DECLARATION
I, VIPRA RATHORE, a student of Institute of Management Education, Sahibabad
hereby declare that the Dissertation titled “A STUDY ON THE EFFECT OF
PATENT ON INDIAN PHARMACEUTICAL INDUSTRY” has been completed
by me under the guidance of Prof. TARUNA GUTAM as part of the course
curriculum for the partial fulfillment of the PGDM course for the academic session
2009-11. I further declare that the contents of the report are authentic and specific
references have been quoted with the secondary data for better cross check and
verification. It is also declared that this work is original and has not been published or
presented earlier.
VIPRA RATHORE
PGDM (2009-11)
IME, SAHIBABAD
CERTIFICATE OF COMPLETION
DEPARTMNET OF MANAGEMENT
INSTITUTE OF MANAGEMENT EDUCAION,
SAHIBABAD GHAZIABAD
This is to certify that VIPRA RATHORE, a student of Institute of Management
Education, Sahibabad has successfully completed the Dissertation as partial
fulfillment of the PGDM course in the academic year 2009-11 . The title of the
Dissertation was “A STUDY ON THE EFFECT OF PATENT ON INDIAN
PHARMA INDUSTRIES”. This project was completed under the guidance of Prof.
TARUNA GUTAM Faculty, IME.
Date:
Signature
Place:
ACKNOWLEDGEMENT
1
At the outset, I would like to thank my mentor Dr. TARUNA GUTAM, (Head of
placement cell IME, Institute of Management Education, Sahibabad), whose give
guidelines to complete the project.
It is my second time to give my report on research that is done by me. Here was very
typical confusing work of it. The research work requires co-operation of many people
and this work is no exception. It is difficult to thank individually all the person who
patronized this work. The researcher has asked for favors, borrowed ideas, expression
and facts from so many that it would require one volume to give credit to all. So, the
researcher wants to thanks all the patrons of this report.
I am very thankful to all the faculty members, the whole college staff for providing
me with necessary facilities and support, essential for bringing out this work in a short
time.
VIPRA RATHORE
PGDM, IME
AUTHORISATION
This is to certify that the project report entitled “A STUDY ON THE EFFECT OF PATENT
ON INDIAN PHARMA INDUSTRIES” done by the VIPRA RATHORE roll no. 9117, is an
authentic work carried out by her at ICICI prudential life insurance, under my guidance. The
2
report is submitted as partial fulfillment of the requirement of PGDM program at IME. The
matter embodied in this project work has not been submitted earlier for the award of any degree
or diploma to the best of my knowledge and belief.
Dr.
TARUNA GUTAM
HOD- IME
EXECUTIVE SUMMARY
As a part of our study curriculum it is necessary to conduct a Dissertation report. It
provides us an opportunity to understand the particular topic in depth and which leads
to through to that topic. My topic for the Dissertation is titled as “A Study on the
effect of patent on Indian Pharmaceutical Industry”.
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To start with we will give brief information regarding Pharma sector then moving to
the main topic we will explain what is topic is all about.
With respect to the effect of Patent on Indian pharmaceutical Industry oriented. There
are certain theories narrated as operant conditioning and projective theory. Based on
secondary source certain theoretical aspects are also included as a part of study.
At last conclusion of report, findings and suggestions was given based on study of
secondary source as well as primary research
SL. NO. PARTICULARS PAGE NO:
1. INTRODUCTION
(1.1) Pharmaceutical Industry
(1.2) Indian Market Prospect
(1.3) Top 10 Pharmaceutical industries
2. RESEARCH METHODOLOGY
(3.1) Research Objective
(3.2) Research Method
(3.3) Methods of Data Collection
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3. Descriptive work of my Sub-Topics
(3.1) Introduction of patent
(3.2) History of patent law
(3.3) TRIPS
(3.4) Provision relating specifically to patents
4. DATA ANALYSIS AND INTERPRETATION
(4.1) Patent and Indian pharmaceutical Industry
(4.2) Classification of pharmaceutical Industry
(4.3) Generic drug
(4.4) challenging Patents
5. THE IMPACT OF WTO ON PHARMA PATENTS
6. PATENT & FUTURE OF THE INDIAN PHARMA INDUSTRY
7. THE GLEEVEE CASE
8. BIBILIOGRAPHY
CHAPTER-FIRST
INTRODUCTION
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Pharmaceutical Industry
Pharma refers to two types of products mainly i.e. Medicines and Surgical
instruments. Typically a consumer (patient) buy these product when they are not well.
