Patent Term Extensions and Their Impact on the Pharmaceutical Industry: India in the Global Context
- Nidhi Anand and Sayali Titre
- Sep 9
- 9 min read
The Innovation-Access Paradox
The issue of extending patent terms for pharmaceuticals represents one of the most complex policy dilemmas in contemporary society, where the need to foster innovation must be carefully weighed against the imperative of ensuring equitable access to medicines. The development of a single approved drug is estimated to cost billions of dollars, with a research and approval timeline stretching over 10–15 years. As a result, the standard 20-year patent term often proves insufficient for pharmaceutical companies to recover their investments and secure adequate returns. Yet, prolonging these monopolies can have profound consequences for global health, particularly in developing regions, where nearly two billion people still lack access to essential medicines.
This tension is sharpened by the reality that effective market exclusivity for patented drugs typically lasts only 8–12 years, largely because of the lengthy regulatory processes required before commercialization. To mitigate this regulatory delay, some jurisdictions provide mechanisms for patent term extensions. However, the scope and implementation of such extensions vary across legal systems, reflecting differing policy priorities in balancing the continuum between innovation incentives and public health access.
Pharmaceutical Patent Timeline
The filing of a patent application often occurs during or just after the preclinical phase, when promising results are identified. This preclinical phase is followed by clinical trials (phases I–III), regulatory evaluation, and ultimately, the obtainment of market approval. It takes an average of 12-15 years in the process, in which the patent clock will continue to run even though the invention is not on the market. The timeline of pharmaceutical patents is indeed unique and significantly more constrained compared to patents in other technological sectors, as visualized below:
The regulatory approval process defines a number of essential turning points. Preclinical phase that takes 2-4 years, focuses on basic research and animal testing. Clinical trials on humans’ phase I-III take 6-10 years of the process to complete. The period of regulatory review by such agencies as the Food and Drug Administration (FDA) or European Medicines Agency (EMA) requires 1-3 years to evaluate the available clinical data and the manufacturing process in detail.
Each one of these stages consists of fixed costs, which cannot be recouped before launching the product into the market, posing a kind of what economists call the regulatory risk and in addition to the already existing business risks. The policies used in calculating extension of term in patents are different in their philosophy, mostly restoration models, compensation models, and models which provide incentives to innovation, as well as an incentive through additional extension of term beyond restoration of time lost to regulatory review.
International System of Extending Patents
U.S. - Hatch Waxman Framework[1]
As a means of bridging that gap, the 1984 Hatch Waxman Act brought into being the earliest worldwide system of pharmaceutical patent term extension, a trillion-dollar precedent that became a blueprint emulated throughout the world. The Hatch-Waxman Framework, officially known as the Drug Price Competition and Patent Term Restoration Act of 1984, offers 5 years of patent term restoration (provided total exclusivity can't exceed 14 years from FDA approval), having been calculated as half of the test period of clinical trials and a complete regulatory review process. This formula acknowledges that clinical testing may be used in only two ways, whereas regulatory review is nothing but a delay.
The system consists of innovative features where there is a balance between incentives for innovations and generic competition. This includes[2]:
In addition to the above, the FDA provides different Market Exclusivities[3]:
Hatch-Waxman framework has created more than 100 billion dollars of extra revenues in pharmaceutical products and developed generic competition based on abbreviated pathways. The US provides generic drugs, which make up about 90 percent of their prescriptions and merely 20 percent of drug-related expenses.
European Union (EU): Supplementary protection certificate (SPC)
Regulation 469/2009[4] sets up the SPC system, which the EU estimates that up to five years may be added on top of the time taken between the start of patenting and the initial EU authorization tagged on the patent. This contrasts with the U.S. method, which looks at the overall development time period and not the junctures of regulation. An additional 6-month extension is possible for pediatric medicines if certain requirements under Regulation (EC) No 1901/2006[5] are met.
It further includes drug manufacturing waivers that permit generic manufacture of brands exported within the SPC period. It allows stockpiling for EU market after SPC expiry, which can be done within 6 months before SPC expiry[6].
Recent changes have resolved "evergreening" issues to allow SPCs only to be claimed on that which has been approved and not on the entire patent claim.
