The Impact of Patents on Innovation, Technology Transfer and Health: A Pre- and Post-TRIPs Analysis of India's Pharmaceutical Industry

Abstract

The debate surrounding the World Trade Organization's Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement indicates that patents matter for development. Yet literature on the geography of knowledge transfer shows that knowledge is spatially sticky, suggesting that the impact of patents can be exaggerated. Using interview evidence, this paper explores how Indian pharmaceutical firms have responded to changes in patent law, including the introduction of more extensive patent protection in 2005 as a condition of TRIPs. A regime of limited patent protection for over three decades prior to TRIPs facilitated informal knowledge transfer and the emergence of a pharmaceutical industry with significant domestic capabilities. Contrary to some expectations, the Indian pharmaceutical industry has continued to grow post-TRIPs, with large domestic firms becoming involved in more formal technology transfer as part of an increasingly collaborative relationship with multinationals. This trend is also driven by a focus on the markets of developed countries, raising questions for the future sustainability of India's low-priced medicines. While changes in patent law can facilitate or inhibit a variety of aspects of development, the adaptation of the Indian pharmaceutical industry suggests that their impact must be related to the broader institutional setting, particularly the underlying domestic capabilities.

Keywords:

• patents
• TRIPs
• development
• pharmaceuticals
• India

Notes on contributor

Rory Horner is a PhD candidate in Geography at Clark University, USA. His dissertation research is titled ‘The State, Patents, and the Development of India's Pharmaceutical Industry’.

Notes

The National Science Foundation's Geography and Regional Science Program's Doctoral Dissertation Research Improvement Grant (no. 1103231) and the Association of American Geographers' Economic Geography Specialty Group Graduate Student Research Award 2012 are gratefully acknowledged for supporting the fieldwork on which this paper is based. The comments of Colin Hay, the journal referees and editorial board, Yuko Aoyama, James T. Murphy and Seth Schindler are also gratefully acknowledged. The usual disclaimers apply.

1. One crore equals 10 million in the South-Asian numbering system.

2. With the exception of six interviews in July 2009 conducted by telephone.

3. Kochanek, in his study of business and politics in India, cites this as ‘perhaps the best example of the deployment of foreign business pressure to influence government policy’ (1974: 308).

4. A company supplies the manufacturer with ingredients to manufacture the product at its plant, before returning the final product to sell under its own name.

5. One estimate is that the founders of perhaps a third of the 200 firms in Hyderabad at one stage worked in IDPL (Felker et al. 1997: 9).

6. One hundred per cent inward FDI in pharmaceuticals is now allowed, while Indian companies are also allowed to invest up to 100 per cent of their net worth abroad.

7. The combined R&D investment of India's top 10 pharmaceutical R&D investors over the last 10 years only amounts to 40 per cent of Pfizer's investment in one year (Joseph 2011).