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Case Title:

Glivec: The Innovation that Failed

Publication Year : 2010

Authors: S Sen

Industry: Healthcare

Region:India

Case Code: IPD0114IRC

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
Research and development (R&D) and innovation has become inescapable for Indian firms in the pharmaceutical industry, post liberalisation. They had so far neglected R&D for a variety of reasons. The protection enjoyed by firms under the regulated regime was a significant motivator. The process patent regime was a clear indication in this regard. Government controls of various types, especially price controls on bulk drugs and essential medicines led to low margins, which neither provided affordability nor the willingness to invest in R&D. However, post signing the General Agreement on Tariff and Trade treaty, India provided a more favourable intellectual property climate (IPC) to firms. Investment in R&D, which was below 2% of the turnover, started moving in the northward direction. In contrast, global pharmaceutical majors spent close to 12% of their turnover. For them, investing in R&D and innovation was the surest way to maintain a competitive edge in the marketplace. However, the contention is that innovation in isolation does not boost bottom lines. The issue is not of incremental or radical innovation - but to put in place a strategy to protect the innovation - without adequate protection (external or otherwise) the competitive edge atrophies.

Pedagogical Objectives:

Keywords :  Novartis, Pharmaceutical industry, Foreign direct investment (FDI), Glivec, Innovation, Research and development, Imatinib Mesylate, Intellectual Property Appellate Board, Evergreening, Monopoly, Exclusive marketing right, General Agreement on Tariffs and Trade - Trade-related aspects of intellectual property rights (GATT-TRIPS), Patent, New chemical entity, Dr RA Mashelkar

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