Asia-Pacific Stance
The region of Asia-Pacific is more diverse, with different strategies based on the degree of development and priorities of some countries. The amended Japanese system does not allow extensions except for prescribed under laws, effective from 2020. The system established in China since 2017, grants extensions to patent terms of innovative drugs, which indicates the shift of the country producing generic drugs towards innovation-driven pharmaceutical development. The amended Korean system resolves problems such as generic entry delays due to broad protection, which limits public access to affordable medicines.
The Approach in India: Access-First Paradigm
Historical Context
India’s patent framework has historically been shaped by its constitutional ethos of advancing social justice and ensuring equitable access to essential resources, including medicines, as part of a dignified standard of living for all citizens. The pre-1970 regime permitted product patents in pharmaceuticals, which effectively enabled multinational corporations to dominate the domestic market and led to high drug prices that were unaffordable for the majority of India’s population. Recognizing the public health implications of such a system, India enacted the Patents Act of 1970, which abolished product patents in pharmaceuticals and confined protection only to processes.
This recalibration of policy created an environment that incentivized domestic companies to develop reverse engineering capabilities. Domestic players became pioneers in process innovation, manufacturing cost-effective alternatives to expensive patented drugs. As a result, India not only achieved self-reliance in pharmaceuticals but also emerged as the largest supplier of generic medicines globally, a development that transformed the country into what is often termed the “pharmacy of the developing world”.
The landscape changed again with the 2005 amendments to the Patents Act, which brought India into compliance with the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). While product patents were reintroduced for pharmaceuticals, the legislature carefully embedded a range of safeguards to protect public health. Provisions such as Section 3(d), which restricts the patentability of new forms of known substances unless they demonstrate enhanced efficacy, reflect a conscious balance between incentivizing genuine innovation and preventing “evergreening” of patents. Similarly, robust compulsory licensing provisions ensured that life-saving medicines could be made available in situations of public health need or where drugs were priced beyond the reach of patients.
Together, these reforms illustrate India’s nuanced approach: a patent policy that acknowledges its obligations under international trade law while simultaneously preserving its role as a critical supplier of affordable generic medicines to the developing world. This balancing act underscores India’s distinctive position in the global pharmaceutical landscape, where it must navigate the tension between encouraging innovation and safeguarding public health.
Legal Architecture
The Indian patents law has some characteristics unique to it, which are not shared with the extension awarding jurisdictions. The subject matter eligibility criteria under section 3(d) of The Indian Patents Act, 1970, exclude patents on minor variations which do not bring about enhanced efficacy to curb the issue of evergreening that some fear would be made worse by patent term extensions. This was an infamous move that denied Novartis, a pharmaceutical company, an opportunity to patent a new crystalline form of Gleevec, and this was a move that saved the Indian healthcare system billions of dollars.
Section 84 of the Indian Patents Act, 1970, that deals with compulsory licensing, the government can grant a compulsory license for a patent which is not being implemented in India or does not serve the public interest.
The provisions of pre- and post-grant oppositions allow a third party to contest the validity of patents, establishing other safeguards to public health. In addition to that, price control measures, such as those under the Drug Price Control Order issued under the Essential Commodities Act, control the prices of essential medicines.
Stakeholder Perspectives
The Indian pharmaceutical environment comprises multiple stakeholders who have competing interests. Multinational pharmaceutical companies contend that the imposition of price controls in India, coupled with the absence of provisions for patent term extension, fails to ensure adequate incentives for innovation and consequently acts as a disincentive to investment in scientific research. Conversely, representatives of the generic pharmaceutical industry, which accounts for approximately 20 percent of the world's total generic volume, strongly oppose the introduction of patent term extensions. They maintain that such a regime would undermine the country’s competitive advantage in ensuring the availability of affordable medicines.
The civil society organizations mostly disagree with extensions, arguing out of the affordability and access to the medicine by the 270 million poor in India. Government policy makers are juggling between competing interests and putting their weight on healthcare access and economic development of the nation, and India as a global generic supplier.
