"India, as a manufacturing hub, offers safe, effective, quality medicines, at the very best prices. Now, we are on our way to become a R&D hub." For Dilip Shah, General Secretary of the Indian Pharmaceutical Alliance (IPA), India is currently on its way to undertake one of the greatest transformations ever experienced within the pharmaceutical industry, although the excitement has been over 30 years in the making. In 1970, India introduced "process" patents, which, unlike patents in America, allowed innovators to protect the way they made drugs, rather than the molecules themselves. This encouraged thousands of small drug copying companies to invent new processes.
The advantage of cost competitiveness
At present, the pharmaceutical industry has become one of the fastest growing industries in the country, with a value of $10 billion and a growth rate of 8 percent. When the country joined the WTO ten years ago, Indian pharmaceutical exports were less than 4,000 Crore Rupees. A decade later, its pharmaceutical exports are 14,000 Crore Rupees, and account for more than a third of the industry's turnover. This is mostly the result of the confidence built up in this strategic industry due to India's progressive adherence to its IP commitments. Now, the country is poised to achieve an annual compounded growth rate of 30 percent in order to double its pharmaceutical exports in three years. Some $60 billion worth of drugs are going off patent in the next few years.
Indian companies' biggest competitive advantage is their cost-competitiveness. A generic medicine can indeed be locally developed, tested, manufactured, and marketed for 20 to 40 percent of what it costs in the West. This mixture of low costs and ingenuity has helped Indian firms to expand their sales and acquire companies far beyond their borders. For example, both Ranbaxy and Dr Reddy's, India's two largest drug firms, have daring patent strategies, challenging big drug makers on some of their core patents in key western markets.
"India is moving to a knowledge-based economy that includes the contribution of IT and technical manpower, which makes the cost of production cheaper", says Dr. Ajay Dua, Secretary to the Government of India for the Department of Industrial Policy & Promotion.