WTO and Indian Pharmaceutical Industry: A Study


Posted: 9 Mar 2007

See all articles by Malla Praveen Bhasa

Malla Praveen Bhasa

Infosys Technologies Limited - Business Transformation Labs of SETLabs


Economic liberalization the world over has paved the way for globalization. The most prominent trend of this process is the emergence of trade agreements as instruments, that are legally binding and enforceable and ones, which are primarily developed by a few developed countries for the developing countries to follow. The World Trade Organization, which is a multilateral trading body, is a polished sword in the scabbard of the industrialized nations for organizing and enforcing global economic governance.

India has been a signatory to the WTO the day it was formed in 1995. Earlier it was a partner country in GATT, WTO's predecessor. Being a member country it is bound by the trade agreement and policies set out in the charter of the World Trade Organization.

India that till now has adopted process patent has been directed by the WTO to do away with it and adopt product patent to comply with the rules charted in the TRIPs agreement. According to the WTO agreement India has been given time up to year 2005 to amend its IPA to allow product patent instead of process patent.

Trade cross-retaliation is one prime problem that India will have to encounter if it does not comply with the specified regulations. In the light of this, an attempt has been made to study the impact of WTO directives post-2005, in the pharmaceutical sector in India. Given the current industry scenario in India, it is in no way a minnow to the global pharmaceutical majors. Yet it is beset with many implications. The policies of the Government apropos of, the pharmaceutical industry show promise and the current budgetary announcements scatter a ray of hope. The pre-WTO scenario (till year 2005, after which WTO regulations would be enforced in India) is characterized by rapid consolidations, acquisitions, mergers, extensive copying of patented drugs, restructuring by TNC's, preparations by them to take the Indian pharmaceutical industry by storm post-WTO and the pre-emptive strengthening of Indian pharma companies to thwart the entry of foreign majors. On the other hand, the post-WTO scenario is likely to be characterized by soaring drug prices, intense competition, new drug discovery and introduction into Indian markets, large expenditures on research and development, large scale downsizing, increase in social costs, etc.

Article 8 and Article 30 of the TRIPs Agreement provide some relief to the Indian policy makers through some lenient provisions set out in them. The government has to take full advantage of the provisions thus laid, by adopting a proactive approach.

In the light of the implementation of TRIPs Agreement after 2005, options like collaborative research, contract research, stepping up of research and development expenditure, developing and exporting of tropical drugs, manufacturing through licensing are open to the business.

JEL Classification: WTO, Pharmaceutical Industry, India

Suggested Citation

Bhasa, Malla Praveen, WTO and Indian Pharmaceutical Industry: A Study. Available at SSRN: https://ssrn.com/abstract=968575

Malla Praveen Bhasa (Contact Author)

Infosys Technologies Limited - Business Transformation Labs of SETLabs ( email )


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