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During the 1990s and early 2000s India was not allowed to sell patented drugs to developed markets such as U.S. In 2005, India signed an agreement with the World Trade Organization (WTO) that secured intellectual property rights for the pharmaceutical industry. This means that many organizations in countries outside of India felt more secure and at ease knowing that their licenses would be protected and therefore began to work and make business arrangements with Indian organizations.
The pharmaceutical drug industry has been most impacted by this agreement. Since 2005, the pharmaceutical drug industry in India has exploded and the revenue has increased from $6 billion in 2005 to over $20 billion in 2015 (Indian Pharmaceutical Industry, 2015). The expected growth is to reach $55 billion by 2020 (Indian Pharmaceutical Industry, 2015). This increase is driven by the expected aging population, rising income levels, and new and emerging medical conditions facing the world today (Pharmaceuticals Industry in India 2015 – 2020, 2015). During 2015, the Indian government revealed “Pharma Vision 2020”. This vision is aimed at making India a global leader in the drug industry (Catalyst, 2015). With the rising demand for effective and inexpensive medication and the medical needs for newer pharmaceuticals, the Indian government believes that it has positioned itself to be among the top 3 drug manufacturers in the world by 2020.
There are many ways how the U.S pharmaceuticals companies benefit from the rise of the Indian pharmaceutical industry. Some are reasons are: lower cost of production,cheap but talented, well-educated labor: lower wage rates, compliance with FDA so no issues regarding drug quality, defense from increased domestic competition in terms of lower input prices, and protection of intellectual property rights.
There are many ways how the U.S consumers benefit from the rise of the Indian pharmaceutical industry. Some are reasons are: lower pharmaceutical prices, lower insurance cost, smaller copays, lower out-of – pocket expenses, FDA approved drugs = Good quality drugs , and identical alternatives at a lower price
Who might have lost out as a result of the recent rise of Indian pharmaceutical industry?
●Competitive and developing countries that are trying to establish themselves in the pharma sector might incur losses as these countries might have invested into R&D to create new drugs. Also, the countries might have suffered losses due to cost effective methodology and growing advancement in the pharma industry in India with which they are unable to compete.
Do the benefits from trade with the Indian pharmaceutical sector outweigh the losses?
●Indian pharmaceutical companies have established themselves as market leaders. The companies are leaders in terms of doing excellent research and development and are driving innovation in the field of medicine.
Benefits
●The benefit of doing trade with the Indian pharmaceutical companies outweighs the losses primarily because of low labor cost in India. This helps companies in India produce drugs at a lower overall cost as compared to that produced in the US. The cost of research and development is also less in India in comparison to US.
Losses
●The losses that would be related with doing business with Indian pharmaceutical companies would be the loss of employment in the US. But by doing business with the Indian companies, people in USA would be benefited because they would have access to medicines that would be available at much cheaper price as compared to the medicines that are produced in USA itself.
Do the benefits from trade with the Indian pharmaceutical sector outweigh the losses?
●Thus, the benefit of providing drugs at a cheaper rate which are essential for good healthcare, outweighs all the other losses that are associated with trading with Indian companies.
What international trade theory (or theories) best explains the rise of India as a major exporter of pharmaceuticals?
●The comparative advantage theory best explains the rise of India as a major exporter of pharmaceuticals.
●The comparative advantage theory directly relates to a country’s ability to produce goods and services at a lower opportunity cost than its trade partners ultimetly giving it the ability to sell goods at a lower price than its competitors.
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