The enactment of the Indian Patents Act of 1970, implemented in 1972, provided an open platform to the Indian pharmaceutical
industry to adopt process patents to manufacture active pharmaceutical ingredients (APIs) and formulations without fear of
infringement of product patents. This resulted in a phenomenal growth in the number of pharmaceutical manufacturing units,
from 2257 in 1970, to 5156 in 1980, 16,000 in 1990, and more than 23,000 in 2005. This was accompanied by a steep increase
in investment from Rs. 2.25 billion (approx. $250 million US) in 1973, to Rs. 45 billion (approx. $1 billion US) in 2002–03.
The prices of the most advanced drugs dropped significantly in India, leading the Indian pharma sector to become more competitive
while remaining extremely cost effective in the global market.
These advantages, however, came with the major drawback of not recognizing the importance of new drug discovery in the Indian
pharmaceutical sector, thus creating the conditions for a lack of scientific knowledge, personnel, and processes required
for successful new drug discovery. However, significant contributions from the Indian pharmaceutical industry, which include
the most innovative manufacturing units, developing the most cost-effective processes, and exceptional medicinal chemistry
knowledge, have been recognized globally. India's becoming a signatory to the World Trade Organization (WTO) in 1995, and
the recent implementation of product patents, have brought about a paradigm shift from process to product innovation and have
compelled major Indian pharmaceutical industries to invest in new drug discovery.
Discovering new drugs: an Indian scenario
The first new drug discovery center in India was started by Ciba-Geigy in the early seventies, followed by Hoechst, Boots,
and AstraZeneca. Ciba-Geigy and Boots decided to close their R&D ventures, while the Indian company Nicholas Piramal acquired
Hoechst's center. Presently, AstraZeneca is the only multinational corporation (MNC) that has drug discovery operations in
India. It is essential to recognize that these operations were initiated when Astra was an independent company and were supported
jointly by the Indian Government to conduct research on tuberculosis It is also interesting to analyze why, despite implementation
of product patent law, multinational companies have not invested into drug discovery in India.
A survey conducted by the Department of Science and Technology in 2002 suggested that the R&D activities of MNC subsidiaries
are minimal in India and mainly directed towards formulation development or troubleshooting. This is demonstrated by the fact
that R&D expenditure by Indian Pharmaceutical companies stands at 2.6%, which is three and a half times more than MNC R&D,
which is low and static at 0.74%. Initially, the cost of drug discovery in India, which is one-tenth of the cost of discovery
in the West, was expected to be a major attracting factor for MNCs to establish their R&D efforts in India. This has not been
the case, as there are multiple factors responsible for deterring MNCs from initiating drug discovery in India.