LICENSING REGIME IN PHARMECEUTICAL INDUSTRY

BY-

ANSHUMAN TRIPATHI

anshumanrok@gmail.com

7985849155

School of Law, UPES,

Dehradun.

Year of Study: Second Year (Five Year Course)

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 Licensing regime in Pharmaceutical Industry
Table of Contents

1. INTRODUCTION…………………………………………………………2-3
2. INTELLECTUAL PROPERTY RIGHTS INVOVLED IN INDIAN
PHARMACEUTICAL AGENCIES……………………………………...4-7
3. REGULATORY AGENCIES……………………………………………..8-10
4. CONCLUSION……………………………………………………………..11

1. INTRODUCTION TO INDIAN PHARMECEUTICAL INDUSTRY

India is currently the largest provider of generic drugs globally. Indian pharmaceutical sector provides to more
than 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per
cent of all medicine in UK.

India beholds an important position in the global pharmaceuticals sector. India also happens to have a large pool
of scientists and engineers who have the potential to steer the industry ahead to an even higher level. Presently
over 80 per cent of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency
Syndrome) are supplied by Indian pharmaceutical firms.

The Indian pharmaceutical sector was valued at USD 33 billion in 2017. The country’s pharmaceutical industry
is expected to expand at a CAGR of 22.4 per cent over 2015–20 to reach USD 55 billion. India’s
pharmaceutical exports stood at USD 17.27 billion in FY18 and have reached USD 10.80 billion in FY19 (up to
October 2018)1.

Indian pharmaceutical companies in the recent times have increased their spending on Research and
Development specifically in specialty drugs and complex generics. This trend has been observed prominently in
top drug makers such as Sun Pharma, Dr Reddy’s, Lupin, as these drugs have been found expensive to
develop. Business in the foreign market has suffered for most of the pharmaceutical companies due to the

1
Indian Pharmaceutical Industry
https://www.ibef.org/industry/pharmaceutical-india.aspx
2
pricing pressure and currency fluctuations, with the shift towards increased spending on Research and
Development being natural. In the duration of past six years, the Research and Development spending by top
Indian pharmaceutical companies has grown by three to six times in comparison to sales which has only risen
by two to four times. Companies have also started to increase expenditure along with their increasing
manufacturing capacities. This trend towards development and marketing specialty drugs would be the next step
for Indian Pharmaceutical companies into moving ahead in the value chain and sustaining the growth
momentum along with good returns2.

In regard with Indian Pharmaceutical Industry, there has been found a quantum jump in the Research and
Development costs with an associated jump in investments required for developing and manufacturing specialty
drugs. There has been a rise in stakes of the developers, therefore pointing out the need to protect the
Knowledge and Developments from unlawful use, at least until the period which would ensure recovery of the
Research and Development and other associated costs and adequate amount of profits for continuous
investments in Research and Development of products. IPR is a strong tool, to protect investments, time,
money, effort invested by these industries, since it grants these industries an exclusive right for a certain period
of time for use of their products. Thus IPR, in this way helps in aiding the economic development of these
industries by promoting healthy competition and encouraging industrial development and economic growth.

A stronger IPR regime helps in aiding the pharmaceutical companies in protecting their innovation from the
research stage to development stage. Creating, managing, and protecting intellectual property are becoming an
important source of raising funds required for investment in Research and Development. IPR has shown a
significant impact in the pharmaceutical industry covering issues that range from discovering, developing to
pricing, distribution, competition mapping, availability, and pricing of new medicines 3. With stronger IPR
protection in India, the pharmaceutical companies are growing at a rapid rate. While on the other side,
government policies are helping the country and market from creating a monopoly in the market which leads to
higher prices of drugs.

