Redrawing the Lakshman rekha

By: |
July 05, 2016 11:47 AM

A national IPR policy, new FDI norms, a possible revamp of the Drugs & Cosmetics Act, Brexit: the pharma sector in India has a lot to chew on

20160715ep02A national IPR policy, new FDI norms, a possible revamp of the Drugs & Cosmetics Act, Brexit: the pharma sector in India has a lot to chew on. Will these prove to be headwinds or tailwinds?

Reactions to India’s national IPR policy span the entire gamut: from experts who caution against a protectionist mindset to patient groups who remind the government that it needs to protect the rights of its citizens to affordable quality medicine. A month after it was released, the dust has settled but the differences remain. The cover story in the July 1-15, 2016 issue of Express Pharma analyses the views of two experts, from opposite sides of the fence. Right now, a middle path doesn’t seem possible but we need to look at the policy as a first step, and each judgement as an interpretation. (See story: A clash of IPR cultures, pages 16-20)

IP lawyer Krishna Sarma, Managing Partner, CLG feels that if flexibilities like compulsory licensing (CL) or revocation, etc. though lawful in certain circumstances, are used routinely as legitimate policy measures to support industrial policy objectives aimed at protectionism or to contain costs, it will certainly discourage innovation and encourage free rides on someone else’s R&D. Academician/ patent agent Prof Sankar Sundaram, Professor of Pharmaceutical Sciences, JSS University, on the other side of the spectrum, would view CLs as India’s right to protect the interests of her population.

But India has made progress, however slight, on the IP front. The annual FICCI-Pinkerton India Risk Survey 2016 (IRS 2016) shows a marginal improvement in the rating of the country’s IP as a threat to businesses in India. According to IRS 2016, IP theft had a 7.27 overall risk rating on a scale of 0-15. The overall risk ranking for IP theft slipped from 6 in 2014, to 8 the next year and to 9 in the latest survey. It is interesting to note that IP theft is the second risk in the eastern region of the country, while it does not figure at all in the top three risks in the other three regions.

The IRS 2016 also notes that compared to last year, India improved its score from 7.23 to 7.05 in 2016 in the US Chamber of Commerce’s Intellectual Property Index for 2016 and holds out hope that the national IPR policy will create the necessary conditions for improvement in tackling IP theft in the country. It also quotes a guide for Singapore companies venturing into India, where Singapore’s Intellectual Property Office red flags patents for the biomedical industry and R&D in general, as well as trademarks for the healthcare sector as IP risks.

But, how much heed should the Indian government pay to rankings put together by other countries, which are meant to be pressure tactics? And these pressure tactics do seem to work, if one reads the optics right. For instance, the recent move to further liberalise foreign direct investment (FDI) norms, coming just days after Rexit (RBI governor Raghuram Rajan’s exit) is being seen as a clear move to deflect global criticism.

The question is, will the liberalisation of FDI in pharma redraw the Lakshman rekha and impact the delicate balance on the IPR front? The existing FDI policy in the pharma sector allowed 100 per cent FDI under automatic route in greenfield pharma projects but for brownfield projects, investors needed government approval. This restriction was to prevent price escalation and creation of monopolies. FDI in brownfield pharma will now be allowed up to 74 per cent under the automatic route, with government approvals required beyond. While this will definitely attract more FDI, some concern areas remain. For instance, the ban on non-compete clauses stays, even below 74 per cent in brownfield projects, which would have allowed the acquirer to prevent the seller from using the sale proceeds in a similar venture. Foreign investors would be more comfortable with such non-competes in place, but clearly the government has other ideas.

Britain’s historic exit from the EU will also have some impact on IP laws but as this will play out over the next two years, pharma companies from India with interests in EU markets will have time to adjust their sails.

In stark contrast to the noise around the formation of the IP policy over the last two years, India’s central drug regulatory authority put out a very quiet notice on June 6 announcing a revisit of the Drugs & Cosmetics Act, 1940 and Rules, 1945. The reason stated was: “to match up with the current regulatory requirements related to safety, efficacy and quality of drugs, medical devices and cosmetics”. Industry observers like Dinesh Thakur, the ex-Ranbaxy employee turned whistleblower, hint at a conspiracy to keep this as silent as possible. (See his blogpost: While the IPR policy was a good two years in the making, it is anyone’s guess how long the revamp of the Drugs & Cosmetics Act will take. All in all, the stormy weather is set to continue for the pharma sector in India.

Viveka Roychowdhury

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