In 2013, the Supreme Court of India gave finality to the decision of Madras High Court by narrowly construing ‘efficacy’ under §3(d) of the Patent Act, 1970 as ‘therapeutic efficacy’. This paper comprehensively deliberates upon the impacts of ‘therapeutic efficacy’ in a law and economics frame- work. The focus lies on the patent breadth or scope and its link with such an interpretation, in light of the indigenous pharmaceutical industry’s dependence on incremental innovation. Finally, this paper highlights the crucial nature of State funding and its importance for the effectiveness and efficiency of this judgment. Such funding shall help to fill in the void created by the judgment and a successful indigenous pharmaceutical industry would be able to emerge out of the vicious circle of reverse engineering, generics and me-too drugs.