Impact Of Globalization On the Pharmaceutical Industry

Author : Shruti Sharma

The contemporary world within which we reside is interconnected in all spheres, whether it is in political, social, economic, or cultural. The pharmaceutical industry acts as an illustration which demonstrates both the financial and the political spheres. The growing interconnectedness in different parts of the world is based on the liberal idea of Adam Smith, which reflects dependency and cooperation among states. This article focuses on the impact of globalization on the pharmaceutical industry. It will also reflect the growing dependency of developing countries like India on major developed countries like the U.S.A and China for the raw material of Pharma. In addition, it also gives insight into the global supply chain and how the ideas of mercantilism and protectionism regarding Intellectual Property Rights are perceived. This article will anticipate whether the TRIPS Agreement has been a boon or a bane for the LDC(Azam, M.2016).

In 1860, American Philosopher, Ralph Waldo Emerson said, “The first wealth is health(The First Wealth, 2014)”. In the present-day context, especially after COVID-19, national health is considered a top priority. With its advent, the pharma industry has seen a prolific expansion of the market and it has emerged as a boon for developed economies. The primary question which becomes apparent is whether globalization has a positive or a negative impact on the pharma industry and how the developing nations are being affected in the most severe manner. This could be understood with the example of an emerging power like India. Though Indian-made drugs account for 40% of the generic medicines in the USA and UK, unfortunately, it is still dependent on China for Active pharmaceutical ingredients [API] (Sarda, 2024). It is required in making drugs including capsules, tablets etc. If trade between both nations is affected then the Indian economy would deteriorate. Therefore, the Indian government introduced the Product Linked Incentive to pace up the ‘Atmanirbhar’ narrative in the pharma sector. A new PLI scheme is in the pipeline for APIs and KMIs to deal with the problem of extensive imports. Countries like China adhere to the theory of mercantilism and rely more on exporting goods. This could be traced back to 2006 when China induced multinational companies [ MNCs] to shift production in China which supported Chinese enterprises(Atkinson, 2021). After this Protection of Intellectual Property Rights became a challenge for the MNCs. Chinese patent offices used to favour domestic produce over foreign produce(Atkinson, 2021). Intellectual property rights give the creator exclusive rights over his/her creation for a certain period of time(WTO | Intellectual Property (TRIPS) – What Are Intellectual Property Rights?, n.d.). 

Globalization in the pharma sector not exclusively refers to trade among various countries for raw materials and manufactured goods but also includes certain research and development activities[ R&D]. Many criteria are related to the issue of multi-nationalization and trans-nationalization of pharma industries(Busfield, 2003). It includes distribution of companies, production across various countries, R&D across the world, the emergence of companies without clear national identities, with nationalized management and a willingness to relocate across the world and the sale of particular pharmaceutical products across the world in a more or less standard form(Busfield, 2003). One question which is still debatable in the global sphere is whether the TRIPS waiver has helped the LDCs or not. Before understanding its relevance it’s important to understand what does TRIPS agreement stands for. The minimum rights conferred by the patent under this agreement, prevent unauthorized persons from using the patented process and making, using, offering for sale, or importing the patented product or a product obtained directly by the patented process(WTO | Intellectual Property (TRIPS) and Pharmaceuticals – Technical Note, n.d.-a). The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement grants patent protection to medicines and their production processes for 20 years.  It has had significant consequences for developing countries and has been a focus of ethical debate over the high cost of medicines. For example, the high price of AIDS treatments has been a particular source of ethical concern(Subramanian, n.d.). 

With reference to the above paragraph, it could be understood that LDCs have always been suppressed by developed economies. Though we are living in a liberal world where we talk about cooperation and the well-being of all, initially it turns out to be a zero-sum game for developing countries. It turns out to be an advantage for one side inevitably and leads to a disadvantage for the others. The beggar thy-neighbour policy could also be applied in the case of countries like the USA, the UK and the European Union that practised vaccine nationalism. They started prioritizing the country’s need for medicines before allowing export. The most prominent example of beggar thy neighbour policy is the enforcement of IPR by developed countries which limits the ability of developing nations to access affordable medicines. Strict patent hinders the ability to provide affordable life-saving medicines like for HIV-AIDS, to the population(JC2049_PolicyBrief_TRIPS_en_1.Pdf, n.d.).

Big economic giants are yielding profits out of it, which in turn creates health challenges globally. In a nutshell, it could be concluded that globalization had a complex impact on the developing countries. It acts as a double-edged sword. The favourable aspect includes increased access to medicines, technology transfer, lower drug prices etc. And for LDCs, the negative impacts are much more vulnerable concerning developed countries. It leads to more dependency on imports, underdeveloped domestic production, quality concerns, unequal access and the foremost one is Intellectual property rights. 

The monopoly of big economic giants like the USA and China in the global economic sector including the pharmaceutical industry reflects their dominance. The irony lies in regard to their idea of free and fair trade. Though they profess this idea and consequently countries like the USA require USFDA approval for Indian Pharmaceutical companies to export products to them. It is considered as a form of protectionism(Commissioner, 2024). Earlier most of the LDCs like India and other African countries were under settler colonialization but in the contemporary era they could be seen under trade colonization. This can be rectified only when countries start focusing on the domestic manufacturing of the products and also by addressing patent regulations(WTO | Intellectual Property (TRIPS) and Pharmaceuticals – Technical Note, n.d.-b).