• Drugs and Cosmetics Act 1940

• Drugs and Cosmetics Rules 1945

• Pharmacy Act 1948

• Drugs and Magic Remedies (Objectionable Advertisements) Act 1954

• Narcotic Drugs and Psychotropic Substances Act 1985

• Medicinal and Toilet Preparation (Excise Duties) Act 1955

• Drugs (Prices Control) Order 1955 (under the Essential commodities Act).

• Industries (Development and Regulation) Act 1951

• Trade and Merchandise Marks Act 1958

• the Patents Act 1970

• Factories Act 1948.

4.1 Indian Council for Medical Research

The Indian Council for Medical Research (ICMR), New Delhi, is the apex body in India for the formulation, coordination and promotion of biomedical research, and is recognised as being one of the oldest medical research bodies in the world.

As early as 1911, the government of India set up the Indian Research Fund Association (IRFA) with the specific objective of sponsoring and coordinating medical research in the country. After Independence, several important changes were made in the organisation and the activities of the IRFA. It was redesignated in 1949 as the ICMR with considerably expanded scope of functions.¹⁰

The government of India through the Ministry of Health and Family Welfare is responsible for providing funding to the ICMR. The Council’s research priorities coincide with the national health priorities such as control and management of communicable diseases, maternal and child health, control of nutritional disorders, mental health research and drug research.

The governing body of the Council is presided over by the Union Health Minister. It is assisted in scientific and technical matters by a scientific advisory board comprising eminent experts in different biomedical disciplines. The board, in its turn, is assisted by a series of scientific advisory groups, scientific advisory committees, expert groups, task forces, steering committees, etc., which evaluate and monitor the different research activities of the Council.¹¹

4.2 Central Drugs Standard Control Organisation

The Central Drugs Standard Control Organisation (CDSCO) setup under the aegis of the Ministry of Health and Family Welfare is entrusted with the task of being the main regulatory body for pharmaceuticals and medical devices. Its functions¹² include laying down standards of drugs, cosmetics, diagnostics and devices, laying down regulatory measures, amendments to Acts and Rules, to regulate market authorisation of new drugs, to regulate clinical research in India, to regulate the standards of imported drugs, coordinating the activities of the state drugs control organisations to achieve uniform administration of the Act and giving them policy guidance, work relating to the Drugs Technical Advisory Board (DTAB) and Drugs Consultative Committee (DCC), and to regulate the standards of imported drugs and providing guidance on technical matters.

4.3 Department of Biotechnology

The Department of Biotechnology (DBT), set up under the Ministry of Science and Technology in 1986, has also played a key role in the economic revitalisation of the industry. In the 1990s, the DBT began funding vaccine and other biotech research.

In its relatively short period of existence, the department has promoted and accelerated the pace of development of biotechnology in the country. Through several R&D projects, demonstrations and creation of infrastructural facilities a clear visible impact of this field has been seen. The department has made significant achievements in the growth and application of biotechnology in the broad areas of agriculture, health care, animal sciences, environment, and industry. A unique feature of the department has been the deep involvement of the scientific community of the country through a number of technical task forces, advisory committees and individual experts in identification, formulation, implementation and monitoring of various programmes and activities.¹³

The DBT now also provides grants and loans to Indian companies to cover international patent and other R&D costs, and has set up biotech industrial parks with Special Economic Zone privileges. In November 2007, the DBT announced the approval of its National Biotechnology Development Strategy,¹⁴ which increased the DBT’s budget to more than US$300 million annually, and includes promotions in the following areas:

4.4 National Pharmaceutical Pricing Authority

The National Pharmaceutical Pricing Authority (NPPA) is an organisation of the government of India which was established, inter alia, to fix and revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in the country, under the Drugs (Prices Control) Order 1995.¹⁵ It is the brainchild of the modifications made in the ‘Drug Policy’ of the government announced in September 1994. The NPPA was established in August 1997, after careful consideration, to bring about a greater degree of ‘objectivity, transparency as well as speed’ in drug pricing matters.¹⁶ The powers delegated to the NPPA,¹⁷ inter alia, include the setting/revision of bulk drugs and formulations from time to time under the Drugs (Prices Control) Order 1995, and the monitoring of prices and availability of drugs in the country. The organisation is also entrusted with the responsibility of recovering amounts overcharged by manufacturers for controlled drugs from the consumers. It also monitors the prices of decontrolled drugs in order to keep them at reasonable levels.

4.5 Overview of the industry

Pharmaceutical production within India began in the 1910s when private initiatives established the Bengal Chemical and Pharmaceutical Works in Calcutta, and Alembic Chemicals in Baroda and with the setting up of pharmaceutical research institutes for tropical diseases such as the Institute of Preventive Medicine, Chennai (in Tamil Nadu), the Central Drug Research Institute, Kasauli (in Himachal Pradesh), the Pastures Institute Coonoor (in Tamil Nadu), etc., through British initiatives.¹⁸ The fledgling industry, however, faced heavy setbacks in the post Second World War period as a result of new therapeutic developments in the Western countries that triggered natural elimination of the older drugs from the market usage by newer drugs. This resulted in the abandoning of local production based on indigenous materials and ingredients and forced the industry to begin importing bulk drugs meant for processing into formulations and for selling in the domestic market.