The pharmaceutical industry has been found as one of the evergreen industries in India. No matter what
happens, whether the economy is on its most stable behavior or in recession mode.4

The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy
introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian
pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive
vaccines also augurs well for the pharmaceutical companies along with better IP laws being constituted for
protection

2
Indian Pharma companies increase spending on R&D
https://www.brandindiapharma.in/pharmaceutical-industry-trends/indian-pharma-companies-increase-spending-on-rd
3
https://www.rdmag.com/article/2016/02/intellectual-property-and-indian-pharmaceutical-industry
4
https://www.iipta.com/role-of-ipr-in-the-pharmaceutical-industry/
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 2. INTELLECTUAL PROPERTY RIGHTS INVOVLED IN INDIAN
PHARMACEUTICAL AGENCIES

2.1 PATENTS
Patents are granted by the government for protection of the inventions. Patent is known as an exclusive right
granted by the government to the applicant for an invention5. A patent can be applied by the inventor or any
other person/company assigned by the inventor. It is the right to exclude others from unauthorized making,
using, offering to sale, selling or importing the invention. Patent is a negative right that means patent is not a
right to make, use or sell the invention, rather it is a right that empowers the patentee 6 (patent owner) to
prevent or stop the use of his/ her invention by third parties without his/ her permission. Patent includes
right to license others for the purpose of making, using or selling the patented invention. Pharmaceutical
companies are usually considered to be at high-risk as once a drug has been successfully created, it is under
the scope of being copied by any third party through reverse engineering as pharmaceutical compounds can
be easily imitated once they have been discovered. Hence, patent helps in protecting the rights of inventor
and invention. If any third party voids their rights, they would be bound to undergo Legal consequences.

India being a member country of World Trade Organization (WTO) signed TRIPS (Trade Related Aspects
of Intellectual Property Rights) Agreement in 1995. TRIPS prescribed the minimum standards of IP laws to
be followed by each of its member countries. India being a signatory of the TRIPS agreement was under a
contractual obligation to amend its Patents law to make it compliant with the provisions of the agreement. In
its first amendment it laid down the provisions for filing of applications for product patents in the field of
drugs.7

Honoring the World Trade Organization mandated product patent regime, Indian Pharmaceutical Industry
has started shifting its focus away from the domestic market to the generic market in the developed world
which is going to expand in the upcoming years. Although India has become a net exporter of
pharmaceuticals, the import dependence on bulk drugs, which is the manufacturing segment, has steadily
increased over the last twenty years. There has been observed a shift away from bulk drugs towards high
valued formulations by both domestic companies and MNCs. The MNCs want to bring in their patented
drugs without any domestic competition. The new patent regime has resulted out to be causing harm to the
patients due to their high costs as well as to the domestic manufacturers since it would make them unable to
manufacture any post 1995 patented drugs through alternative processes due to which the early reactions
were of panic. These were the main reasons why Ranbaxy, Dr. Reddy’s and Cipla had started raising
revenue through exports in the early years during the huge off-patent global wars. Until the government uses
the flexibilities provided in Articles 30 and 31 of TRIPS like compulsory licensing for essential drugs, there
will be serious repercussions on future access to essential drugs not only in India but around the world at
affordable prices. The third set of amendments in the patent law was introduced as the Patents (Amendment)

5
Section 2(1) (m) of The Patents Act, 1970.
6
Section 2(1) (p) of The Patents Act, 1970.
7
Development of Patent Law in India
http://www.ijddr.in/drug-development/patenting-of-pharmaceuticals-an-indian-perspective.php?aid=4994
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 Act, 2005. Through this amendment product patent regime was introduced in India. Mere discovery of new
form, new property or new use of a known substance was made patentable under certain conditions,
provisions related to pre grant and post grant oppositions were modified and provision for the grant of
compulsory license for export of patented pharmaceutical products in certain conditions was introduced.
The pharmaceutical industry is undergoing a process of consolidation whereby there is concentration at the
top due to mergers and acquisitions to tap the opportunities emerging in the domestic as well as the global
market in the various stages of the value chain such as R&D, manufacturing and marketing 8. Cost has
played an important role in this issue. An average figure of USD 1 Billion is quoted per drug for its
Research and Development. This high investment is known to be as the major reason why the
pharmaceutical industry has observed a lack of investments in developing medicines for non-profitable
diseases. In this phase of intense competition from MNCs post 2005, many companies have raised their
investment in research though they still need to out license their research to multinationals for clinical trials.
On its own, many Indian domestic companies aren’t equipped to bring out a drug from the investigational
stage to final stage. Therefore there are a number of collaborations between MNCs and domestic companies.
The role of government has been found of utmost importance. Since the breakthrough drugs typically come
out of government funded laboratories, there is a need for government funded research organizations to
expand their role by partnering with private sector.

