Abstract: India’s Rise as the “Pharmacy of the World”
India’s rise as the “Pharmacy of the World” is not a story that happened overnight, but it is the product of deliberate legislative choices made over decades, choices that consistently prioritised accessibility over profit and the needs of the poor over the demands of multinational corporations by the Indian government.
Evolution of India’s Pharmaceutical Patent Regime
This paper traces that journey, beginning with the colonial patent regime that left India’s pharmaceutical market entirely dependent on foreign companies, through the transformative Indian Patents Act of 1970, which introduced process patents for pharmaceuticals and gave domestic companies the legal room to reverse-engineer the life-saving drugs at a fraction of their original cost that foreign companies offered.
| Key Phase | Major Development | Impact on India’s Pharmaceutical Sector |
|---|---|---|
| Colonial Patent Regime | Dependence on foreign pharmaceutical companies | Limited domestic manufacturing capability |
| Indian Patents Act, 1970 | Introduction of process patents for pharmaceuticals | Enabled affordable drug production by Indian companies |
| TRIPS Era | Patent law amendments and compliance obligations | Reshaped the pharmaceutical innovation landscape |
TRIPS Agreement and Patent Law Amendments
The paper then examines India’s entry into the TRIPS Agreement in 1995 and the subsequent amendments to the Patents Act, including the deletion of Section 5 and the introduction of product patents in 2005, which fundamentally altered the competitive landscape.
- India joined the TRIPS Agreement in 1995.
- Section 5 of the Patents Act was deleted.
- Product patents were introduced in 2005.
- The pharmaceutical market experienced significant structural changes.
Balancing Patent Protection and Public Health
Crucially, the paper analyses how India balanced these international obligations through provisions like Section 3(d), which effectively shut the door on patent evergreening, and compulsory licensing under Sections 84 and 94, best illustrated by the landmark Bayer v. Natco case of 2012.
| Legal Provision | Purpose |
|---|---|
| Section 3(d) | Prevented patent evergreening |
| Sections 84 and 94 | Enabled compulsory licensing in appropriate circumstances |
| Bayer v. Natco (2012) | Landmark illustration of compulsory licensing principles |
Dependence on China for Active Pharmaceutical Ingredients
Finally, the paper addresses a structural threat that now looms over this success story, which is India’s dangerous over-dependence on China for Active Pharmaceutical Ingredients.
Policy Responses for Pharmaceutical Self-Reliance
This paper then examines the policy responses, including the PLI scheme and Bulk Drug Parks, that seek to secure India’s pharmaceutical future.
- Production Linked Incentive (PLI) Scheme
- Bulk Drug Parks Initiative
- Strengthening domestic pharmaceutical manufacturing
- Reducing import dependence for critical ingredients
Introduction
India has been dominating vital segments in the pharmaceutical sector all over the world, providing generic and affordable medicines to the whole world. India is known as the “Pharmacy of the World”, given the fact that the Indian pharmaceutical industry is the 3rd largest by volume with a domestic market size of USD 60 billion. India contributes to 40% of the USA’s generic medicine demands, 50% of Africa’s requirement for generics, 25% of the United Kingdom’s medicines and 60% of the global vaccines. [1]
India became one of the biggest contributors globally because of its significantly cheaper medicines as compared to the rest of the world. The catalyst behind this high distinction of price of the same medicines is hidden inside the journey of The Patents Act, 1970 [2], and how Indian legislation chooses the need of the poor and affordability over creating a market of expensive and profit-making medicines sucking money out of the need of someone.
In this paper, we will be looking at how the Indian pharmaceutical sector evolved from the British era (1856-1947) to post-colonial changes in the demand of the global market. Then we will look at the 1970s Indian Patent Act and how it differed from international standards in the case of the pharmaceutical sector. Later on, in 1995, India joined the TRIPS Agreement and adapted to new standards for patents.
Patents
Understanding patents would start with understanding what Intellectual Property (IP) and Intellectual Property Rights (IPR) mean and their relevance to patents. ‘IP’ refers to a creation of someone, such as inventions, literary works, designs, symbols, and images. It protects intangible ideas as legal rights of someone.
IPRs are the legal rights granted to creators/inventors/artists to protect their IP. These rights allow the artist to be the sole user of the creation and protect it against unauthorised use. Some of these IPR are:
- Patents
- Trademarks
- Industrial Designs
- Geographical Indications
- Copyright
The most relevant IPR in the pharmaceutical sector is patents.
