Impact Of Globalization On Indian Pharmaceutical Industry

1228 words (5 pages) essay in Economics

25/04/17 Economics Reference this

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Globalization is a progression which engages economic inter-dependence of countries world-wide eliminating all obstacles for economic integration as if the whole world is a single village. Evidently, in this process, the affluent nations with greater financial power, manipulate the scenario to their suitability and the poor and the developing nations are compelled to integrate, surrendering their economic independence aware of the consequences towards their own interests. In this process the world financial institutions like the World Bank, IMF and now the WTO advance the interest of the rich countries alone. The Transnational Corporations (TNCs) of the rich nations are practically controlling the world finances. Presently, the world is colonised by global finance and the TNCs sustained by the neo-colonial structure including the World Bank, IMF and WTO are controlling the financial situation world-wide. The developing nations and the third world countries are powerless against global finance and are incapable of controlling its movement within their own national boundaries.

This paper observes the impact globalization has had on the Indian pharmaceutical industry. The pharmaceutical industry in India has progressed constantly since the economic reforms of June 1991 and the re-establishment of Product Patent Act, 1970. Before the economy opened its gates to liberalisation and globalisation, the industry was protected by inward-looking policies which cultivated growth in the firms. The economic reforms resulted in the entry of foreign competitors and inflow of FDI into the industry. Apart from FDI’s contribution to the robustness of India’s economic engine, it provided positive externalities (spillovers) in various forms to the domestic pharmaceutical industry and led to improved domestic productivity and competitiveness.

Several countries in the world, including India, have achieved self-sufficiency in knowledge

intensive sectors by allowing for a loosely defined intellectual property regime (IPR). The formulation of Trade Related Intellectual Property Rights (TRIPs) world over fundamentally represents a big step in the opposite direction as it refers to a tightening of national IPR systems. Considering India as a representative of a technologically advanced developing country, and pharmaceuticals as an instance of an emerging knowledge intensive sector, the paper examines the impact of TRIPs on the incentives to innovate.

India was coerced to introduce structural adjustment programme at the behest of IMF, Wolrd Bank and WTO which generated a severe impact on India’s drug industry, health care system, on the labour engaged in the industry and ultimately on the people of the country. These structural adjustment policies are mainly the abridged role of the Government, severing subsidy in the social sector, increase in administered prices, liberalisation of trade by increasing tariff rates providing incentives for foreign investment, privatisation of the public sector, equating foreign companies with Indian companies, de-regulating the labour market etc. This is intended towards the withdrawal of the state initiative from the social and welfare sectors like health, education, public distribution etc.

In this article, I intend to elaborate the adverse effect of globalization on India and the workers in the drug industry. Is globalization a boon or a curse for the Indian pharmaceutical industry?


The Patent Act was introduced in 1970, and was effective from 1972. This Act doesn’t permit product patents on medicines, agricultural products and atomic energy. This is Act is most appropriate for developing nations. Process patents are permitted for 5-7 years. Primarily, with the assistance of the Act, India is currently self-sufficient in the manufacturing and production of basic drugs spanning various groups of drugs. Indian scientists developed new processes for 107 drugs. Indian companies are, at present, among the world leaders in the production of bulk drugs from basic stages. Today, the prices of drugs in India are comparatively cheaper than many other countries. As per, UNIDO, India is recognized to produce its own drug needs with its own technology and manpower indigenously. Today, approximately 23 thousand factories on different scales are producing drugs in India.


Efforts to change the Indian Patent Act 1970 are a process of the globalization programme. The obligation of an unequal trade treaty like the WTO is a movement towards globalization in favour of the MNCs of wealthy nations. Because of them, the markets of the developing nations are compelled to open for the developed countries. The third world economies are coerced to comply with the WTO agreements without fully understanding the implications. Already, the Government of India, is relaxing all regulations on MNCs in all industries. The FERA and MRTP ACTs have subsequently been amended as per the new directives issued by the WTO. Customs duties and corporate taxes have been lowered. Relief, concessions and facilities have been extended to the MNCs as to Indian companies. These new rules are impacting the indigenous drug industry adversely.

As per the directives issued by the WTO for the product patent regime, the accessibility of new drugs in our country may be deferred on the desire of the patent holders. Today, newer drugs are made accessible in India within a 4-6 years period. Prices of drugs will go up by 5 to 10 times as it is evident from the prices of drugs in India and other countries like Pakistan, U.K. and U.S.A. where product patents are in force. Ranitidine is sold by Glaxo in India at Rs. 7.20. The same product is sold by the same company in the USA at Rs. 545. There are many such examples. The drug prices in the wealthy countries like USA and UK etc have risen up dramatically, so much that the health care expenditure is mainly borne by insurance companies at a very elevated premium. People in these countries can’t even think of treatment without insurance coverage. The product patent system will surely hinder India’s drugs export as nations will be compelled to purchase from patent holders only.


Unlike consumer goods, drugs are not purchased by the preference of a person, but on a doctors’ prescription. Consumers have no choice of their own on this matter.

Prices of drugs are increasing by leaps and bounds along with the prices of other commodities in recent times. The drug manufacturers are flouting the Drug Price Control Order (DPCO). The DPCO was first introduced in 1970. In 1970 most of the drugs were under price control. In 1987 this was diluted and the number of drugs which were restricted declined to 347, in 1987 it was brought down to 163 drugs and in 1994 only 73 drugs were under DPCO. Even then industry is not happy; they want the control to be abolished totally. They have already demanded decontrol of 17 bulk drugs and further recommended full decontrol within 3 years time (Economic Times, 28th September, 1998). Many developed countries of Europe control drug prices directly. In the U.K., the government determines the profit level of drugs supplied by individual companies.A company has to reimburse excess profits to the Department of Health.

A recent study shows that the prices of many life-saving bulk drugs have gone up steeply. Drugs policies in our country are decided not by the need of our people, the pattern of diseases or by the purchasing capacity of the people, but by the profit motive of the industry and the Central Government is playing the role of a silent onlooker.

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