Pharma innovation in India: Global pharmaceutical giants in the United States, Europe, Japan, and China have long recognised that sustained leadership depends on research, not replication. They spend billions of dollars each year on clinical research, new drug discovery, and patent protection — activities that create durable competitive advantages. According to the World Intellectual Property Organisation, there were 18.6 million patents in force across 140 jurisdictions by the end of 2023. China alone held five million — more than any other nation.
India’s progress is visible but modest. The country filed about 64,487 patent applications in 2023, and for the first time, domestic filings accounted for more than half the total. Yet the scale of R&D investment remains small. India’s pharmaceutical sector spends roughly $3 billion on research and innovation annually — barely a fraction of the $50–60 billion invested in the United States or the $15–20 billion in China. The contrast reveals a persistent gap between India’s human capital and its ability to translate that potential into proprietary science.
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Generics strength, innovation deficit
India’s reputation as the “world’s pharmacy” is well earned. Its companies supply low-cost generics to markets across the world, often ensuring access to essential medicines in poorer countries. But this success has also created a structural trap. Generics compete almost entirely on price, leaving little room for profit once patents expire. In contrast, novel drugs—protected by intellectual property—yield far higher margins and longer product cycles.
The underlying imbalance is visible in corporate spending patterns. Most Indian firms allocate only 6–12% of revenue to research and development, while global innovators typically commit 15–20% or more. This limited investment constrains pharma innovation and leaves India dependent on formulation and contract manufacturing rather than genuine discovery. Only around 15% of India’s total patent filings relate to pharmaceuticals or medical technology, a telling indicator of where the industry’s priorities lie.
Barriers to clinical research and patents
Several structural barriers explain India’s pharma innovation shortfall. The first lies in the country’s underdeveloped clinical research ecosystem. Conducting advanced trials — from Phase I safety tests to Phase III efficacy studies — demands costly infrastructure, trained personnel, patient enrolment systems, and strict regulatory oversight. Many Indian companies prefer to focus on less risky activities such as contract manufacturing or producing off-patent formulations rather than undertaking original drug discovery. The result is a thinner pharma innovation pipeline and fewer home-grown drugs entering global markets.
A second challenge is institutional. Innovation flourishes where universities, research institutes, hospitals, and private firms collaborate seamlessly. In the United States, Germany, and China, governments have created well-funded translational research frameworks that connect academia with industry. India is only beginning to build such linkages. The Promotion of Research & Innovation in Pharma MedTech Sector, launched in 2023 with ₹5,000 crore, signals intent but remains small relative to the sector’s potential. Delays in regulatory approvals, fragmented oversight, and a risk-averse business culture continue to slow progress.
Finally, the ecosystem for intellectual property remains weak. Patent filings in India are rising, but their commercial quality and global coverage remain limited. Building globally recognised patents requires years of sustained funding, sophisticated legal strategy, and confidence in domestic IP enforcement—factors that many Indian firms still find daunting.
Building an pharma innovation-driven industry
India now faces a choice between consolidating its success as a low-cost manufacturer or aspiring to become a genuine pharma innovation hub. To do so, it must commit to a comprehensive transformation that blends policy reform, private investment, and scientific ambition.
The first step is to increase research spending substantially. India’s pharma companies need to move beyond incremental formulation work and devote larger budgets to discovering new molecules and biologics. Fiscal incentives—such as R&D tax credits, faster depreciation for research assets, and royalty relief on patented drugs—can make innovation more attractive to investors. Equally important is the creation of well-equipped centres of excellence in pharmaceutical and med-tech innovation. These hubs, linked to top universities and biotechnology parks, can provide infrastructure for early-stage research, bioinformatics, and clinical validation.
The second step is to strengthen India’s clinical-research base. The country has inherent advantages—diverse patient populations, skilled medical professionals, and lower operational costs—but lacks sufficient globally accredited trial sites. Expanding these, and ensuring compliance with international standards, can position India as a preferred location for multinational trials. Regulatory processes must become faster and more predictable without compromising ethics or data integrity.
A third pillar is the promotion of a stronger intellectual-property culture. Patent awareness, training, and financial support for filing global patents should be integral to both academic and industrial research. Universities and start-ups must be encouraged to commercialise discoveries through licensing and partnerships. The government’s role should be catalytic—offering protection, co-funding, and clear legal recourse for innovators.
Finally, the industry must embrace collaboration as a growth strategy. Partnerships among government, academia, and the private sector can bridge skill and funding gaps. Large Indian conglomerates and high-net-worth entrepreneurs need to view pharma innovation as a long-term national investment, not a speculative venture. Only such coordinated action can elevate Indian firms from being efficient producers to being credible global innovators.
Capturing the innovation premium
The economic case for this transition is compelling. Drug discovery and biotechnology innovation create high-value employment—scientists, clinicians, data analysts, and regulatory specialists—and generate intellectual property that yields recurring global revenue. As populations age and chronic diseases rise, the global demand for new therapeutics will surge. If India positions itself as a centre for innovation rather than imitation, it could capture a far greater share of this expanding market.
Innovation will also shift India’s growth model from low-margin manufacturing to high-value intellectual output. Royalty income, export of patented drugs, and technology licensing can strengthen the current account and expand the knowledge economy. At the same time, a more research-intensive pharmaceutical base will reinforce the country’s scientific ecosystem, attract foreign direct investment, and enhance national credibility in global health diplomacy.
India’s journey from generics to genuine innovation will not be easy. It will demand patience, capital, and institutional reform. But the rewards—higher profitability, technological leadership, and sustainable growth—make it an imperative rather than a choice. The coming decade will decide whether India remains the world’s pharmacy or emerges as the world’s innovator in pharma.