New Delhi: India's accession to the world patent regime by introducing 'product patent' regulations for the pharmaceutical industry will lead to India becoming a favourable destination for multinational corporations, says a study by global research firm, Evalueserve.

This is because the new regulation grants patent protection in almost every aspect of development - from molecules and micro-organisms to processes and step-wise sequences for any innovation. The amended patent regulation effectively eliminates the potential for 'copycat' production; thus eliminating the fear of reverse-engineered generics flooding the market.

This ordinance will also benefit firms in India that wish to file for foreign patents, in the US and the European Union. According to the Evaluserve study, the Indian software industry will also benefit, as computer programmes, too, will now be patentable under certain circumstances. The study analyses key implications and opportunities arising out of the changes brought about by the Patents Amendment Ordinance 2004, effective January 01, 2005.

According to the study, India has over 30,000 pharmaceutical business units, and over 80 per cent of the players do not have adequate resources for effective development of new drugs. With the product patent regime in place, many companies will be restricted to operating in the overcrowded generics market. As a result, the study expects consolidation through acquisitions, alliances and other models in the near future, with well-heeled foreign firms buying an entrée or position in the Indian market.

The study also identifies expansion potential, which is particularly strong in the areas of managed care and insurance. The eventual increase in the prices of drugs will make them less affordable for many Indians, which, in turn, could prove to be an opportunity for health insurance firms - both domestic and foreign - where low-premium insurance providers could acquire a large number of subscribers. Another opportunity presented by the new regulation is in 'pre-clinical' and 'proof of concept' studies and for conducting research for 'new chemical entities (NCEs)'.

India, which was not widely favoured as a destination for pre-clinical studies earlier, will now grant patent safety to MNCs, allowing them to invest in Indian contract research organisations (CROs). Further, an increase in healthcare costs may prompt the entry of 'healthcare maintenance organisations (HMOs)' and customised healthcare management firms into India in the near future.

As a result, the study notes, the product patent regime is expected to lead to an expansion of existing market boundaries and emphasises that "the new regime is expected to have an impact not only on the pharmaceutical market but also on the entire healthcare value chain."

The study also analyses the impact of the amendment to Section 39 of the Patents (Amendment) Ordinance 2004, which has introduced strict restrictions on Indian applicants seeking to file abroad. Starting January 1, 2005, all resident Indian applicants wanting to file for patents in foreign countries will need a 'no objection certificate' from the Indian government.

Dr. Alok Aggarwal, chairman, Evalueserve, says, "Although these provisions have been included to guard India's national security interests, they are likely to slow down the patent-filing activity of Indian applicants in foreign countries. It should be the endeavour of the Indian Patent Office that no-objection applications are processed without long-drawn bureaucratic processes." He adds, "The time limit prescribed for processing such applications should be reduced from three months to a few weeks."

The new Ordinance will also affect the patentability of computer programmes. As per amended section 3(k) of The Patents Ordinance 2004, a computer programme per se is not patentable. However, a computer program is patentable in the following cases:

• A computer program that has a technical application in industry;
• A computer program in combination with hardware.

The study analyses the implications and likely outcomes of this rule, which does not specify which element, hardware or software, must contain novelty in order to be patentable, leading to the question of whether a novel program which must run on a non-novel processor and memory constitutes a patentable combination.

"In spite of these ambiguities" Dr. Aggarwal says, "It is believed that by introduction of these provisions, India has moved a few steps towards patenting of computer programs. However, a defined set of policies and guidelines for patenting of software should emerge, which resolve some of the open ended issues."