An analysis of R&D collaborations within the sectoral innovation system of the Indian pharmaceutical industry

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An analysis of R&D collaborations within the sectoral innovation system of the Indian pharmaceutical industry

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Title: An analysis of R&D collaborations within the sectoral innovation system of the Indian pharmaceutical industry
Challenges and opportunities for the innovation of novel drugs
Author: Ackerhans, Sophia
Abstract: The Indian pharmaceutical industry is the country’s leading science-based industry with wide ranging capabilities in the complex field of drug technology and manufacturing. Expanding at a compound annual growth rate of 23.9 per cent, the Indian pharmaceuticals market is anticipated to reach USD 55 billion by 2020. Among the pharmerging markets, it is highly ranked in terms of quality and the extensive range of manufactured drugs. India signed the Agreement on Trade Related Intellectual Property Rights in 1995. This agreement aimed at harmonizing intellectual property rights and patent protection worldwide. India's decision to sign was disputed since civil society campaigners believed it would prevent access to low cost drugs and many Indian generics drug firms susptected to lose their right to reverse-engineer products, which were patent-protected abroad. Most small-scale generics firms remained resistant, while the majority of large-scale firms welcomed the possibility of entering higher-income markets, fuelled by their visions of becoming innovators themselves (S. E. Smith, 2000). Signing the Agreement on Trade Related Intellectual Property Rights necessitated amendments to the Patents Act, 1970. This Act had previously offered Indian firms equivalent protection to that of their foreign counterparts, encouraging them to produce new chemical entities instead of generic drugs (Schüren, 2013). The new institutional framework has resulted in a search for novel drugs and new markets, leading to an increase in collaborations on research and development. This paper investigates whether, and to what extent, external sourcing activities and R&D collaborations between Indian pharmaceutical firms and their partners in the sectoral innovation system constitute a viable option for them to upgrade into the development of new, enhanced drugs. This was achieved through conducting an analysis of the pharmaceutical industry‘s sector innovation system and R&D collaboration modes between Indian pharmaceutical firms and their external partners. Analysis of the active pharmaceutical ingredient sector’s innovation system in India has shown that partnerships exist mainly within the industry, and not between firms, the academia and the public sector. Industry-academia collaborations are especially lacking within pharmaceuticals, although scientific journals published by universities represent one of the most important sources of innovation for the private sector. Most of the firms engaged in general and early stage R&D collaboration projects in order to improve their time and cost efficiencies, as well as to expand their market coverage in order to stay competitive and remain active in the MNC’s global development and production network. Indian firms still depend on their expertise in reverse engineering, gained under the old institutional framework, which incentivized the industry to produce process patents. The Patents Act, 2005, which introduced product patents, has not led to a change in incentives. On the contrary, the strict patent specifications have led to a decrease in the approval of product patents in India. 10 Analysis of the inter-organizational research and development collaboration modes revealed that some of the issues, which decreased efficiency in cooperation, included cultural differences between private and public entities, as well as a prevailing lack of trust between firms. Out of the modes analyzed, public-private partnerships proved themselves most successful in leveraging synergies for the generation and diffusion of knowledge. The success of these partnerships relies on the ability and motivation of the participants to openly share their knowledge and bring the product to the market. However, the benefits are not guaranteed, and there were also collaboration projects where foreigness proved to be aliability which reduced or compensated the synergies. Based on the assumption that exchanges of internal and external knowledge have a positive impact on the generation of ideas and learning, the liability of foreigness is mainly rooted in the preconditions to share knowledge. Indian firms face a lack of organizational flexibility to coordinate R&D projects as well as a well-functioning bureaucratic structure on the corporate and the public sector levels, which impede the ability of Indian firms to share knowledge. Similarly, Indian firms face deficiencies in motivation within their own businesses, as well as on the side of their partners, to engage in reciprocal learning processes, an issue which is mainly rooted in a deficit of trust on the part of the external partners.
URI: http://hdl.handle.net/10417/5938
Date: 2016-10-26
Pages: 155
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