Since Indian patent system at start was a “Process patent” driven system, the transition to “product patent”
system was expected to be devastating to the pharmaceutical industry, due to which the early reactions were
of panic. The expected outcomes were such as “unexpected rise in drug price” and subsequent destruction of
the Indian Pharmaceuticals Industry. However, the Indian pharmaceutical sector has been able to cope up
with the new regulatory changes and the indigenous Research and Development has sector started growing.

Granting of “patent” was a way to encourage innovation, which allowed patentees to enjoy monopoly over
the patented product for a period of 20 years from the date of filing. The effect of this monopoly has been
observed to be very severe in pharmaceutical sector, more so in the case of lifesaving drugs. To counteract
this monopoly-associated damage, the Patents Act, 1970, has some specific provisions to balance the
situation. This act also has a provision that the patented products to be available to end users at sufficient
quantity, and at the same time, the price should be in affordable range. If the patentee fails to do so, the
Government of India can give Compulsory License (CL) to interested parties so that the patented product
fulfills the requirement of the product. Although lots of controversies came after India's grant of first “CL”
to NATCO and subsequent grants, the trend seems to be an unbiased one, with a critical balance between
the interest of generic manufacturers, intention of the patentee, and the interest of the population9.

Patents are granted to those inventions which satisfy certain conditions called as criteria of patentability.
Therefore, for any invention to be patented it should have a newness 10, should be an inventive step11 and
should have industrial applicability12.

8
Jha, Ravinder. “Options for Indian Pharmaceutical Industry in the Changing Environment.” Economic and Political Weekly, vol. 42,
no. 39, 2007, pp. 3958–3967. JSTOR, www.jstor.org/stable/40276473.
9
Bayer v. Ajanta IN225529 (3275/DEL/1998)
10
Section 2(1) (j) of The Patents Act, 1970.
11
Section 2(1) (j) of The Patents Act, 1970.
12
Section 2(1) (ja) of The Patents Act, 1970.
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 2.2 TRADEMARKS
Trademarks refer to distinctive signs which distinguish services or goods of one undertaking from those
without undertaking. It provides exclusive right to use registered trademark in connection with the specific
goods and services in the territory of India. The act13 extends protection to only registered trademarks. For
infringement of an unregistered trademark, an action for passing- off will lie.

In the Pharmaceutical Industry it is held important that the trade marks should be differentiable and not
confusing. No trade mark should be similar to any existing Trade mark. It should also not be held as
covering similar goods or services. Certain different signs or designs are considered weak but they can get
registered. They should be containing certain elements that could provide them a different nature to some
aspects. As known such trade marks for pharmaceutical conditions or for generic names, a medicinal
product or any chemical element having the same needs should be distinguished by a trade mark or by a
fancy name and the same should not be confusing or similar to the generic names or chemical names and
should not be misrepresenting the therapeutic properties or the nature of the medicinal product.

In the pharmaceutical industry, there is stated a special cause which helps differentiating the effects of
infringement and passing off from other sectors and industries. That special feature or cause is named to be
as the “health” of the consumer. Any misrepresentation and deception in a mark can lead the consumer to
make a wrong decision and it may have adverse effect on the health of the user with hazardous results
specially in a country like India where there is a large amount of illiteracy and public health is considered to
be the sole priority, it cannot have any deception in pharmaceutical industry as it can cause immense harm
to the public at large.14 The Hon’ble has Supreme Court has also laid down the need of stricter standards in
matters related to infringement of trademarks when in context with pharmaceutical products15.

