India’s drug industry saved the world once. Can it do it again?

The phone rang just before midnight.

It was early February in 2001 in Mumbai, and Yusuf Hamied, a seasoned chemist at the Indian multinational pharma company Cipla, was at a dinner party. He picked up the phone anyway. A New York Times reporter was on the line, calling to check a rumor: Was Hamied really offering HIV meds for $1 a day?

In 2001, AIDS — which develops when HIV goes untreated — killed around 3 million people, 70 percent of whom were in Africa. The main treatment, antiretroviral therapy, was remarkably effective but out of reach for most of the world, running about $10,000 to $15,000 a year per patient. Millions of people were dying because they couldn’t afford those prices.

The Times reporter’s rumor turned out to be true. Hamied’s company Cipla had just publicly offered the latest HIV treatment to the aid group Doctors Without Borders for only $350 a year — a 97 percent price cut over prevailing drugs. Almost overnight, a therapy once priced for rich countries was suddenly within reach for the countries hit hardest by AIDS.

“Dr. Hamied, your life will not be the same from tomorrow,” the reporter said, and hung up.

The next morning, the story of Hamied’s accomplishment was on the front page of the Times. The news ricocheted through aid agencies, health ministries, and the halls of Washington. The Cipla offer “changes everything,” Toby Kaspar, an official of Doctors Without Borders, said at the time.

Indian generics would soon become the backbone of the global HIV response. Within two years, the US launched PEPFAR, the President’s Emergency Plan for AIDS Relief, a massive $15 billion program to deliver HIV treatment to sub-Saharan Africa and beyond. In the last two decades, that single program has helped save more than 25 million lives.

That victory was only possible at that scale because of cheap Indian generic drugs, which helped PEPFAR save nearly $1 billion early on, according to a US Government Accountability Office report. The competition created by those generics also drove the cost of HIV drugs further down.

That dollar-a-day offer in 2001 felt like a miracle, but it wasn’t. It was the payoff of a pharma revolution that had been quietly building for decades. India didn’t just stumble into becoming the world’s pharmacy. It got there through a series of intentional and defiant choices.

Today, Indian generics dominate the world. By one estimate, roughly 60 percent of prescription tablets and capsules for the US market are now made in India. Across Africa and many Asian countries, the share is even higher. Major aid agencies like UNICEF and Global Fund source most of their HIV drugs and other essentials from Indian drugmakers. And generic competition has pushed the preferred HIV treatment in poor countries to under $45 a year.

But India’s dominance came at a cost.

Recently, contaminated cough syrups from India have been linked to the deaths of more than 140 children overseas. And dependence on the country’s manufacturers has become so great that when a single Indian factory making a critical cancer drug shut down in 2023, US hospitals were forced to ration chemotherapy, even turning to China for emergency imports.

For decades, there was an implicit bargain made with India. In exchange for a flood of affordable, lifesaving medicines — the same generics that turned HIV from a death sentence into a treatable disease — the world would tolerate a system built for the lowest possible price. Now, that bargain is breaking, and the pharmacy of the world is becoming a choke point.

And this is all unfolding just as the world is set to lean even harder on India. Demand for drugs that treat chronic conditions such as diabetes and heart disease is climbing. Patents on weight-loss blockbusters like Ozempic will start to expire over the next decade, opening a market that analysts say could reach around $100 billion a year, which would send even more volume to the cheapest, highest-capacity makers.

The question isn’t whether India can make the world’s drugs. It’s whether it can make them safely and reliably — and whether it can adapt to the needs of the future.

How India became the pharmacy of the world

India won independence from the United Kingdom in 1947, but its patent system remained stuck in the colonial era. Under old British rules, if a Western company invented a drug, it effectively owned the drug itself — the fundamental molecule — and no one else could make it.

India’s own governmental reports warned that these rules were choking off local manufacturing, yet they remained in place for decades. As a result, the country had to rely heavily on Western drugmakers for almost every essential medicine.

By 1966, newly elected Prime Minister Indira Gandhi saw an opportunity to change that. Her socialist government was building momentum, nationalizing banks and pushing a powerful campaign for “self-reliance.” India was creating its own public-sector drug companies. But patent hurdles stood in the way of innovation and self-sufficiency.

So in 1970, India rewrote the rules. The new Patents Act made a surprisingly simple but transformative change: it eliminated product patents for drugs and foods, allowing only process patents. A company could no longer own a drug outright — only its particular way of making it. If an Indian firm like Cipla could figure out a different way to make the same drug, it could legally sell it.