The sector course a wide range of products such as analgesic, anti-bacterial, insulin,
bactericidal etc.
INDIAN MARKET PERSPECTIVE (PHARMA)
The Indian Pharmaceutical Industry today is in the front rank of India’s science-
based industries with wide ranging capabilities in the complex field of drug
manufacture and technology. A highly organized sector, the Indian Pharma Industry is
estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks
very high in the third world, in terms of technology, quality and range of medicines
manufactured. From simple headache pills to sophisticated antibiotics and complex
cardiac compounds, almost every type of medicine is now made indigenously.
The Indian Pharmaceutical sector is highly fragmented with more than 20,000
registered units. It has expanded drastically in the last two decades. The leading 250
pharmaceutical companies control 70% of the market with market leader holding
nearly 7% of the market share. It is an extremely fragmented market with severe price
competition and government price control.
The pharmaceutical industry in India meets around 70% of the country's demand for
bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets,
capsules, orals and injectibles. There are about 250 large units and about 8000 Small
Scale Units, which form the core of the pharmaceutical industry in India (including 5
Central Public Sector Units). These units produce the complete range of
pharmaceutical formulations, i.e., medicines ready for consumption by patients and
about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production
of pharmaceutical formulations.
Following the de-licensing of the pharmaceutical industry, industrial licensing for
most of the drugs and pharmaceutical products has been done away with.
Manufacturers are free to produce any drug duly approved by the Drug Control
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Authority. Technologically strong and totally self-reliant, the pharmaceutical industry
in India has low costs of production, low R&D costs, innovative scientific manpower,
strength of national laboratories and an increasing balance of trade. The
Pharmaceutical Industry, with its rich scientific talents and research capabilities,
supported by Intellectual Property Protection regime is well set to take on the
international market.
Top 10 Pharmaceutical Companies in India
1. Ranbaxy
With a 2007 turnover of Rs 4,198.96 crore (Rs 41.989 billion) by sales, Ranbaxy
is the largest pharmaceutical company in India.
2. Dr Reddy's Laboratories
With the turnover of Rs 4,162.25 crore (Rs 41.622 billion), Dr Reddy's
Laboratories is the second largest pharmaceutical company in India.
3. Cipla
With the revenue of Rs 3,763.72 crore (Rs 37.637 billion) Cipla is the third largest
pharmaceutical company in India.
4. Sun Pharma Industries
Sun Pharma Industries is the fourth largest pharma company in India with the total
revenue of Rs 2,463.59 crore (Rs 24.635 billion) and led by Dilip Sanghvi.
5. Lupin Labs
Lupin Labs has the total revenue of Rs 2,215.52 crore (Rs 22.155 billion
6. Aurobindo Pharma
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Sales revenues stood at Rs 2,080.19 crore (Rs 20.801 billion) makes it the sixth
largest pharmaceutical company in India.
7. GlaxoSmithKline Pharma (GSK)
GSK is the seventh largest pharma company with the total sales revenue of Rs
1,773.41 crore (Rs 17.734 billion)
8. Cadila Healthcare
Eight largest company has the total sale revenue at Rs 1,613.00 crore (Rs 16.13
billion)
9. Aventis Pharma
Aventis Pharma has the revenue of Rs 983.80 crore (Rs 9.838 billion) and the
ninth largest pharmaceutical company in India.
10. Ipca Laboratories
Revenue of Rs 980.44 crore (Rs 9.804 billion) makes Ipca India's 10th largest
pharma firm by sales.
RESEARCH METHODOLOGY
Research Objectives:
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1. To study the effect of patent on Indian pharmaceutical Industries.
2. To study the Implications of patent on Pharmaceutical Industry.
3. To study the classification of pharmaceutical industry.
Data collection Method:
(a) Secondary Data Collection method:
(b) Reference books.
(c) Internet.
(d) News paper
(e) Articles
CHAPTER – FIRST
Meaning of Patent
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A patent is a set of exclusive rights granted by a state (national government) to an
inventor or their assignee for a limited period of time in exchange for a public
disclosure of an invention.