A patent is defined under Sec 2(1)(m) of The Indian Patents Act, 1970 [3] and further explained in the Act itself. A patent is a legal right granted by a government that gives an inventor exclusive authority to make, use, and sell their invention. In exchange for this monopoly, the inventor must publicly disclose the technical details of how the invention works or, in the case of pharmaceuticals, disclose the chemical composition of the drugs.
In the pharmaceutical sector, patents are the most common type of IPR used to protect the chemical formulae by protecting the process of creation of certain products or the products themselves. This protection is temporary, typically lasting for 20 years from the filing date according to the TRIPS Agreement [4] discussed later. Once the 20-year term expires, the invention enters the public domain, meaning anyone can freely use, manufacture, or build upon it. [5]
Types of Patents
Patents can be of 2 types, which comprise the following:
- Process Patent
- Product Patent
| Patent Type | Description |
|---|---|
| Product Patent | Refers to providing a patent for the final tangible product itself; example: chemical compounds. No one can make, sell or exploit that exact same product no matter the process of formation. |
| Process Patent | Protects the specific method, technical sequence, or manufacturing process used to create a product. If someone else finds a completely different process or a shortcut to create the exact same end product, they are not infringing on the process patent. |
For example, manufacturing and industrial engineering processes.
The Indian Patent Act, 1970, used process patents for pharmaceuticals until 2005, when India introduced product patents for pharmaceutical products.
Patent Laws During the Colonial Era (1856-1947)
The first formal step into patent legislation in India, enacted under British rule, was in form of ‘Act VI of 1856′, which was later replaced by ‘The Inventions and Design Act 1888’ and then by ‘The Indian Patents and Design Act, 1911′. These lasted until independence and India drafting their own ‘Indian Patent Act, 1970′.
During the British era, IP laws, specifically patent laws, were very strict for the pharmaceutical products themselves and not just the process. The Indian pharmaceutical market was filled with MNCs and foreign industries, and the dominance of their highly priced drugs and medicines flooded the Indian market without any sign of local industries.
This all happened because British laws were imposed on India, which favoured Western investors more than the Indian local market. The vast majority of pharmaceutical patents granted during the colonial period were issued to foreign individuals and multinational corporations (MNCs), which left the Indian pharmaceutical market as an import-dependent market.
Indian Patent Act, 1970
After Indian Independence, 1947, the Indian government took nearly 20 years to draft their own legislation known as the Indian Patent Act, 1970. This act came into effect in 1972 and was made in a way that it would help the local pharmaceutical market to grow and provide significantly cheaper options to the people of India as compared to the rest of the world.
This act, let alone, shook the roots of foreign pharmaceutical companies dominating the global market with their products.
Introduction of Process and Product Patents
This Act introduced the concept of product and process patents to India, where essential items like food and pharmaceutics were placed in the section of process patents. [6]
Taking an example of the USA, where pharmaceuticals fall under product patents, the inventor of any drug would own the rights regarding the final product of that drug itself, and any method whatsoever to create that drug would just be void, giving the investor absolute ownership over the product itself.
Whereas switching to a process patent gave rights to sell and use based only on a specific method of creation to the inventor, and they would not have absolute ownership over the rights of the product itself but rather the process through which they make it.
This change provided an opportunity to the Indian companies to use the final product as their base model and reverse engineer the product and remake it through a different method or with some minor changes in the process of making the same product, which would not violate the right over the process of making that drug and also give the same result to be sold. [7]
Case Study: Propranolol and Cipla
For example, in the UK, Imperial Chemical Industries discovered a drug named ‘propranolol’, which was used to deal with high blood pressure. They already had a product patent in India for the drug.
In India, Dr Yusuf Hamied – who is a scientist and founder of Cipla – reverse-engineered this drug, created a slightly distinct method to create the same drug and sold it at a very low cost in India. [8]
Case Study: HIV/AIDS Triple Drug Cocktail
In another example, foreign companies were selling a triple-drug cocktail to Africa for HIV/AIDS costing $12,000 per year, which is nearly $33 per day.
This was a very highly charged drug which was not accessible to the majority of people; this problem was recognised by Cipla.
Then Cipla reverse-engineered this triple drug cocktail and sold it at a very low price of less than $1 per day. [9]
Growth of Indian Pharmaceutical Industry
This reverse engineering of drugs and being legally able to hold a patent for the method of creation of those medicines helped the Indian and global markets with affordable medicines when Indian players started to enter the domestic market.
This gave India self-sufficiency in the pharmaceutical sector, and soon India started to export these drugs too, to a point where India is now the biggest pharmaceutical exporter to Africa and the USA.
This became a catalyst in the growth of the Indian pharmaceutical sector and created big domestic companies like Cipla, Dr Reddy’s Laboratories and Ranbaxy Laboratories.
