ABSTRACT
Prior to 1970, the Indian pharmaceuticals industry was relatively small in terms of production capacity. At the time of India’s Independence in 1947, India’s pharmaceuticals market was dominated by multinational companies (MNCs) which controlled between 80% and 90% of the market primarily through imports (Greene 2007). The scene changed radically with the Patent Act of 1970. Product specific patents were disregarded in favour of manufacturing process patents, which allowed Indian companies to reverse engineer or copy foreign patented drugs without paying a licensing fee. This policy initiative created a favourable environment for the domestic industry to grow and acquire technical competence. At the same time, domestic drug prices were set at very low levels under the provision of Drug Price Control Orders of 1970 and 1979. Simultaneously high import tariffs were imposed. The changed policy regime helped the domestic industry to grow rapidly. The market share of MNCs declined from 68% in 1970 to only 23% in 2004 (Chaudhuri 2005, 18, Table 2.2). The value of total production of bulk drugs and formulations at current prices rose from Rs. 4900 million in 1974-1975 to Rs. 14,400 million in 1980-1981 and further to Rs. 354,710 million in 2003-2004 due to the entry of many domestic firms along with a massive increase in the production by the older firms (Chaudhuri 2005, 40).