PATENTS
The basic obligation in the area of patents is that, inventions in all fields of technology
whether products or processes shall be patentable if they meet the three tests of being
novel, involving an inventive step and being capable of industrial application. In
addition to the general security exception, which applies to the entire TRIPS
Agreement, specific exclusions are permissible from the scope of patentability. These
are available in the areas of inventions whose commercial exploitation is to be
prevented to protect public order or morality, human, animal plant life or health or to
avoid serious prejudice to the environment. In addition, we can exclude from
patentability diagnostic, therapeutic and surgical methods for the treatment of human
and animals, plants and animals other than microorganisms, and essentially biological
process for the production of plants and animals other than non-biological and micro
biological processes.
To meet our TRIPS obligations as on 1.1.2000, the Patents (Second Amendment) Bill,
1999 has been introduced in the Parliament in December 1999 and is before the Joint
Committee of the Houses.
In respect of plant varieties, there is an obligation to provide for protection either by
patents or by an effective sui generis system or by any combination thereof. The
Agreement does not spell out the elements of an effective sui generis system and it is
left to each Government to determine the elements, which could be deemed to be
providing effective protection. A decision has been taken to put in place a sui generis
system as it is perceived to be in our national interest. A Bill in this regard is before
the Joint Committee of the Houses of the Parliament.
INDIAN PATENT LAW AND TRIPS
Patent is a monopoly right granted by the State to an inventor for a limited period, in
respect of the invention, to the exclusion of all others. A system of patents serves
many useful purposes. If the invention is commercially utilized, the patent ensures
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just reward in terms of money and recognition for the inventor, for all the time and
effort, knowledge and skills, money and other resources invested to come up with the
invention. For the society, commercial exploitation of an invention means newer and
better products, higher productivity, and more efficient means of production. The
objective of granting the patent is to ensure that it is worked (utilized) in the country;
and it is not meant to block production or further research and development. A patent
system encourages technological innovation and dissemination of technology. This in
turn stimulates growth and helps the spread of prosperity and better utilization of
resources. In an age when technology and knowledge are the greatest generators of
wealth, the number of patents filed and granted nationally and internationally is a
good indicator of the health of science and technology in a country. Patent is granted
by a State and hence has territorial applicability. That is, it is valid only in the
country, which grants the patent. There is no mechanism to obtain a global patent and
you have to apply separately in all the countries where you want the invention to be
protected.
HISTORY OF PATENT LAW
Post independence, a committee headed by Dr Bakshi Tek Chand was set up to
examine the patent system prevailing under the Patents and Designs Act 1911, which
submitted its report on 30th April 1950. The report observed that — "The Indian
Patents System has failed in its main purpose, namely, to stimulate inventions among
Indians and to encourage the development and exploitation of new inventions for
industrial purposes in the country so as to secure the benefits thereof to the largest
section of the public.”
In 1957, Govt. of India appointed Justice N. Rajagopala Ayyangar examines and
review the Patent law in India who submitted his report September 1959
recommending the retention of Patent System despite shortcomings. The Patent Bill,
1965 based mainly on his recommendations incorporating a few changes, in particular
relating to Patents for food, drug, medicines, was introduced in the lower house of
Parliament on 21st September, 1965. The bill was passed by the Parliament and the
Patents Act 1970 came into force on 20th April 1972 along with Patent Rules 1972.
This law was suited changed political situation and economic needs for providing
impetus technological development by promoting inventive activities in the country.
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Under the new Act, a section 5 was introduced that stated that food, medicines, drugs
etc will be granted only process patents. While there will be both process and product
patents in the other fields of technology, there will only be process patents for
inventions in the fields of drugs, medicines, food, fertilizers and chemicals. The result
of implementation of Section 5 was to ensure the absence of product patents on drugs
and medicines; which meant every new drug patented elsewhere could be legitimately
reverse engineered and developed in India by way of any process that was not
patented. The impact on the Indian pharma scene and the health sector was immediate
and significant. It resulted in the presence of a number of pharmaceutical companies
that could quickly develop any drug new or old by every process that had not been
patented. Since the drugs were not on patent, these could be made available in
markets at very reasonable prices.
TRIPS- A Major Step Forward
The General Agreement for Tariffs and Trade (GATT) was set up in 1948 to deal with
the multilateral trade issues. The latest round of GATT negotiations, the Uruguay
Round was finally concluded in April 1994, and led to establishment of World Trade
Organization (WTO), which became operational on 1 January 1995. The agreement
on Trade Related Aspects of Intellectual Property Rights (TRIPS) was adopted as an
integral part of the Final Act of the Uruguay Round, so that all the countries which
become members of WTO must accept the provisions of the TRIP’s as a part of deal.