That meant that if an Indian drug company changed the manufacturing steps even slightly, it could claim a new process and legally sell the same drug. As Achal Prabhala, a public health activist who campaigns for access to medicines, puts it, “having no product patents was equivalent to having no patents.”

A new wave of firms, including Cipla, turned reverse-engineering into a craft and then an industry. India’s generics industry blossomed, though outside the country, almost nobody was paying attention. In dollar terms, the country was basically a rounding error in the global drugs market.

But then policy decisions made far from New Delhi supercharged India’s generic industry.

In 1984, the United States passed the Hatch-Waxman Act, which essentially created a fast lane for generic drug candidates. Instead of repeating years-long, wildly expensive clinical trials, generic makers could win approval by showing their version behaved the same way in the body as the brand-name drug. Suddenly, it became much easier and cheaper for generic drugs to enter the US market.

The second critical move came from Geneva. In 2001, The World Health Organization launched its medicines prequalification program to vet drugs for UN agencies and big funders. Indian manufacturers quickly met the program’s quality standards and, within a few years, made up a large share of HIV, TB, and malaria medicines on its approved lists.

By the early 2000s, Indian drug makers had become major exporters of low-cost generics to other developing countries and were starting to carve out a foothold in the US market.

India’s fight to keep its quirky patent system

Western pharmaceutical companies, media conglomerates, and tech giants saw India’s patent model as a direct threat. Beginning in the late 1970s, a small group of executives from Pfizer, IBM, and other US giants — including Warner Communications — lobbied Washington to rewrite the global trade rules on intellectual property. They pushed to shift the locus of enforcement out of a sleepy forum with almost no real power into the new World Trade Organization (WTO), where breaking the rules could trigger trade sanctions. And it worked.

The result was TRIPS — Trade-Related Aspects of Intellectual Property Rights — a global treaty that inextricably tied patents with trade, and essentially required member countries to accept the whole package of rules, including the patent ones. In practice, it was an all-or-nothing choice: join the system that governs nearly all world trade on TRIPS terms, or stand outside it. Critics accused rich countries like the United States and Japan of “pulling up the ladder” because they themselves had built key industries by copying foreign technology, only to now close that path off for everyone else.

India begrudgingly accepted the bargain, choosing to take a hit to its pharmaceutical sector in order to keep selling textiles and farm goods abroad and gain access to richer markets. Once India signed on, the WTO gave it a decade of grace period — until 2005 — to dismantle its old patent law and restore product patents.

But for India, it was, in Prabhala’s words, “losing a pawn to gain a knight.”

As the deadline approached, lawmakers began drafting a new patent law. Then, a political earthquake hit. India’s BJP-led ruling alliance party was unexpectedly voted out in 2004. The new government, led by the Congress party, depended on the support of a small bloc of communist parties that had spent decades railing against monopolies. “We told the government that we can support the legislation only if you accept our suggestions in national interest,” one communist leader said at the time.

The new government hammered out an improvised compromise: it would restore product patents as TRIPS required, but try to curb drug monopolies. In March 2005, with almost no debate, the government slipped in a last-minute change that set a higher bar than the US or Europe for what counted as meaningful innovation.

“Here’s the floor TRIPS sets — what if we dig it five feet deeper?” said Prabhala, who campaigned alongside activists for India’s 2005 patent law. “It’s still the floor, right?”

The new clause aimed squarely at one of pharma’s favorite tricks: evergreening, which is when companies stretch a monopoly by making minor tweaks to an old drug — a new coating, a different salt, a slow-release version. Under the new rule, you couldn’t get a fresh patent just for repackaging an old medicine. You had to show the new version actually worked better for patients.

The international pharma industry immediately fired back.

The first big test came in 2006 from Novartis, the Swiss drug maker behind the cancer drug Glivec. It wanted a new Indian patent not on the original molecule, but on a new form of the same drug. India’s patent office rejected it, citing the new law.

Novartis, in response, went to a state high court in southern India to dismantle the law itself, arguing that the Indian clause was unconstitutional and violated WTO rules. A win for Novartis would make it easier for minor patent tweaks to old drugs to delay generics — a real risk not only to Indian companies, but to the millions of people who depended on Indian-made drugs.

Then came a twist. Before a pivotal 2007 hearing, a government expert panel released a report hinting that India’s tougher patent rules might clash with TRIPS. For Novartis, it looked like useful ammunition, until activists combed through the text and noticed familiar language. Passages appeared to be lifted almost verbatim from a study funded by a pharma industry group that included Novartis.

The report was withdrawn, and Novartis lost its best talking point. The high court rejected the company’s challenge, and in 2013, India’s Supreme Court put an end to the case. India’s new law stood; Novartis’ patent did not.

