The growth of the pharmaceutical industry in India is quite
phenomenal. From small beginnings during the first post-independence
decade, the industry has come a long way and become very
robust today. This industry is able to weather the impact
of the three F's - Finance (inflation in the economy), Fuel
price escalation and Food shortage on the global scale.
The share prices of the pharmaceutical sector reflect robustness,
as the prices are hardly hit despite the rapid fall of the
Sensex. The pharmaceutical industry produces valuable life-saving
drugs along with numerous over-the-counter drugs such as
Paracetamol. The following analysis brings out the reasons
behind the success of this industry.
Till 1970, the growth of the Indian pharma industry was
very slow. The Patent Act of 1972 and government investment
in the pharma industry infused life into the domestic pharmaceutical
sector. Product patents for pharmaceuticals, food and agro-chemicals
were removed by the Act, allowing patents only for production
processes. Automatic licensing was put in place and the
statutory term was shortened to seven years on drug patents.
This led to the era of reverse engineering, where new products
were developed by a firm by changing their production processes.
During the last three decades, the private Indian pharmaceutical
firms focused their efforts on reverse engineering-oriented
research and development, and this activity was very much
limited to applying known knowledge, or to making minor
adjustments and modifications. In addition, a few public
sector laboratories operated in pharmaceutical research
and development under the Council of Scientific and Industrial
Research (CSIR). Thus, the lag period between the launch
of a new product in its maiden market abroad and in India
was reduced in some cases to two years low, as a result
of well-mastered production technologies.
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