The TRIP’s agreement covers a whole range of intellectual property issues including
patents, trademarks, geographical indications, industrial designs, integrated circuits,
copyright and trade secret protection etc.
PROVISIONS RELATING SPECIFICALLY TO PATENTS
Articles 27-34 of TRIP’s require WTO member states to introduce strong patent
protection, the most important elements of which are:
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Patents to be available under essentially the same criteria of patentability as in the
European Patent Convention (EPC) for all fields of technology, including product
patents for pharmaceuticals (Article 27).
Patents rights to be without discrimination as to whether products are locally made
or imported (Article 27).
Provisions defining what constitutes infringements: this includes importation of a
patented product (Article 28.1(a)) and using, selling or importing the direct
product of a patented process (Article 28).
Compulsory licenses to be allowed only under strict conditions (Article 31).
Patent term to be at least 20 years from filing date (Article 33). According to the
Transitional provisions (Article 70.2) this should also apply to patents which are
already granted.
Reversal of onus of proof for process patents (Article 34).
These differences in patent systems led to disputes in the GATT negotiations on the
inclusion of IPRs in the WTO. The type of patent system that India established was
clearly against the global IP regime promoted by the US. The main objection of the
US is to the provision in India's patent law that allows for process but not product
patents in the area of food, drug or medicine. The United States terms the activities of
India to find alternative processes as “piracy”. According to the US, Indian firms are
copying technology developed by advanced nations. This is leading to large-scale
losses for the US. The Pharmaceutical industry in the US has been especially vocal on
this issue. Pharma, the association that represents US based pharmaceutical
companies’ points out, “Based on the refusal of the Government to provide
pharmaceutical patent protection, India has become a heaven for bulk pharmaceutical
manufacturers who pirate the intellectual property of the world’s research- based
pharmaceutical industry.”
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India is a signatory to the TRIPS Agreement hence it modified its patents law in
conformity with TRIPS Agreement. India was put under the contractual obligation to
amend its patents act in compliance with the provisions of TRIPS. India had to meet
the first set of requirements on 1- 1-1995. This was to give a pipeline protection till
the country starts giving product patent.
It came to force on 26th March 1999 retrospective from 1-1-1995. It lays down the
provisions for filing of application for product patent in the field of drugs or
medicines with effect from 01.01.1995 and grant of Exclusive Marketing Rights on
those products although the domestic industry in India began to mobilize to counter
India’s policy shift in on IPRs. Pharmaceutical companies and other interests were
totally against changing patent laws.
India amended its Patents Act again in 2002 to meet with the second set of obligations
(Term of Patent etc.), which had to be effected from 1-1-2000. This amendment,
which provides for 20 years term for the patent, Reversal of burden of proof etc. came
into force on 20th May, 2003.
The Third Amendment of the Patents Act 1970, by way of the Patents (Amendment)
Ordinance 2004 came into force on 1st January, 2005 incorporating the provisions for
granting product patent in all fields of Technology including chemicals, food, drugs &
agrochemicals and this Ordinance is replaced by the Patents (Amendment) Act 2005
which is in force now having effect 1.1.2005.
CHAPTER THREE
PATENTS AND INDIAN PHARMACEUTICAL INDUSTRY
(COMPETITION ISSUES)
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INDIAN PHARMACEUTICAL INDUSTRY- AN INSIGHT
The Indian pharmaceutical industry is a successful, high-technology-based industry
that has witnessed consistent growth over the past three decades. Indian
Pharmaceutical Industry has an important role in promoting public health. The net
worth of the industry is about 8 Billion Dollars with a growth rate of 8-9% PA. It is
4th in the world in terms of volume drug output and exports to nearly 212 countries.
The growth of an industry are highly dependent on the regulatory environment. India
had a product patent regime for all inventions under the Patents and Designs Act
1911. However, in 1970, the government introduced the new Patents Act, which
excluded pharmaceuticals and agrochemical products from eligibility for patents. This
exclusion was introduced to break away India’s dependence on imports for bulk drugs
and formulations and provide for development of a self-reliant indigenous
pharmaceutical industry and the same helped in-
Reduction in the manufacturing costs in terms of license fee.
Reduction in the costs involved in R&D.
Diffusion of technology and knowledge through reverse engineering.
