Importance of patent regime in pharma industry

Patents in the pharma industry are generally treated equivalent to their product portfolio and hence play an important role in rocketing the market value of a firm.

Drug Medicine Pharma manufacturing Factory Industry Unit
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Last Updated on January 6, 2024 by The Health Master

Importance of patent regime in pharma industry. The pharmaceutical industry is among the prime beneficiaries of the fast-paced technological advancements.

As is evident with the addition of new life-saving innovations into the market every day, making the industry stand tall among the total revenue contributors of a country.

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For an innovation-driven sector like pharma, where coining new life-saving elixirs distinguishes a company from being a “generics” manufacturer to a “research-based” organization.

One can never go wrong about the importance of patents regime in safeguarding these innovations, and their contribution in making the remedial market one of the biggest research-driven money-spinning markets across the globe.

Patent Regime in pharma industry: Tools for driving innovation

The amalgam of the IP and the pharma industry is not a new phenomenon, if one looks at developed economies across the globe.

Although, it may be considered a recent phenomenon in India, after the completion of TRIPS compliance in 2005, whence it started.

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Since then it has brought a surge of innovation in the medical science and healthcare. 

Intellectual property rights, primarily patents, are the cornerstone of the pharma industry as the industry solely relies on the innovation that can be monetized in the future. 

Developing and launching a new drug in the market involves enormous cost (approx. US$ five billion), time (approx. 5-6 years) and the success or failure, being based on clinical trials, is highly unpredictable.

The only factor that motivates these companies to take the risk and keep the boat sailing is the promise of safeguarding their innovations against exploitation and duplicity by the competitors.

It is accompanied by the help in recouping investments incurred during research and development by marketing of the drug offered by the patent rights. 

The biggest example of the importance of patent regime can be seen in the growth of the pharma industry in India post the amendments in Indian Patent Act under the TRIPS ruling and introduction of product patent in pharma industry.

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Indian companies rapidly adopted to this change and started investing in R&D.

The sector previously weighed down by the fear of losing market share to the generic companies producing the same medicines at a low cost, marched ahead under the new armour wielded to them via product patents and has reached to an extent where Indian pharmaceutical companies stand among the largest pharmaceutical firms in the world.

It also opened the doors for contract-based researches with MNC’s and acquisitions, the most notable one being the acquisition of India’s largest pharmaceutical company, Ranbaxy by the Japanese MNC, Daiichi Sankyo back in June 2008 and its re-acquisition by Sun Pharma in 2014.

Patents regime in pharma industry are generally treated equivalent to their product portfolio and hence play an important role in rocketing the market value of a firm.

The roadblocks to intellectual pharma pool

Like every other innovation sphere, the patenting of pharmaceutical compositions has been a matter of debate among those in favour of it, and those who call themselves the advocates of the poor.

While the ones in favour of it put forward the argument that patenting their innovation relieves them from the fear that their invention will be duplicated by generic companies, who do not invest in R&D and sell the drugs at marginal prices.

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Those against believe that providing exclusivity to the production of remedial products provides monopoly to a certain company hindering the innovation in sector and also leads to these companies charging exorbitant prices for their products which makes eventually makes it inaccessible to the poor people suffering from the disease. 

Another prime concern regarding patent rights among the pharma domain is the “Ever-greening” strategy used by behemoth companies to protect their financial interests in which they append some minor changes in their existing product like using same base formula, but with a different structure and secure the patent on that product, claiming it to be novel.

Further, frivolous patent infringement suits are filed by companies which result in activation of an automatic 24-30 month delay in processing to prevent their competitors from bringing their product to the market. 

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To sum up, patent rights help in gaining a competitive edge in the market necessary to promote innovation and economic growth, thereby providing an incentive for the innovator to innovate – this is as much a need in pharma, as in the other sectors.

In fact, considering the advancements in pharma industry serve the most basic right, i.e. the right to a healthy life, the patent regime should be of paramount in pharma industry.

Adequate patent protection can provide pharma industries a platform for future growth and produce new drugs.

Also, protecting new inventions help pharma industries recuperate skyrocketing costs incurred in R&D and maximize the commercial product lifecycle.

But, there exists a need to draw a silver lining to bridge the gap of controversy regarding the fears related to the patenting of pharmaceutical products.

Although, it is difficult to define that line between “Evergreening” and deciding which incremental innovations do or do not merit a patent – it will have to be done by the policy makers. 

By Amit Aggarwal
Co-Founder and Director of Effectual Services, ( Advisory firm that offers IP support solutions to Fortune 500 companies )

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