Innovation and Intellectual Property Laws: The Case of Indian Pharma Industry
The pharmaceutical industry is stimulated with a culture of radical innovation. However, the Indian pharma firms frequently accede to the internal and external pressures that often coerce them to pursue immediate profit arenas rather than investing in radical innovation. The paper reflects on the importance of stringent intellectual property laws and their impact on innovation and firm profitability. The authors seek to determine the relationship between R&D expenditure and innovation in the pharmaceutical firms.
The study gathers significance as over the last two decades India’s IPR and FDI regime have become favourable to foreign players with huge capital. In the pre-TRIPS era, innovation in the pharma industry was predominantly limited to incremental innovation and there was increased emphasis on generic drugs rather than on developing new drugs and molecules.
Vital amendments in the normative framework of the Indian pharmaceutical industry have elicited the firms in India to make far-reaching changes pertinent to their outlook on innovation which is echoed in their R&D budgets. This is also reflected in the fact that international firms are conducting their clinical trials for COVID-19 vaccine in India without any apprehension of patent infringement.
The results of the study show that an increase in R&D activity has a positive impact on innovation. Moreover, this relationship is strengthened in presence of a stricter IPR Regime. The results also confirmed that increase in innovation activity enhances the firm's profitability. Thus, in view of the stringent patent laws, the pharmaceutical firms operating in India should invest their resources in innovation. This will have a positive impact on the profitability of the firms and help them be in a position where they can sustain their competitive advantage in the industry.