The lack of protection for product patents in pharmaceuticals and agrochemicals had a
significant impact on the Indian pharmaceutical industry and resulted in the
development of considerable expertise in reverse engineering of drugs that are
patentable as products throughout the industrialized world but unprotectable in India.
As a result of this, the Indian pharmaceutical industry grew rapidly by developing
cheaper versions of a number of drugs patented for the domestic market and
eventually moved aggressively into the international market with generic.
Drugs once the international patents expired. In addition, the Patents Act provides a
number of safeguards to prevent abuse of patent rights and provide better access to
drugs. The Indian Patents (Amendment) Act, 2005 introduced product Patents in India
and marked the beginning of a new patent regime aimed at protecting the Intellectual
property rights of patent holders. The Act was in fulfillment of India’s Commitment
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to World Trade Organization (WTO) on matters relating to Agreement on Trade
Related Aspects of Intellectual Property Rights (TRIPS Agreement).
CLASSIFICATION OF PHARMACEUTICAL INDUSTRY
The global pharmaceutical industry structure can be divided into two:
• Bulk drugs (20%) The bulk drug segment of the market has increased in the past
decade at around 20% annual growth rate.
•Formulations (80%) Production of formulations has increased by around 15%
annually.
The Indian Pharmaceutical Industry among top five producers of bulk drugs in the
world. The largest firms account for the majority of the R& D investment in the
industry and hold the majority of the patents. A small number of multinational
enterprises (MNEs) dominate the global pharmaceutical industry, top twenty-five
MNEs having accounted for 64.5 percent of the world (2003) Firms can be either in
production of bulk drugs or formulations or may manufacture both. Firms in to
formulations may be further classified into innovating firms and non- innovating
firms. However, R&D is insignificant when compared to MNEs. There are about
8174 bulk drug manufacturing units and 2389 formulations units spread across India.
Total: 10563 units.
Anticompetitive Practices in Pharmaceutical Industry & Competition Act 2002
The pharmaceutical industry in India is gearing up to face new challenges. The
product patent regime is no longer the challenge - it is a reality that the Indian pharma
industry has accepted.
The new set of challenges stem from the deeper implications of the imminent product
patent regime. With the exception of a few, most Indian pharma companies are
unfamiliar with the nuances of complex patent prosecution strategies. The research-
based pharmaceutical companies, on the other hand, have firsthand knowledge of
successfully designing and implementing, sophisticated patent prosecution
strategies.27 Therefore, the first hurdle for the Indian pharma industry is unevenness
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in the domain knowledge on patents. The Generic Competition is also an important
issue where Brand-name drug companies have used a number of strategies to prevent
generic competition. Let take a look over on some of issues and Anti- Competitive
practices involved in it.
Generic Drugs
A generic drug (generic drugs, short: generics) is a drug which is produced and
distributed without patent protection. The generic drug may still have a patent on the
formulation but not on the active ingredient. A generic must contain the same active
ingredients as the original formulation. According to the U.S. Food and Drug
Administration (FDA), generic drugs `are identical or within an acceptable
bioequivalent range to the brand name counterpart with respect to pharmacokinetic
and pharmacodynamic properties. By extension, therefore, generics are considered
identical in dose, strength, route of administration, safety, efficacy, and intended use.
In most cases, generic products are available once the patent protections afforded to
the original developer have expired. When generic products become available, the
market competition often leads to substantially lower prices for both the original
brand name product and the generic forms. The time it takes a generic drug to appear
on the market varies from country to country.
Economics
Generic drugs can save patients and insurance companies substantial costs. The
principal reason for the relatively low price of generic medicines is that competition
increases among producers when drugs no longer are protected by patents. Companies
incur fewer costs in creating the generic drug, and are therefore able to maintain
profitability at a lower cost to consumers. The costs of these generic drugs are so low
that many developing countries can easily afford them. For example, Thailand has
imported millions of doses of a generic version of the blood-thinning drug Plavix
(used to help prevent heart attacks), at a cost of 3 US cents per dose from India, the
leading manufacturer of generic drugs.29 Generic manufacturers do not incur the cost
of drug discovery, and instead are able to reverse engineer known drug compounds to
allow them to manufacture bioequivalent versions.
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Generic manufacturers also do not bear the burden of proving the safety and efficacy
of the drugs through clinical trials, since these trials have already been conducted by
the brand name company.
