The problems and opportunities facing midsize pharmaceutical companies in the developed world are similar to those that will soon face India’s leading drug makers. Historically, these Indian companies have concentrated on reverse engineering patented drugs and selling them locally for 8 to 15 percent of what they cost elsewhere. This strategy is unsustainable, for impending regulatory and demographic changes are making the Indian market more similar to global markets, thus forcing Indian companies to compete against global ones according to global rules. Indian companies must either identify arenas in which they can compete successfully with the large multinationals or develop new models of collaboration.

Significant changes are expected in the Indian market over the next five years. First, in signing the General Agreement on Tariffs and Trade (GATT), the Indian government agreed to adopt worldwide patent standards by 2005. Despite industry expectations, the impact on prices is likely to be limited, since only drugs patented in the West after January 1995 will receive protection, and they are likely to constitute less than 10 percent of the Indian pharmaceutical market by 2010. The real impact of India’s decision to sign the GATT will be the stagnant sales facing Indian drug...