These companies mastered the art of reverse engineering in India. They would take an expensive drug from any foreign company charging an overprice for a drug and reverse engineer the drug using different methods or small changes in the molecule and patent those processes and sell the same drug for an exponentially cheaper price.
All this was only possible because of Indian legislation providing process patents for pharmaceutical products to provide an advantage to the domestic industries of India over foreign companies.
Compulsory Licensing Under Indian Patent Act
The Indian pharmaceutical sector grew with an exponential growth rate with the help of process patents, especially in the area of agrochemicals and pharmaceuticals.
Under this act, the concept of ‘compulsory licensing’ was also introduced, which is stated under Sections 84 & 94 of the Indian Patent Act, 1970. [10]
Compulsory licensing is an involuntary contract created by the government for the welfare of society. It occurs when a government authorises a third party (like a domestic generic pharmaceutical company) to manufacture, use, or sell a patented product or process without the consent of the patent owner.
Here Section 94 of the Indian Patent Act, 1970, talks about how the government could use the statutes of compulsory licensing in case of any national health emergency, passing over the patent rights to the applied domestic supplier.
Whereas Section 84 of the Indian Patent Act, 1970, states that in cases where any of these statutory conditions are met:
- Reasonable requirements of the public have not been satisfied
- The drug is not available at a reasonably affordable price
- The patented invention is not worked in India
Then any interested person (such as a generic drug manufacturer) can apply to the Controller General of Patents for a compulsory licence after the expiration of 3 years from the date the patent was granted.
Bayer v. Natco (2012)
India has granted a compulsory licence only once, in the case of Bayer v. Natco (2012). [11]
In this case, Bayer had a patent for ‘Nexavar’, a critical drug used to treat advanced kidney and liver cancer. They were selling the drug at a cost of $3,500+ per month.
Then an Indian generic manufacturer, Natco Pharma, applied for a compulsory licence under Section 84, arguing that the drug failed all three statutory conditions.
Natco promised to sell the exact same generic equivalent for just $110, which was a 97% price drop, and to pay a 6% royalty to Bayer.
The controller general granted the licence in 2012.
During this case, a controversial statement by the owner of Bayer was also were popular, where he said:
“We did not develop this product for the Indian market – let’s be honest – we developed this product for Western patients who can afford this product.”
This statement shows the intent of the industrialists for profit-making through the business of pharmaceuticals and their justifying the need of concepts like compulsory licensing for the poor, where they cannot afford the medicines. [12]
Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement
After creating a significant position in the global market of pharmaceuticals, India was hit by a huge economic crisis, leaving India with just 2 weeks of foreign reserves at that point. India had a need to open up their market for foreign direct investment (FDI) and connect to the global market.
At that time, Indian foreign minister Dr Manmohan Singh introduced LPG (Liberalisation, Privatisation and Globalisation) to open up the Indian economy to the world. These sweeping economic reforms were implemented to rescue India from a severe economic crisis.
A part of this reform to stabilise the country was also by joining International Organisations such as WTO (World Trade Organisation) by signing Marrakesh Agreement in April 1994 [13].
India Becomes a Founding Member of WTO
India became one of the founding members of the WTO, which also required India to sign the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement in January 1995.
India was a developing country without fully developed pharmaceutical patent laws, because of which TRIPS provided India 20 yrs to match the global standards of patent law as proposed by TRIPS, which included 2 major changes to be made by India within the time period of 20 years.[14]
These 2 Changes Were
- Reintroducing Product Patents (The Most Massive Structural Change) – Completely legalised pharmaceutical product patents. [15]
- Drastically Extending the Patent Lifespan – The 2002 amendment extended the patent term to 20 years. [17]
Reintroducing Product Patents (The Most Massive Structural Change)
Completely legalized pharmaceutical product patents.[15]
| Aspect | Old Law | TRIPS Law |
|---|---|---|
| Pharmaceutical Product Patents | According to Sec. 5 of the Indian Patent Act, only process patents were provided to the pharmaceutical products and not the product itself. It legally enabled Indian domestic firms to reverse-engineer Western medicines. | India had to match Article 27 of the TRIPS Agreement, and to do that, Sec 5 had to be deleted. Then, from 1st January, 2005, product patents officially returned, making it illegal for generic manufacturers to reverse-engineer and copy newly discovered chemical entities. [16] |
Drastically Extending the Patent Lifespan – The 2002 Amendment
Extended the patent term to 20 years [17].
| Aspect | Old Law | TRIPS Law |
|---|---|---|
| Patent Term | The 1970 Act cut pharmaceutical process patent terms down to just 5 years from the date of sealing or 7 years from the date of filing (whichever was shorter). | India changed the life span for patents to minimum of 20 years from the date of filing. |
Impact of TRIPS on Indian Pharmaceutical Patent Law
After changing the required sections in the Indian Patent Law, 1970, as suggested by the TRIPS Agreement, India now entered the global standards of patent laws, which totally cleared any chance for reverse engineering the drugs and selling them for a low price.