Generic drug companies may also receive the benefit of the previous marketing
efforts of the brand-name drug company, including media advertising, presentations
by drug representatives, and distribution of free samples. Many of the drugs
introduced by generic manufacturers have already been on the market for a decade or
more, and may already be well-known to patients and providers (although often under
their branded name). For as long as a drug patent lasts, a brand name company enjoys
a period of “market exclusivity” or monopoly, in which the company is able to set the
price of the drug at a level which maximizes profitability. This price often greatly
exceeds the production costs of the drug, which can enable the drug company to make
a significant profit on their investment in research and development, thus enabling
them to fund the research and development of new medicines which most generic
companies cannot afford to do. The advantage of generic drugs to consumers comes
in the introduction of competition, which prevents any single company from dictating
the overall market price of the drug. Competition is also seen between generic and
name-brand drugs with similar therapeutic uses when physicians or health plans adopt
policies of preferentially prescribing generic drugs as in step therapy. With multiple
firms producing the generic version of a drug the profit-maximizing price generally
falls to the ongoing cost of producing the drug, which is usually much lower than the
monopoly price.
When can a generic drug be produced?
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When a pharmaceutical company first markets a drug, it is usually under a patent that
allows only the pharmaceutical company that developed the drug to sell it. Generic
drugs can be legally produced for drugs where:
1) The patent has expired,
2) The generic company certifies the brand company's patents are either invalid,
unenforceable or will not be infringed,
3) For drugs which have never held patents, or
4) In countries where a patent(s) is/are not in force.
The expiration of a patent removes the monopoly of the patent holder on drug sales
licensing. Patent lifetime differs from country to country, and typically there is no
way to renew a patent after it expires. A new version of the drug with significant
changes to the compound could be patented, but this requires new clinical trials. In
addition, a patent on a changed compound does not prevent sales of the generic
versions of the original drug unless regulators take the original drug off the market.
This allows the company to recoup the cost of developing that particular drug. After
the patent on a drug expires, any pharmaceutical company can manufacture and sell
that drug. Since the drug has already been tested and approved, the cost of simply
manufacturing the drug will be a fraction of the original cost of testing and developing
that particular drug.
Challenging patents
Brand-name drug companies have used a number of strategies to extend the period of
market exclusivity on their drugs, and prevent generic competition. This may involve
aggressive litigation to preserve or extend patent protection on their medicines, a
process referred to by critics as “evergreening”. Patents are typically issued on novel
pharmacological compounds quite early in the drug development process, at which
time the ‘clock’ to patent expiration begins ticking. Later in the process, drug
companies may seek new patents on the production of specific forms of these
compounds, such as single enantiomers of drugs which can exist in both “lefthanded”
and “right-handed” forms, different inactive components in a drug salt, or a specific
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hydrate form of the drug salt. If granted, these patents ‘reset the clock’ on patent
expiration. These sorts of patents may later be targeted for invalidation by generic
drug manufacturers. Large pharmaceutical companies often spend millions of dollars
protecting their patents from generic competition. Apart from litigation, companies
use other methods such as reformulation or licensing a subsidiary (or another
company) to sell generics under the original patent. Generics sold under the
exclusivity period as they fall under the patent holder's original drug application.
OBJECTIVES:
The main objectives of this policy are:-
a. Ensuring abundant availability at reasonable prices within the country of good
quality essential pharmaceuticals of mass consumption.
b. Strengthening the indigenous capability for cost effective quality production and
exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical
sector.
c. Strengthening the system of quality control over drug and pharmaceutical
production and distribution to make quality an essential attribute of the Indian
pharmaceutical industry and promoting rational use of pharmaceuticals.
d. Encouraging R&D in the pharmaceutical sector in a manner compatible with the
country’s needs and with particular focus on diseases endemic or relevant to India
by creating an environment conducive to channelising a higher level of investment
into R&D in pharmaceuticals in India.
e. Creating an incentive framework for the pharmaceutical industry which promotes
new investment into pharmaceutical industry and encourages the introduction of
new technologies and new drugs.
