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Issue #1547      16 May 2012

Generics under threat

Can India still supply cheap medicines for the world?

For millions of poor and sick people around the world, the Indian pharmaceutical industry has been something of a life-saver, thanks to its capacity to produce cheap generic versions of expensive patented drugs. However, some recent developments are threatening to undermine India’s role as the pharmacy of the developing world. Martin Khor explains.

India may be more famous for the Taj Mahal, its religious ceremonies, Bollywood films and one of the highest economic growth rates in recent years. But more than all these, India has had a positive worldwide impact through its large supplies of low-cost, good-quality generic medicines. Millions of lives have been saved or prolonged by this.

Many people go to India to buy life-saving generic medicines from pharmacy shops and bring these back in suitcases to give to close relatives who cannot afford the expensive branded original products.

A decade ago, an Indian company Cipla produced HIV/AIDS generic medicines that could treat a patient for $300 a year, far cheaper than the branded product’s cost of $10,000 a patient a year. Today, the Indian drug cost has been cut further to below $80.

This has enabled millions more AIDS patients to be treated. India supplies 70 percent of the HIV/AIDS medicines obtained by UNICEF, the Global Fund and Clinton Foundation for developing countries.

And 75-80 percent of medicines (not only for AIDS) distributed by the International Dispensary Association to developing countries come from India. No wonder India has been termed the pharmacy of the developing world.


In January the Indian Drug Manufacturers’ Association (IDMA), which has 700 drug companies as members, celebrated its 50th anniversary. There was much to celebrate, including the industry’s high growth, wide range of medicines and its contribution to good affordable drugs.

But there are also many factors that may hinder the continuation of the companies’ role as chief supplier of medicines for developing countries.

A main factor of the industry’s success has been the Indian government’s move in 1970 to exclude pharmaceutical drugs from product patenting. This paved the way for local companies to produce generic versions of the expensive foreign medicines and within a few decades they had taken over 80 percent of the local market, while also supplying cheap medicines abroad.

The situation took a negative turn when the intellectual property agreement known as TRIPS was established in 1995 together with the World Trade Organisation. It disallowed countries from excluding medicines from patentability.

However, the TRIPS Agreement allowed countries to determine the criteria for an invention that can be granted a patent, and governments to grant a compulsory licence to local companies to produce the patented products if the latter’s requests to patent owners for a voluntary licence do not succeed.

To implement its TRIPS obligations, India passed changes to its patent law in 2005 so that medicines could now be patented. However, the new law also contained the flexibilities such as strict criteria for patentability (trivial changes to a patent-expired product would not qualify for a new patent), allowance for public opposition to a patent application before a decision is made, and compulsory licensing.

India has one of the best patent laws in the world in terms of giving some space to its producers to make generic medicines. But it is also true that the old policy space has been eroded because many new drugs since 2005 have been patented by multinational companies which are selling them at exorbitant prices.

Indian companies can no longer make their own generic versions of these new medicines unless they successfully apply to the government for compulsory licences - which is quite cumbersome - or unless they obtain a licence from the patent-owning multinational, and that usually comes with stringent conditions especially for export.

Another worry is that India is currently negotiating a free trade agreement with the European Union. Such agreements usually contain provisions, such as data exclusivity and extension of the patent term, which prevent or hinder generic production.

Finally, six Indian companies have recently been bought up by large foreign firms. If this trend continues, the Indian pharmaceutical market may be dominated by multinationals again. It is uncertain whether they will continue to supply the developing world with cheap generic medicines when this may be in conflict with their own branded products.

International health organisations such as UNAIDS, UNITAID and Doctors Without Borders have raised serious concerns that these recent trends may threaten India’s role as the chief supplier of affordable medicines to African and other developing countries.

“Millions will die if India cannot produce the new HIV/AIDS medicines in future, it is a matter of life and death,” said Michel Sidibe, UNAIDS executive director, during a visit to India last year.

Thus, a strategy that involves the government and the drug companies is needed to ensure that the local pharmaceutical industry continues to thrive, that it produces not only the existing medicines but also the new medicines even if they are patented, and that they are supplied at affordable prices not only in India but in the rest of the developing world.

That was a sobering message that emerged at the 50th anniversary conference of the Indian drug association, even in the midst of congratulations on the achievements of the past.

Martin Khor is Executive Director of the South Centre, an intergovernmental policy think-tank of developing countries, and former Director of the Third World Network.

Third World Resurgence

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