In India, registration of color marks is not considered to be an easy task. The Trade marks Act in India has
not particularly prohibited the registration of any single color, but the task of establishing distinctiveness in
single color is considered to be as the major task unless the color by establishing a long association with a
particular mark has come to prove the source or origin of any product whose unique differentiability enables
easy identification of the product from other products in the same classification of goods. In the Indian
Judicial System, it has been stated that exclusive possession over colors cannot be claimed. On the
constantly arising issue of color marks in the Indian Pharmaceutical Industry, the Court stated that the
medicines are not bought by the customers by their color but by their names. There can be found thousands
of tablets available with the chemists for different disorders. No individual is supposed to go to a chemist
asking for any color of the tablets. All medicines are considered to be sold by prescriptions or on the advice
of a doctor. The tablets available without a prescription are also considered to have names by which they go
in the market. The distinctiveness of the medicines is considered to be found in the name not in the color or
shape16.

The Indian Courts in the Pharmaceutical Industry also had to deal with a numerous cases of infringement in
the visual or graphic similarities. The phonetic similarity is also another important issue which was

13
Trade Marks Act, 1999.
14
Section 13 of Trade Marks Act, 1999.
15
Cadila Healthcare Ltd. v/s Cadila Pharmaceutical Ltd, 2001 (5) SCC 73
16
Colgate Palmolive Company v/s Anchor Health and Beauty Care Ltd. 2003 DLT 51, 2003 (27) PTC 478
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 considered to be dealt by the Indian Courts as it was a very important factor that was likely to result in
infringement. Phonetic similarity is considered to be often misleading a person to come to different
decisions. India, having a large illiteracy, considers phonetic similarity in trademarks to be a very important
issue as any common man having an average intelligence and an imperfect memory is most likely to get
confused and deceived owing to phonetic similarities in two products. The consumer is likely to recognize
any medicine by its color, packaging or dressing. Indian Courts are considered to be very strict in such
matters which relate to issues involving parts of drugs as they directly affect the health of any individual.
Individual health often shows symptoms to the public health in and around him. Therefore, stating phonetic
similarity as an important issue in the Indian Pharmaceutical Industry. The Indian Courts state that the cases
of infringement must be looked upon from the point of view of a common man with average intelligence
with whom such phonetic similarities are most likely to cause deception and confusion17.

The issues of infringement and passing off are considered to be very important in the pharmaceutical
industry as a major concern of health and life of an individual lies upon them. The Courts are strict and
consider public welfare and public health to be of utmost importance.

As trademarks were being increasingly used by the pharmaceutical industry for naming their medicinal
preparations either on the basis of the ingredients of the product or on the basis of the diseases they cure and
the organ to which they relate to or any fancy name connected to the product18, a mandate was laid down in
the Trade marks Act which has to be carefully considered before naming the medicinal preparation. One
would have to ensure that none of the provisions of section 13 of The Trade marks Act, 1999 were being
infringed so that the product can have an appropriate trade mark signifying its source. Passing off needs
should not be faced by the manufacturer/seller in order to save time, energy and money that may have to be
spent on litigation.

17
Amritdhara Pharmacy v/s Satyadeo Gupta (AIR 1963 SC 449).
18
Trade marks in the Pharma Sector – A Ready Reckoner
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 3. REGULATORY AGENCIES