The biggest reason for the global domination was now taken away from India.
Post TRIPS Agreement and Section 3(d) of Indian Patent Law
Still, the Indian government did not give up on domestic industries and provided them yet another way to have a head start as compared to foreign MNCs. Now with new amendments in the Indian Patent Act, 1970, clause 3(d) was also added, which stated that “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.” [18]
Understanding Sec 3(d) and Evergreening
Understanding Sec 3(d) in the context of Indian pharmaceuticals would take us to the concept of “evergreening” in patent filing. Patent evergreening is a corporate strategy; it is primarily utilised within the pharmaceutical and biotechnology sectors, where a patent holder attempts to prolong their market monopoly past the standard statutory term by securing successive, secondary patents on minor modifications of an already existing invention. [19]
According to international standards, after the completion of the patent time period of 20 years, there is a need to be a change in the product to file another product patent. The pharmaceutical companies would sometimes make very minute changes in the product, as small as changes in the dosage of the product and filing for another patent. The companies would follow it for always keeping the patent evergreen for the product and never ending their rights to the product. This was the concept of evergreening the patent, which companies used for a very long time.
Impact of Sec 3(d) on Evergreening Practices
Now with the Sec 3(d) in the Indian Patent Act,1970 Evergreening was no more possible. The section explained that the patent to the same product cannot be filed until and unless there is a significant change in the efficiency or structure of the whole product. Physical modifications (like higher solubility, longer shelf life, or easier manufacturing) do not qualify as therapeutic advancements in India. The drug must actually perform significantly better inside the human body to treat the illness. This defeated the whole base of the Evergreening strategy. Now companies could not file patents for their products with minor changes anymore, and the product would be open to the market to use.
Key Requirements Under Section 3(d)
- Patent protection cannot be extended through minor modifications.
- A significant improvement in efficacy or structure is required.
- Physical improvements alone are insufficient.
- The medicine must demonstrate enhanced therapeutic efficacy.
- Evergreening strategies are restricted under Indian patent law.
| Factor | Before Section 3(d) | After Section 3(d) |
|---|---|---|
| Minor Product Modifications | Could support new patent filings | Generally not patentable |
| Dosage Changes | Often used for secondary patents | Require proof of enhanced efficacy |
| Market Exclusivity | Could be extended repeatedly | Limited by stricter patentability standards |
| Generic Entry | Frequently delayed | Facilitated after patent expiry |
India’s Calibrated Intellectual Property Approach
According to officials in the Indian government and industry, India is currently using a “calibrated approach” to intellectual property protection to strike a balance between public health, drug accessibility, and domestic industry interests. India has created an intellectual property framework that balances national priorities with recognition of the demands of the international intellectual property system. [20]
Local companies know exactly when a base molecule’s 20-year term ends. They can build manufacturing plants, purchase raw materials, and prepare their supply chains to launch the generic version. Now because of this, the Indian pharmaceutical sector again had an opportunity to serve the people with low-price medicines and keep India’s dominance in this sector.
Real-Life Example of Section 3(d) Application
Now taking some real-life examples of this case –
Novartis AG v. Union of India (2013): Landmark Judgment
The landmark judgement in Novartis AG v. Union of India (2013) 6 SCC 1 [21] established India’s definitive legal shield against the pharmaceutical practice of “evergreening”. The case arose when Swiss multinational Novartis sought an Indian product patent for the beta-crystalline form of imatinib mesylate, a life-saving leukaemia drug marketed as Gleevec.
Although Novartis had globally patented the base active molecule in 1993, the Indian Patent Office rejected the 2005 domestic application under Section 3(d) of the Patents Act, 1970, classifying it as a non-patentable modification of a known substance. Novartis appealed, arguing that this specific crystal form offered a 30% increase in bioavailability and superior physical stability, which should qualify as an inventive upgrade.
Disallowing the appeal, the Supreme Court of India ruled that in the case of pharmaceuticals, “efficacy” must be construed strictly as therapeutic efficacy, which is the actual increased capability of a drug to cure or mitigate an illness. The Court held that minor physical upgrades do not automatically equal therapeutic advancement; applicants must provide concrete clinical data proving superior medical outcomes.
