A landmark judgement on a cancer treatment by India's Supreme Court may force foreign firms to overhaul their strategies, but ultimately the country's pharmaceutical market is too lucrative for multinationals to ignore, analysts say.
The court on Monday rejected a demand from the Swiss drug maker Novartis for a patent on Glivec, used to treat chronic myeloid leukaemia. The court ruled the drug failed to meet the criteria for being considered a new invention.
The ruling sets a precedent for other foreign companies hoping to patent certain drugs.
Generic versions of such drugs are sold at a fraction of the price in India, discounted by up to 95 per cent, so the ruling was hailed as a victory for local pharmaceutical companies and patients.
"The implication of this decision is that it will be very difficult for MNCs [multinational companies] to really come up with a genuine invention," said Ranvir Singh, a pharmaceuticals analyst at Sharekhan. "In that way, the MNCs will find it difficult to get patents."
Novartis India's vice chairman, Ranjit Shahani, said after the ruling that it would not invest in research and development in India.
"India is a lucrative market growing fast, so it would be very difficult to ignore it altogether," Mr Singh said. "For MNCs, now things are very clear. The dust will settle gradually. Once you know the rules clearly, you're in a better position to make your strategy and plan.
"Earlier there was some uncertainty on the definition of patents. Now the Supreme Court has come up with a clear definition. I believe that other emerging markets would also follow suit gradually.
The value of India's pharmaceutical market is expected to reach US$55 billion (Dh202.01bn) by 2020, according to a report by McKinsey.
There has been a series of acquisitions of Indian pharmaceutical companies in recent years by multinationals looking to tap the domestic market. But this also raised concerns in India that foreign companies would push more expensive patented products.
"We believe that the event will have a neutral impact on the industry dynamics," said Sarabjit Kour Nangra, a vice president of research at Angel Broking.
"The growth of the industry will not be impacted. Also, while the MNCs will be cautious in terms of product launches, it will not [prevent] them from launching the products. It can be viewed as teething problems in terms of implementation of the patents law.
"With generic being a major proportion of the overall market, the growth of the Indian markets will not change because of the judgement."
Branded generic drugs make up 70 to 80 per cent of the pharmaceutical retail market in India, according to McKinsey.
Mr Singh explained that multinationals could still generate revenues by partnering with local firms and selling branded generics at a premium in India.
For many years, India's industry used sophisticated reverse engineering skills to produce copies of patented western drugs until 2005. India did not enforce any patent protection laws for pharmaceuticals until 2005, when it introduced product patent protection to comply with the World Trade Organization's requirements.
India is a major exporter of generic drugs to scores of countries including the United States and Japan.