In the post-Independence period, the Indian pharmaceutical industry has been described as having exhibited four stages of growth.¹⁹ In the first stage, during the 1950s–60s, the industry was predominantly run and dominated by foreign entities, and it continued to rely heavily on imported bulk drugs despite its inclusion in the list of ‘basic industries’ for plan targeting and monitoring. Foreign firms were enjoying strong patent protection under the Patent and Design Act 1911, and were averse to local production and mostly opted for imports from home countries as a function of the patent protection.

Given the inadequate capabilities of the domestic sector to start local production of bulk drugs and the hesitation of foreign firms to do so, the government decided to intervene through starting public sector enterprises. This led to the establishment of the Indian Drugs and Pharmaceuticals Ltd (IDPL) plants at Rishikesh and Hyderabad in 1961 and the Hindustan Antibiotics at Pimpri, Pune, in 1954 to manufacture penicillin.²⁰

The conception of these public sector enterprises is considered to have played a defining role and to have been a key feature in the development of the pharmaceutical industry, as it assumed proactive roles in producing bulk drugs indigenously and led to significant knowledge spillovers into the private domestic sector. The second stage of the industry took place in the 1970s. The enactment of the Indian Patents Act (IPA) 1970, and the New Drug Policy (NDP) 1978, during this stage are important milestones in the history of the pharmaceutical industry in India. The IPA, 1970, brought in a number of radical changes in the patent regime by reducing the scope of patenting to only processes and not pharmaceutical products, and also for a short period of seven years from the earlier period of 16 years. It also recognised compulsory licensing after three years of the patent. The enactment of the process patent contributed significantly to the local technological development via adaptation, reverse engineering and new process development. As there exist several ways to produce a drug, domestic companies innovated cost- effective processes and flooded the domestic market with cheap but quality drugs. This led to the steady rise of the domestic firms in the market place. The NDP 1978 has increased the pressure on foreign firms to manufacture bulk drugs locally and from the most basic stage possible. Foreign ownership of up to 74 per cent, under the Foreign Exchange Regulation Act (FERA) 1973, was permitted to only those firms producing high-technology drugs. Foreign firms that are simply producing formulations based on imported bulk drugs were required to start local production from the basic stage within a two-year period. Otherwise, they were required to reduce their foreign ownership holding to 40 per cent. New foreign investments were to be permitted only when the production involves high technology bulk drugs and formulations thereon.²¹ The end result of the strategic government interventions, in the form of a soft patent policy and a regime of discrimination against foreign firms, affected the industry with a time lag and, as desired, provided strong growth impetus to the domestic sector during the 1980s.

In the third stage of its evolution, domestic enterprises based on large-scale reverse engineering and process innovation achieved near self-sufficiency in the technology and production of bulk drugs belonging to several major therapeutic groups and have developed modern manufacturing facilities for all dosage forms whether tablets, capsules, liquids, orals, or injectibles and so on. These had a lasting impact on the competitive position of the domestic firms in the national and international markets.²² In 1991, domestic firms have emerged as the main players in the market with about 70–80 per cent market shares in the case of bulk drugs and formulations respectively.²³

The industry turns out to be one of the most export-oriented sectors in Indian manufacturing, with more than 30 per cent of its production being exported to foreign markets. The trade deficits of the 1970s have been replaced by trade surpluses during the 1980s. The Indian pharmaceutical industry, which had little technological capabilities to manufacture modern drugs domestically in the 1950s, has emerged technologically as the most dynamic manufacturing segment in the Indian economy in the 1990s.²⁴

The growth momentum unleashed by the strategic policy initiatives continued in the fourth stage of the evolution of the industry during the 1990s. The production of bulk drugs and formulations has grown at very high rates, and the share of bulk drugs in total production has gone up to 19 per cent in 1990–2000 from a low of 11 per cent in 1965–66. This stage has also witnessed dramatic changes in the policy regime governing the pharmaceutical industry. The licensing requirement for drugs has been abolished, 100 per cent foreign investment is permitted under the automatic route, and the scope of price control has been significantly reduced. India has carried out three Amendments in March 1999, June 2002 and April 2005 to the Patent Act 1970, to bring Indian patent regime into harmony with the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The third and final one, known as the Patents (Amendment) Act 2005 came into force on 4th April 2005 and introduced product patents in the drugs, food and chemicals sectors. The term of patenting has been increased to a 20-year period. These changes in the policy regime in the 1990s thus started a new chapter in the history of the Indian pharmaceutical sector where free imports, foreign investment and technological superiority would determine the trade patterns and industrial performance. The Indian pharmaceutical industry is looking at this era of globalisation as both an opportunity and a challenge.²⁵

The Indian pharmaceutical sector is therefore emerging as one of the major contributions to Indian exports, with export earnings rising from a negligible amount in early the 1990s to Rs. 20139.57 crores (US$7.24 billion) by 2007–08. The exports of drugs, pharmaceuticals and fine chemicals from India have grown at a compounded annual growth rate (CAGR) of 17.8 per cent during the five-year period 2003–04 to 2007–08. The Indian domestic pharmaceutical market size is estimated at US$10.76 billion in the year 2008 and is expected to grow at a high CAGR of 9.9 per cent until 2010 and thereafter at a CAGR of 9.5 per cent until 2015.²⁶