Significance of the Novartis Judgment
- Strengthened the application of Section 3(d).
- Restricted pharmaceutical patent evergreening.
- Protected the Indian generic drug industry.
- Emphasized proof of therapeutic efficacy.
- Improved access to affordable medicines.
| Aspect | Details |
|---|---|
| Case | Novartis AG v. Union of India (2013) 6 SCC 1 |
| Drug | Beta-Crystalline Form of Imatinib Mesylate (Gleevec) |
| Issue | Patentability of a modified form of a known substance |
| Legal Provision | Section 3(d), Patents Act, 1970 |
| Court Finding | Enhanced bioavailability alone does not establish therapeutic efficacy |
| Outcome | Patent application rejected |
| Public Impact | Monthly treatment costs reduced from ₹1.2 Lakhs to ₹8,000 only |
This historic decision preserved the local generic market, slashing monthly treatment costs from ₹1.2 lakhs to ₹8,000 only.
Threats to the Indian Pharmaceutical Industry: The API Dependence Problem
India’s pharmaceutical industry, often celebrated as the “pharmacy of the world”, faces a set of structural vulnerabilities that threaten its long-term sustainability and strategic autonomy. [22] Among these, the most pressing is its overwhelming dependence on China for Active Pharmaceutical Ingredients (APIs).
APIs are the biologically active components that give a drug its therapeutic effect. Without APIs, finished drug formulations simply cannot be manufactured, making them the backbone of the entire pharmaceutical supply chain.
Understanding Active Pharmaceutical Ingredients (APIs)
An API is the chemically active substance in a medicine responsible for its intended pharmacological effect. For instance, in a paracetamol tablet, the API is paracetamol itself, while the remaining components like binders, fillers, and coatings are inert excipients.
Every finished drug, whether a tablet, capsule, or injection, requires a precise quantity of its corresponding API. The quality, purity, and consistent availability of APIs directly determine the safety and efficacy of the final medicine.
| Component | Role in Medicine |
|---|---|
| API (Active Pharmaceutical Ingredient) | Provides the intended therapeutic effect |
| Excipients | Binders, fillers, coatings, and other inactive substances |
China’s Dominance in Global API Production
China has systematically built itself into the world’s largest producer and exporter of APIs over the past three decades.
This dominance was not accidental but it was rather the result of deliberate state policy, including:
- Massive government subsidies to chemical manufacturers
- Relaxed environmental regulations that allowed cheaper production
- Economies of scale achieved through consolidation of manufacturing clusters
- Sustained under-pricing that drove competitors out of the market
India, which once had a robust domestic API manufacturing base, gradually shifted toward importing Chinese APIs because they were significantly cheaper.
Today, India imports approximately 68% of its API requirements from China [23].
The strategic risk this creates became starkly visible during the COVID-19 pandemic, when Chinese export restrictions and supply chain disruptions caused severe shortages of raw materials for Indian manufacturers, threatening the supply of essential medicines both domestically and globally [24].
Key Risks Arising from API Dependence
- Supply chain disruptions during global crises
- Shortages of critical pharmaceutical raw materials
- Increased manufacturing vulnerability
- Threats to domestic medicine availability
- Risks to global pharmaceutical exports from India
- Challenges to national health security
Path to Overcome the Threats
Recognising this vulnerability, the Indian government has taken meaningful steps through the Production Linked Incentive (PLI) scheme for bulk drugs [25], which provides financial incentives to domestic API manufacturers to revive and expand local production capacity.
Additionally, the establishment of bulk drug parks in states like Himachal Pradesh, Andhra Pradesh, and Gujarat aims to create dedicated manufacturing ecosystems with shared infrastructure to reduce production costs.
Government Initiatives for API Self-Reliance
| Initiative | Objective |
|---|---|
| Production Linked Incentive (PLI) Scheme for Bulk Drugs | Encourage domestic API manufacturing through financial incentives |
| Bulk Drug Parks | Create shared infrastructure and reduce manufacturing costs |
Additional Measures Required
However, policy alone is insufficient.
India must simultaneously:
- Invest in process chemistry research
- Develop skilled manpower for chemical synthesis
- Build environmental compliance infrastructure
- Foster genuine industry-academic collaboration
- Innovate cost-competitive domestic API manufacturing processes
Reducing China dependence is not merely an economic imperative but rather it is a matter of national health security.References:
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- The Patents Act, 1970 (Act 39 of 1970), s. 84.
- The Patents Act, 1970 (Act 39 of 1970), s. 94.
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