3.1 CENTRAL DRUG STANDARD CONTROL ASSOCIATION (CDSCO)

The CDSCO of India is established under Drugs and Cosmetics Act, 194519. The CDSCO is considered to
be the main regulatory body for regulation of the pharmaceutical, medical devices and clinical trials in
India. Its head office is located in New Delhi along with multiple zonal offices across India and functions
under the control of the Directorate General of Health Services, Ministry of Health and Family Welfare,
Government of India. CDSCO also works in close compliance with Central Drug Laboratories which
performs the quality control tests. The central authorities are considered to be the main authorities
responsible for approval of all new drugs, clinical trials and in laying down the standards for drugs, its
control over quality of imported drugs, coordination of the activities of State Drug Control Organization
(SDCO) and providing its expert advice with an expertise view of bringing about the uniformity in the
enforcement of the Drugs and Cosmetics Act. The state authorities on the other hand are majorly concerned
about the regulation of manufacturing, sale and distribution of Drugs licensing drug testing laboratories,
approving drug formulations for manufacture, carrying out pre- and post-licensing inspections, and
overseeing the manufacturing process, for drugs manufactured by respective state units and those marketed
in the state. These authorities are formed under the Drug and Cosmetics Act 1940 and Rules 194520.

All new Drugs are permitted to be marketed in India in accordance with and along with the permission of
DGCI after ensuring the drugs to be safe, Effective and Complying with the requirements of Schedule Y of
the Drugs and Cosmetics rules. All applicants are required to provide their technical data for safety and
efficacy before any of their drugs could be marketed in India. Schedule Y of Drugs and Cosmetics Act also
explains the Guidelines for granting of permission for conducting clinical trials in India. The regulations for
such trials are examined by the office of DGCI before granting of permission. The office of DGCI also
grants the permission for conducting bioequivalence studies. The registration of all such clinical trials has
been made mandatory with the centralized clinical trial registry of Indian Council of Medical Research
(ICMR). All the Drugs and Cosmetics rules are being amended to make the registration of clinical research
organizations mandatory. It is all proposed to amend and include a separate chapter on clinical trials in the
Drugs and Cosmetics Act.

Banning of Drugs and Cosmetics and oversight and market Surveillance is also one of the major functions
of the CDSCO.

19
Drugs and Cosmetics Act, 1945
20
Roles and Responsibilities of CDSCO
http://www.jli.edu.in/blog/roles-and-responsibilities-of-cdsco/
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 3.2 DRUG CONTROLLER GENERAL OF INDIA (DGCI)
The Drug Controller General of India under the purview of Central Drug Standard Control Association is
held responsible for the approval of licenses of certain categories of drugs such as blood and blood products,
vaccines etc and sera in India. Drug Controller General of India comes under the Ministry of Health &
Family Welfare. The Drug Controller General of India (DGCI) is responsible for the approval of all the New
Drugs, Medical Devices and Clinical Trial which are conducted in India. The DGCI is advised by the Drug
Technical Advisory Board (DTAB) and Drug Consultative Committee (DCC) on regulating the imported
drugs.

DCGI also lays down the standard and quality of manufacturing, selling, importing and distribution of drugs
in India, acting as the appellate authority in case of any dispute arising regarding the quality of drugs. The
DGCI is responsible for the preparations and maintenance of the national reference standard. He looks after
the uniformity in the enforcement of Drugs and Cosmetics Act along with the training of Drug Analysts
appointed by the State Drug Control Laboratories and other institutions. He’s also the one appointed for the
analysis of Cosmetics received from CDSCO as survey samples.

From the notified information by Medical Device Rules 2017 by the Government of India, DCGI would
also be acting as the Central Licensing Authority (CLA) for all the medical devices which fall under the
ambit of these rules. Out of four Classes of medical devices from Class A to Class D, DCGI will be the
direct licensing authority for Class C and D devices, whereas it will coordinate licensing for Class A and B
devices through State drug controllers, who will act as State Licensing Authority21 .

3.3 NATIONAL PHARMACEUTICALS PRICING AUTHORITY (NPPA)

The National Pharmaceutical Pricing Authority is an independent body consisting of experts formed under
the Ministry of Chemicals and Fertilizers in the year 1997 in order to implement and enforce the various
provisions of the Drug Prices Control Order (DPCO) for regulating the medicine prices in conformity with
the powers which have been delegated to it. The NPPA is also delegated to exercise the functions of the
Central Government in respect to various paragraphs of the Drug Price Control Orders. It is also the
regulator for ensuring the availability and accessibility of medicines at affordable prices under the Ministry
of Chemicals and Fertilizers. The main functions of NPPA include:

 Implementation and enforcement of the provisions of DPCO

 Monitoring the availability of drugs, identifying shortages if any and to take the remedial steps in
conformity with it.
 To collect and maintain data on the production, exports and imports, the market share of individual
companies and profitability of companies etc for bulk drugs and formulations.
 It also undertakes relevant studies with respect to the pricing of drugs and pharmaceuticals.
 To give advice to the Central Government on the changes and revisions in the drug policies.
 To provide assistance to the Central Government in the parliamentary matters relating to the drug
pricings.

