X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Pharma: How crucial is 2005 - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Dec 4, 2003

    Pharma: How crucial is 2005

    2005 is expected to be a landmark year for the domestic pharma industry as product patents will become applicable and Indian manufacturers will not be able to bring out generic version of patented drugs. In view of the above, there is a perception that domestic pharma companies are doomed post 2005. In this article we shall give you a brief view of how the patent regime has evolved in India and how correct the above perception is.

    The fortunes of the Indian pharmaceutical industry are significantly influenced by the regulatory structure under which it operates. While the prices are controlled by the DPCO (Drug Price Control Order), patents on the drugs are governed by The Indian Patent Act, 1970. Although the Indian Patents Act, 1970, was a first step towards the recognition of intellectual property in India, the objective of providing drugs to all at an affordable price ensured that the Act recognized only process patents and not product patents.

    Absence of product patents resulted in domestic manufacturers making generic version of patented drugs, which were sold at very low prices. Gradually, the domestic pharma companies ate into MNC Pharma Company's market share. However, subsequently, India became a signatory to WTO resolution on TRIPS agreement. Consequently, India is required to recognize product patents by bringing about the necessary amendments to The Indian Patent Act, 1970.

    As a step in this direction, the Indian government passed The Patents (Second Amendment) Amendment Bill, 1999. As per the new Act, although application for product patents will be accepted, the same will be processed only after 1st January 2005. Until then, Exclusive Marketing Rights (EMR) would be granted to such products.

    EMR will give the right holder exclusive right to sell or distribute the drug or medicine for a period of five years or till the grant of a patent. However, EMR will be granted only incase of those drugs for which patent application has been filed after 1st January '95. Given that it takes roughly 8 - 10 years for a patented drug to come to the market, very few drugs actually qualified for EMR. Moreover, since the amendment was introduced, not a single EMR for a drug was granted by the Patent office. This raised doubts regarding the commitment of government regarding moving towards a patent regime.

    However, the recent grant of EMR (the first for a pharma company) to Novartis for its anti-cancer drug 'Glivec' has reinstated faith in government's commitment towards the patent regime. However, the grant was not without opposition from domestic drug manufacturers on technical and legal grounds. Thus, while granting of EMR has silenced those who might argue that the government is not serious about implementation of product patents post 2005, the opposition that the EMR approval has received from domestic pharma industry has certainly indicated that bringing a third amendment to The Patent Act, 1970 will not be easy.

    As far as implications of the implementation of product patents on the domestic pharma companies is concerned, investors need to understand that with a majority of the branded drugs sold in India are outside the purview of product patents (since product patents will be granted only to those drugs that are patented post '95), the Indian manufacturers will continue to sell these drugs. However, the impact of product patents will be felt once new products patented post '95 enter the domestic market, as the Indian companies will not be able to manufacture generics version of the same.

    This apart, the Indian companies will also have opportunities in contract manufacturing and contract research and co-marketing. Further, R&D initiatives undertaken by Indian pharma companies could see the launch of innovative drugs by these companies. Moreover, the potential of the global generics market, given the fact that majority of the block buster drugs are expected to go off patent in the next few years, is also a good opportunity for domestic pharma companies. Thus, although a third amendment to the Patent Act is eminent, all is not lost for the domestic pharma companies. Instead of worrying about the introduction of patent regime, investors need to carefully study the strategy adopted by individual companies for countering the 2005 threat.

     

     

    Equitymaster requests your view! Post a comment on "Pharma: How crucial is 2005". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    This Company Beat the Business World's 'Three Killer Cs' (The 5 Minute Wrapup)

    Aug 16, 2017

    And what it has in common with beating the stock market too.

    5 Steps To Become Financially Independent (Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Let's Hope This Correction Continues (The 5 Minute Wrapup)

    Aug 14, 2017

    Last week's correction is making a number of Super Investor stocks look a lot more attractive...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 16, 2017 (Close)

    MARKET STATS