Analysis on Economic and Social Impact
The economic impact of patent term extensions is challenging, and it extends beyond the pharmaceutical industry. While patent term extensions do improve the returns to pharmaceutical research and development (R&D) and thus potentially encourage investment in it for neglected diseases, they also come with drawbacks. The longer these extensions last, the higher the costs will grow, according to the year of extension, which would increase the prices of drugs up to 10-20 percent, which is largely due to reduced competition from generic drugs.
In 2023, the value of pharmaceutical exports in India was more than 24 billion dollars, with a major part of this accounted for by the production of generics, and the patent term extension may possibly have an effect on the competitiveness of the exports. India's generic industry aids to secure health of the rest of the world as seen by the success of companies such as Cipla in the provision of Acquired immunodeficiency syndrome (AIDS) drugs to Africa at affordable price.[7]
India experiences a special epidemiological development because it has a mix of communicable and non-communicable diseases. Patent term extension may affect the different disease areas in a dissimilar way. The effectiveness of generic imatinib used to treat chronic myeloid leukemia, which costs less than 100 dollars per month in India and more than 8,000 dollars per month in the United States, proves the access implications of patent policy decisions.
Diplomatic and International Trade Dimensions
Extensions of patent terms are common in bilateral trade negotiations, and it has been the continuous pressure on India that it needs to think of patent term extensions. IP protection of pharmaceuticals is regularly discussed in the US-India trade relationships, with the U.S pharmaceutical sector pressing the U.S government to give extended patent protection. The Special 301 Report of the United States Trade Representative (USTR) has been highly critical of patent policies in India, but India has still stuck to its stand of being pro-public health.
The patent term extensions constitute "TRIPS Plus" measures, going beyond the minimum requirements mandated under the WTO framework. The tendency in India affects the general discussions on balance of fair levels of protection of IP on pharmaceuticals in developing nations, with the nation persistently encouraging entrenchment of TRIPS safeguards to fullest of all the possible flexibilities, guaranteeing health provisions.
Despite its public health-oriented position, India continues to actively pursue and strengthen international trade relationships. This balanced approach is evident from the India–UK Free Trade Agreement (FTA), signed in 2025[8]. This demonstrates that India can uphold its domestic priorities, such as access to affordable medicines and public health safeguards, while still engaging in comprehensive trade negotiations. This balance highlights India's strategic role in shaping both economic growth and social welfare.
Conclusion
The Innovation-Access Balance Conundrum
Pharmaceutical patent term extensions are complex measures that demand fine-tuning to local situations, development agendas, as well as health system requirements. The present stance of India, i.e. to decline extension of standard 20-year patent duration, is a hallmark of India as a global market supplier of generics that maintains its determination in the benefit of healthcare accessibility. This policy has helped India to become the pharmacy of the world, providing affordable medicines to billions of patients and making the pharmaceutical industry globally competitive.
Nevertheless, with the further development of the pharmaceutical innovation system in India and the desire of the state to solve emerging health care issues and retain competitive benefits, the strategy of the country regarding patent term extensions may need a delicate retrace. A working model would likely be well-designed systems that incentivize innovations without patent monopolies hindering access to essential medicines.
India could adopt a hybrid approach that combines selective and conditional patent term extensions with non-patent-based incentives such as R&D tax credits, innovation prizes, and advance market commitments. Any extensions granted should be tied to clear public health goals, including commitments to local manufacturing, technology transfer, and affordable pricing, ensuring that innovation directly benefits Indian patients and the domestic industry. At the same time, strengthening alternative incentive mechanisms will diversify pathways for pharmaceutical R&D, reduce reliance on monopoly pricing, and encourage participation from both multinational and domestic firms. Finally, by pursuing regional collaboration with other developing nations, India can enhance its negotiating power in global IP debates. Taken together, these measures would allow India to strike a careful balance between fostering pharmaceutical innovation and maintaining accessibility, affordability, and public health priorities.
The decision India makes on patent term extensions will have far-reaching consequences, not only for domestic healthcare but also for global medicine availability and pharmaceutical innovation. As the nation expands its pharmaceutical capacity while upholding its commitment to affordable healthcare, its approach to patent term extensions will serve as a critical test case for balancing innovation, access, and public health in the 21st century.
Nidhi Anand
Partner
Sayali Titre
Managing Associate
References:
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