664-666R&D intensity is critical to the growth of hi-tech sectors like pharmaceuticals and information technology and is aimed at boosting innovation. In turn, innovation brings new products that could earn revenues to further boost R&D intensity1. Indian pharmaceutical industry earns nearly sixty percent of its revenues from exports and is a leader in global generics market with largest share of ANDA and DMF filings. Significant increase in patenting activity is also observed post India’s accession to TRIPS agreement in 1995 and subsequent introduction of Product Patent Regime in 20052. This study aims at establishing a causal relationship amongst R&D intensity, patents, regulatory filings and export intensity. Also, the impact of these variables on export intensity of Indian Pharmaceutical sector has been studied by fitting them into an econometric model

Banerji, A

Suri, F K

English

NOPR

Journal of Scientific & Industrial Research Vol. 78, October 2019, pp. 664-666       Does R&D Intensity and Innovative Activities drive Indian Pharmaceutical Exports?  A Banerji1* and F K Suri2 1Department of Management Studies, Maulana Azad National Institute of Technology, Bhopal, Madhya Pradesh 462003, India 2Regional Centre for Biotechnology, Faridabad, Haryana, 122016, India  Received 29 October 2018; revised 18 June 2019; accepted 24 July 2019  R&D intensity is critical to the growth of hi-tech sectors like pharmaceuticals and information technology and is aimed at boosting innovation. In turn, innovation brings new products that could earn revenues to further boost R&D intensity1. Indian pharmaceutical industry earns nearly sixty percent of its revenues from exports and is a leader in global generics market with largest share of ANDA and DMF filings. Significant increase in patenting activity is also observed post India’s accession to TRIPS agreement in 1995 and subsequent introduction of Product Patent Regime in 20052. This study aims at establishing a causal relationship amongst R&D intensity, patents, regulatory filings and export intensity. Also, the impact of these variables on export intensity of Indian Pharmaceutical sector has been studied by fitting them into an  econometric model.  Keywords: Technology Management, R&D intensity, Export intensity, Innovation and export intensity, patents, Indian Pharmaceutical Industry  Introduction The study uses real financial data for Indian pharmaceutical industry for period 2000-01 to 2013-14 as shown in table 1. The study period starts from 2000-01 as the R&D intensity of Indian pharmaceutical industry; patent data as well as regulatory filings were negligible prior to 2000-01. As the study takes into the regulatory filings, therefore the data up to 2013-14 has been taken into account as USFDA was reporting ANDA and DMF filings till 2013-14 and thereafter the reporting pattern changed to ANDA and DMF approvals. For this reason, the study period was selected as 2000-01 to 2013-14.The data for exports and R&D expenditure have been drawn from Center for Monitoring of Indian Economy (CMIE), Prowess Database. Data for ANDA and DMF filings (referred as regulatory filings) have been taken from annual reports of Department of Pharmaceuticals, Government of India& United States Food and Drug Administration (USFDA). Patent data has been extracted from World Intellectual Property Organization (WIPO) Statistics Database3. Eviews 8 was used for statistical and econometric analysis. All data points were made stationary by converting to natural log and then taking first difference. This study attempts at determining a causal relationship between variables namely; R&D intensity (RDI), pharmaceutical export intensity (PEI), regulatory filings (RF), and total patents granted (TP). Econometric analysis was performed using Granger causality to test two way causal relationships amongst the variables. This was followed by fitting the variables into Autoregressive distributed lag (ARDL) model.  Results and Discussion It was found that R&D intensity Granger causes export intensity. A two way causal relationship was found between regulatory filings and R&D intensity. Similarly, a two way causal relationship was observed amongst variables; total patents and regulatory filings. Also, total patents granted as well as regulatory filings were found to be Granger causing pharmaceutical export intensity as shown in table 2. The results of Granger causality tests can be explained with the fact that R&D expenditure is aimed at developing new products for domestic as well as overseas markets. Firms invest in R&D to boost their presences in regulated  markets  like  US  and  Europe  and that the  ————— *Author for Correspondence E-mail: amitbanerji123@gmail.com BANERJI & SURI: DOES R&D INTENSITY AND INNOVATIVE ACTIVITIES   665  Table 2 — Results of Econometric Analysis Pairwise Granger Causality Tests Sample: 1 14  Lags: 1        Null Hypothesis: Obs F-Statistic Prob.       DPEI does not Granger Cause DRDI  12  0.60300 0.4574  DRDI does not Granger Cause DPEI  3.75138 0.0847      DRF does not Granger Cause DRDI  12  20.0445 0.0015  DRDI does not Granger Cause DRF  78.3758 1.E-05      DTP does not Granger Cause DRDI  12  64.8069 2.E-05  DRDI does not Granger Cause DTP  469.740 4.E-09      DRF does not Granger Cause DPEI  12  3.89655 0.0798  DPEI does not Granger Cause DRF  0.93581 0.3586      DTP does not Granger Cause DPEI  12  3.90333 0.0796  DPEI does not Granger Cause DTP  0.81170 0.3911      DTP does not Granger Cause DRF  12  17.6064 0.0023  DRF does not Granger Cause DTP  12.5278 0.0063     ARDL Model Dependent Variable: PEI   Method: Least Squares   Sample (adjusted): 2 14   Included observations: 13 after adjustments       Variable Coefficient Std. Error t-Statistic Prob.  