The $5 billion Indian drug industry has flourished for decades under a patent regime allowing drug companies to copy medicines patented abroad provided they used a different manufacturing process. As a result, medicines are sold in India at a fraction of the cost in the developed world.

But India has recently made key changes to its patent law to meet its commitments to the World Trade Organization on intellectual property rights.

The amendments cover several products including drugs, and are expected to be ratified by Parliament shortly.

The booming domestic pharmaceutical industry says the new rules offer a host of opportunities - and dismiss fears business will be hurt.

Drug companies say they will now be able to manufacture and export generic drugs that have patents which expire in a few years, generating billions of dollars. They also hope to turn their modern manufacturing plants into production centers for overseas pharmaceutical companies, or become suppliers of drug ingredients.

A consultant to India's drug industry, DG Shah, said the new patent protection also opens up the prospect of turning India into a global hub for pharmaceutical research and development using the country's cheap scientific talent. He said several Western companies have already entered into agreements with Indian businesses. "They (global drug companies) are also getting into strategic alliances with large Indian companies to do some contract research, and the Indian companies are also investing on their own. In addition, a number of global generic companies are setting up their product development centers in India," he said.

Multinational drug companies see India as a lucrative new market and hope they will now be able to introduce new drugs into the country, where an estimated 70 to 80 million people are now able to afford more expensive medicines.

But the Indian government is also allaying fears that millions of poor consumers will have to pay more for medicines, saying drugs patented before 1995 will not be covered by the new rules.

The Indian industry hopes this clause will make it possible for them to continue supplying cheap anti-retroviral AIDS medicines to other developing countries, particularly in Africa.

However, smaller drug makers that survived on copycat drugs may be hit hard, and many may have to shut down.