With the Patent Amendment Act of 2005, India approved the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement,
enforced by the World Trade Organization (WTO) on all its member countries.1 In the patent amendment act, India implemented product patent protection for pharmaceutical and biopharmaceutical products,
because article 27.1 of the TRIPs agreement requires product patent protection for pharmaceutical products.2
Before the 2005 Patent Act, the Indian Patent Act of 1970 had allowed the pharmaceutical industry to use reverse engineering
to manufacture products patented in other countries, including recombinant protein products.3 The new law, however, prohibits Indian companies from making, selling, or importing any products patented after 2005 without
the consent of the patent holder.
Thus, the new intellectual property regime (IPR) presents challenges for the Indian biopharmaceutical industry to transition
from its focus on process innovation and generic manufacture to novel product innovation.
COUNTING ON COLLABORATION
The average cost of drug development has increased over the years, and the cost and time required are even higher for biopharmaceuticals.
Because the Indian biopharmaceutical industry does not have the monetary resources to develop novel drugs, it requires financial
support or collaboration with other companies. In this context, partnership with foreign companies is probably the best option
for Indian companies to take the next step forward on the path of novel drug innovation. Now that India has a patent protection
scheme in place, international companies can collaborate with Indian companies without any fear of losing their intellectual
property. But factors beyond intellectual property protection influence foreign companies interested in collaborating with
Indian companies. In this article, we assess India's attractiveness to foreign companies, using an analysis of the strengths,
weaknesses, opportunities, and threats (SWOT) of India's business climate generally and of its biopharmaceutical industry
climate in particular. This analysis can help predict whether India's biopharmaceutical industry is likely to make a successful
transition to an innovation model in the near future.
Factors that Affect Foreign Investment
In general, biopharmaceutical companies outsource drug development work either because of a lack of internal resources, a
determination that outsourcing is cheaper than doing the work internally, or to improve competitiveness by gaining access
to advanced technologies without having to develop them internally. Outsourcing to foreign countries is usually done to reduce
costs by gaining access to skilled human resources at a lower cost.4 But when considering such international outsourcing, firms evaluate not only the capabilities and costs of an individual
firm, but also a number of factors related to the overall business climate in the country in which the potential outsourcing
partner is located. The following parameters are normally considered when evaluating the countries with which to collaborate:5
- Availability of a skilled workforce
- Cost of salaries and infrastructure
- Availability of land, telecommunications equipment and bandwidth, and other infrastructure supports
- Government support and assistance, and bureaucratic and regulatory concerns
- Legal and intellectual property (IP) environment
- Maturity of the markets and companies
- Competency of local companies
These factors can be analyzed for the Indian market by conducting a SWOT analysis.
STRENGTHS AND OPPORTUNITIES
Three factors—the people, environment, and infrastructure—are critical for a healthy environment for business collaboration,
particularly in the biopharmaceutical sector.