RDI 7.830368 2.846284 2.751085 0.0403 LNTP -0.129055 0.097836 -1.319097 0.2443 LNRF 0.249905 0.215931 1.157340 0.2994 C -1.387805 0.445791 -3.113127 0.0265 PEI(-1) 0.368086 0.191750 1.919616 0.1130 RDI(-1) -1.265347 3.769674 -0.335665 0.7508 LNTP(-1) -0.297353 0.096082 -3.094786 0.0270 LNRF(-1) 0.356776 0.120209 2.967952 0.0312      R-squared 0.936636 Mean dependent var 0.459647 Adjusted  R-squared 0.847926 S.D. dependent var 0.084393 S.E. of regression 0.032910 Akaike info criterion -3.714808 Sum squared resid 0.005415 Schwarz criterion -3.367147 Log likelihood 32.14625 Hannan-Quinn criter. -3.786268 F-statistic 10.55845 Durbin-Watson stat 1.579074 Prob (F-statistic) 0.009784         Source: Result of analysis using Eviews 8  ANDA and DMF approvals are one of the major R&D productivity indicators in India4, 5. ARDL model (Table 2) suggested that the current year R&D intensity had a positive and significant impact on pharmaceutical export intensity. Also, the lagged year regulatory filings had a positive and significant impact on export intensity of Indian pharmaceutical industry. Results of the ARDL model suggested that lagged year total patents granted to Indian Table 1 — Data Set: Pharmaceutical Exports, R&D Expenditure, Regulatory Filings and Patents Granted in Indian Pharmaceutical Industry during 2000-01 to 2013-14. 1 Regulatory Filings  (ANDAs & DMFs) Total Patents Pharma Export Intensity  (Exports/Total revenue) Pharma R&D Intensity  (R&D spend/Total Revenue) 2000-01 229 56 0.400023 0.019931 2001-02 255 99 0.477345 0.024177 2002-03 345 147 0.391371 0.027066 2003-04 413 246 0.38167 0.035952 2004-05 573 379 0.401192 0.046411 2005-06 624 382 0.404112 0.05069 2006-07 649 550 0.403725 0.047615 2007-08 762 513 0.398848 0.046945 2008-09 769 520 0.466846 0.048782 2009-10 836 497 0.435808 0.044427 2010-11 849 545 0.439821 0.03999 2011-12 897 496 0.528043 0.047597 2012-13 1005 635 0.653466 0.053569 2013-14 938 635 0.593169 0.048624 Source; United States-Federal Drug Administration (USFDA), CMIE, Prowess Database, Annual reports of Department of Pharmaceuticals-Government of India, WIPO IP Statistics Data Center  J SCI IND RES VOL 78 OCTOBER 2019   666 pharmaceutical industry had a significant but negative impact on export intensity. This seems to be merely a statistical artifact as patents filed through PCT route are aimed at securing innovations in overseas markets and shall have a positive impact on export intensity. This result does not corroborate with the finding of previous studies wherein patenting activity is positively affecting pharmaceutical exports 6. Total patents granted may not have a positive impact on exports over one year lag as patents are mainly a protection for an innovative product or process. It is then followed by further development and testing of the new product which may take 3-4 years time till it is approved by regulatory authorities for launch 7.   Conclusion It was found from the current study that Indian pharmaceutical exports were mainly driven by regulatory filings (ANDAs and DMFs) and not by total patents granted. It was observed that R&D efforts as well as R&D expenditure made by Indian pharmaceutical industry were focused at developing generics (due to patent expiries) for developed markets especially US and Europe. It is evident that fewer resources were committed towards innovative research resulting in fewer patents. This finding was validated from the fact that nearly sixty percent of the revenue of Indian pharmaceutical firms are from exports and India is has the largest share in generics market in the US8.   References 1 Briones PenalverA J, Antonio C Santos J, Bernal Conesa J A, & Santos M C, Innovation Management and Strategy,  J Sci Ind Res, 77 (2018), 437-441. 2 Thomas R, Narayanan K, Kathuriya V, Tyagi S, Mahajan V, & Nauriyal D.K, Innovations in Indian Drug and Pharmaceutical Industry: Have they impacted exports?  J Intellec Prop Rights, 19 (2014), 243-252.  3 WIPO IP Statistics Data Center, https://www3.wipo.int/ipstats/index.htm?tab=patent,(accessed on 02.04.2018). 4 13thAnnual Report 2016-17, Pharmaceutical Exports Promotion Council of India (Pharmexcil), https://pharmexcil.com/docs/Pxl13thAnnualReport2017.pdf., (accessed on 04.04.2018). 5 Suri F K, Banerji A, Patents, R&D Expenditure, Regulatory Filings and Exports in Indian Pharmaceutical Industry,  J Intellec Prop Rights, 22(1)(2017), 136-145. 6 Tyagi S, Nauriyal D K, Gulati R, Firm level R&D intensity: evidence from Indian drugs and pharmaceutical industry, Rev Man Sci,12(1) (2017), 167-202. 7 Dhar B & Gopalkumar K M, Effects of Product  Patents on Indian Pharmaceutical Industry, (2011), http://wtocentre.iift.ac.in/Papers/3.pdf (accessed on 07.02.2018). 8 Vaidya M, Garg S, Singh C, & Mahajan M M, Changing Dimensions of Drug Patents of Indian Pharmaceutical Industry, J Intellec Prop Rights,23 (2018), 111-118.  

Does R&D Intensity and Innovative Activities drive Indian Pharmaceutical Exports?

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Does R&D Intensity and Innovative Activities drive Indian Pharmaceutical Exports?

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