaceutical industry. This Act did not allow product patents on medicines, agricultural products and atomic energy. For these only process patents could be registered. This act enabled Indian companies to develop skills in reverse engineering and to produce alternate processes for drugs. Exempt from paying for licenses and royalties, Indian companies could now access the newest molecules from all over the world and reformulate them for sale in the domestic market. As a result, after 1970, many new drug firms were set up. These companies developed R&D base, which was later leveraged by them to move up the R&D value chain. By the mid 1980s, India had emerged as a major pharmaceutical producer and the indigenous sector had captured a substantial proportion of the market.