21
https://en.wikipedia.org/wiki/Drug_Controller_General_of_India
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 NPPA plays an important role in implementing the National Pharmaceutical Pricing Policy 2012. NPPA
also provides the ceiling prices to all the drugs which have been notified under the Schedule-1 of the
DPCO, 2013 while monitoring the annual price increases for them and the non-scheduled drugs.

The NPPA has recently reduced the MRP of 390 non-scheduled cancer medicines by up to 87%.22
NPPA has also asked the manufacturers and hospitals to revise the prices based on the trade margin
formula. This price reduction by NPPA is expected to result in an annual saving of Rs. 800 crore by the
patients by estimating this policy to benefit about 22 lakh cancer patients in India.

22
https://currentaffairs.gktoday.in/tags/nppa
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 CONCLUSION
It is has been observed that the management of Intellectual Property and Intellectual Property Rights is
a vast area which calls for multiple actions and strategies which need to be aligned with national laws
and international treaties and practices. It is no longer driven purely by a national perspective.
Intellectual Property and rights associated with it are highly influenced by the needs of the market,
market response, cost involved in translating IP into commercial venture and so on. Different forms of
IPR demand different treatment, handling, planning, and strategies and engagement of persons with
different domain knowledge such as science, engineering, medicines, law, finance, marketing, and
economics. Each industry should evolve its own IP policies, management style, strategies, etc.
depending on its area of specialty23. Pharmaceutical industries in the currently time have an evolving IP
strategy. Due to the possibility that there exist some invalid IPR, antitrust law, therefore, steps are being
taken to ensure that invalid rights are not being unlawfully put forward to establish and maintain illegal,
policies, which result in exclusive possession within the pharmaceutical industry, although there’s still
many issues which need attention over this topic.

Although, the IP system covers the scope of development, by focusing on various IP strategies, the
pharmaceutical companies can avoid litigation which might lead to financial loss to their companies.
Also this could help them in exploiting the IP-related products through commercialization and
licensing. This helps in increasing the demand of low-value drugs and in the rapid growth of
pharmaceutical companies.

Although a number of patent applications in India are filed from the pharmaceutical sector, their clinical
translation is found to be very less. In terms of market the current Indian Pharmaceutical Market is
dominated by the generic market and invention has a found to be a very little share helping in its
expansion. Till now, the Indian Patent System is found to be balancing the balance between the interest
of the patentee and public at large. There are several stories such as imatinib (Novartis), tadalafil (Eli
Lilly), rosiglitazone (GlaxoSmithKline), fenofibrate (Abbott), sorafenib (Bayer) regarding the product
patent, EMR, off-patent products, and how the inventor company tries to save their inventions from
generic marketing.24 Essential lessons can be learned from such events allowing us to understand the
limitations of current IPR system and ultimately helping us in making the system stronger.

The Indian Pharmaceutical Industry has recently shown great potential and is continuing to grow
consistently at a rapid rate. The Indian pharmaceuticals industries’ generic drug sector is vast and is
establishing its presence in foreign markets at a good rate. The newly formed drug sector is also
expecting to record a healthy growth owing to significant industry- wise increase in R&D expenditure
and proposed new- drug launches.25 The Indian Pharmaceutical Industry needs to work in accordance
with the legal changes so as to continue with their success.

23
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3217699/
24
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6044128/
25
http://www.nishithdesai.com/information/areas-of-service/industry/pharma-life-science.html
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