David had beaten Goliath in court. But could he keep winning in the factories that now supplied the world?

India bent the rules without breaking them, and the world got cheap drugs because of it. But that bargain rested on an unwritten promise: that generic medicines would be cheap, yes, but that they’d also work. Today, that foundation is cracking.

For years, reporters and whistleblowers flagged Indian-made medicines in poorer countries as substandard or contaminated, but outside public-health circles, those warnings barely registered. When outsiders have raised the alarm, the government’s instinct has often been to suppress. When academics published studies finding substandard Indian drugs in Africa in 2014, for example, the government threatened to sue the researchers rather than act on their findings.

In 2022, two lethal outbreaks showed how contaminated drugs can slip through India’s safeguards. In the Gambia, pediatric acute kidney infection cases were tied to four Indian-made cough syrups; the WHO issued a global alert after labs found diethylene and ethylene glycol in the products, leading to the deaths of 141 children. A few months later, Uzbekistan reported child deaths linked to syrups from another Indian firm; a court later convicted 23 people over the episode. That same year, the WHO issued a global alert highlighting how shaky India’s drug oversight can be.

According to Dinesh Thakur, a public health activist and pharma whistleblower, and Prabhala, India’s drug industry covertly operates a two-track system: one set of factories built to impress foreign inspectors, and another for India and poorer markets. States collect licensing fees from manufacturers, so they have little appetite for shutting plants down. Even when bad actors are caught, the penalties are largely administrative — a 60-day suspension and then back to business. As a result, many manufacturers do just enough to scrape through inspections.

After the Gambia scandals, regulators ran nationwide inspections and told manufacturers to upgrade plants to WHO-level standards or shut them down. Some licenses have been cancelled, and a few owners arrested. But even the WHO says India still has “a long way to go,” pointing out that exports now face tougher checks than many drugs sold at home.

The response has so far been “piecemeal reforms, opaque and badly worded legislation, and the absence of both resources and the will to implement quality standards,” Thakur said. India still has no real national system for recalling bad drugs once they’ve gone out the door.

But even if India reforms its pharmaceutical system, more challenges are on the way.

The world’s disease map is changing. Climate change and new pandemics will demand vaccines and therapies that don’t exist yet. As more countries get richer and older, chronic conditions will be responsible for more deaths. And India has been largely missing from the global race to create new first-in-class medicines.

India’s generic boom was built on old-school chemistry: “small-molecule” pills. Think statins for cholesterol, HIV drugs, blood pressure tablets — medicines that, once you know the formula, a skilled chemist can copy and turn into a cheap pill. That’s the world India mastered. But the new frontier isn’t like that. It runs from weight-loss injections like Ozempic and Wegovy to cancer-treating antibodies and experimental gene and cell therapies — complex biologic drugs grown from living cells, not just chemicals mixed and pressed into a tablet.

It’s substantially more challenging to reverse-engineer those the way you would for a cholesterol pill. China has managed it, making biotech an explicit national priority and pouring public money into labs, research parks, and startups. Today, Chinese firms account for roughly 30 percent of the drug molecules that Big Pharma is now licensing from outside companies, including new cancer and autoimmune therapies.

A handful of Indian firms are making cheaper versions of insulin and cancer antibodies or signing licensing deals, but a majority of the industry is still geared to make cheap generics once a patent lifts. And India almost never invents the underlying drugs.

If the next breakthroughs are invented in Boston and Beijing, and India isn’t in that room, poorer countries may never see a cheap version at all. That’s because there’s nothing Indian factories can legally copy until someone else has done the hard, expensive science first.

Big Western drug makers typically spend around 20 percent of their sales on research and development, while Indian pharma companies are closer to 7 percent. India as a whole puts little over half a percent of its GDP into R&D, while China allocates more than four times that share. In 2024, Cosentyx, a drug from Novartis that treats psoriasis and arthritis, brought in more revenue than Sun Pharma, India’s biggest drug company, made across its entire global business.

Unless India finds a way, its “pharmacy of the world” model risks becoming a pharmacy of yesterday’s drugs, with the newest medicines reserved for those who can pay full price. On paper, India still has one of the most radical patent laws in the world — and it still has the potential to do the world a lot of good.

If India can fix its quality crisis and start investing in new science, the law it fought for could once again be used to push down prices on the next generation of drugs, the way it once did for HIV treatment. If it doesn’t, that hard-won law will stay mostly symbolic — and India will be remembered more for what it could have done for global health than for what it chose to do.