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THE PHARMA REVIEW (SEPTEMBER - OCTOBER 2011)

The Impact of Drug Policies on the Small Scale Drug Industry in India -A Factor Analysis Approach

Dr. (Lt Cdr) G. Shanmugasundaram

Abstract
A study was conducted on the small scale drug industry in eight districts of Tamil Nadu and Pondicherry, India to evaluate the impact of drug policies on the Small Scale Drug Industry (SSDI). Thirteen variables were considered for the study. Three factors were extracted through factor analysis (principal component analysis) in industry and combined effect and only two factors extracted in non-industry group based on Eigen value criteria of more than one. These three factors together accounted for66.82 percent, 61.65 percent 62.94 percent for industry, non industry and combined effect respectively. Based on the nature of variable, all factors were given descriptive names. These factors are Indian Patent Act, Fiscal Policies and licensing effect. Indian Patent Act (Amendment) 2005 made substantial portion of the total variance in all the three groups.
Back ground
The New Industrial Policy (NIP) 1991 and the Government’s commitment under World Trade Organisation (WTO) agreement led to policy changes, which posed challenges to the Indian industry. Imports were largely freed and placed on Open General License (OGL) system and tariffs were reduced. Tough time is ahead for industrial sector as the battleground is an unprotected open field. Everything depends on the strength that one has and the ability to convert this into competitive advantage in a multilateral trade regime. However each country is given to some extent the freedom to protect its national interest. In this scenario pharmaceutical industry affected more. Before the Globalization of the Indian Industries, the Pharmaceutical Industry in India was doing well due to the following: 1) Indian Patent Act (IPA) 1970: 2)Drug Price Control Order (DPCO): 3)Foreign Exchange Regulation Act 1973: 4)Tariffs on Imports:
Effect of Globalization
Indian Patent Act 2005(Amendment) in the place of Indian Patent Act 1970
As part of the globalization programme, India has become a signatory of the GATT (now known as the World Trade Organization (WTO) since 1994) and hence a signatory to the TRIPS. Under the TRIPS agreement India are under compulsion to introduce "Product Patent" by 2005[1]. So the Indian Pharmaceutical Industry which was enjoying a favorable climate due to cost-advantages was affected by the introduction of the product patent after which cost-advantage were not possible..

 

 

 

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