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THE IMPACT
OF THE WORLD TRADE ORGANISATION ON
PHARMACEUTICAL PATENTS
The establishment of the World Trade Organization (WTO) has led to a tremendous
paradigm shift in world trade. The agreement on Trade-Related (Aspects of)
Intellectual Property Rights (TRIPS) was negotiated during the Uruguay round trade
negotiations of the General Agreement on Tariffs and Trade (GATT) and “one of the
primary reasons for incorporating intellectual property issues into the GATT
framework was the pharmaceutical industry”. India signed the GATT on 15 April
1994, thereby making it mandatory to comply with the requirements of GATT,
including the agreement on TRIPS. India is thereby required to meet the minimum
standards under the TRIPS Agreement in relation to patents and the pharmaceutical
industry. India’s patent legislation must now include provisions for availability of
patents for both pharmaceutical products and processes inventions. Patents are to be
granted for a minimum term of 20 years to any invention of a pharmaceutical product
or process that fulfils established criteria. Compulsory licence provisions under Indian
law will be required to be limited and conditional to comply with the TRIPS
Agreement, and the government will grant such licences only on the merit of each
case after giving the patent holder an opportunity to be heard. In addition, there will
be no discrimination between imported and domestic products in the case of process
patents, and the burden of proof will rest with the party that infringes. India has
decided to avail itself of the full transition period for developing countries and has
until January 2005 to extend patent protection to pharmaceutical products. In keeping
with the TRIPS commitments, India has started on a process of amending the Patents
Act by providing exclusive marketing rights (EMRs) and creating a mailbox system
for patent applications for a period of five years or until the patent is granted or
rejected, whichever is earlier.
This provision was introduced in the Patents (Amendment) Act 1999, which grants
the inventors what is known as “pipeline protection”. If the applicant has already filed
an application for his or her invention in any convention country and a patent or EMR
has been granted in that country on or after 1 January 1995, the applicant would be
Eligible to file for patent to pharmaceutical and agrochemical products in India. These
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patent applications will be kept pending. When India changes its patent law as per
WTO recommendations, the pending patent application will be eligible for product
patent. Until such patent is granted or rejected or for a period of five years (whichever
is less), the applicant will be granted EMRs in India if the application is found
eligible. The amended Patents Act also provides for compulsory license for the EMR
on the same lines as patents and also omits a provision that prohibited Indian
inventors the product patent regime. Some of the existing pharmaceutical companies
believe that product patents will pave the way for innovation in India, while others
hold the view that the high cost of R&D will stifle the growth of the Indian
pharmaceutical Industry.
With a regulatory system focused only on process patents, helped to establish the
foundation of a strong and highly competitive domestic pharmaceutical industry
which in the grip of a rigid price control framework transformed into a world supplier
of bulk drugs and medicines at affordable prices to common man in India and the
developing world. Introduction of product patents will, however, mark the end of a
golden age for IPI (Indian Pharmaceutical Industry). The new regulations will reshape
the landscape of IPI forcing significant changes and divide within the industry. A look
into organization of pharmaceutical producers of India (OPPI) directory shows only
300 units out of 10,000 registered companies are in the organized sector. While
process patent helped to flourish IPI into a world-class generics industry, product
patent regime will filter the best from the pack and would be favorable to players with
built-in scientific and technical resources. The impact of the new regulations will not
deter the Indian pharma majors as they are already doing roaring business in the very
countries where these patent laws are strictly in force. Export markets increasingly
drive IPI: in a turnover of US$5 billion, exports constitute $3.2 billion and the
industry is poised to grow to $25 billion by 2010. The share of IPI in world
pharmaceutical market is 1.0% (ranks 13th) in value and 8% (ranks 4th) in volume
terms. The global market for generic drugs is estimated at $27 billion (2001) and the
expiry of patents on drugs will be worth $80 billion (2005) offers a huge opportunity
to IPI. India today has the largest number of US Food & Drug Administration (FDA)
approved drug manufacturing facilities outside the US. In addition, Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain, Italy,
China and Israel put together. DMF has to be approved by FDA for a drug to enter the
22
US market. Research & Development (R&D) is a key to the strength of
pharmaceutical industry especially in the product patent period. The global
pharmaceutical industry spent $30.4 billion (2001) on R&D. The R&D expenditure
(as a percentage of turnover) by the IPI is low (1.9%) when compared global giants
(1016%). With transition into the new regime many Indian companies are mobilizing
their resources war chest with an increase in their R&D budget. Government of India
(GOI) encouraged the R&D in pharmaceutical companies by extending 10 year tax
holiday to this sector. Besides, planning commission has earmarked $34 million
towards drug industry R&D promotion fund for the tenth plan. FDI in India was low
in prior Product Patent era. Why? Bringing a new drug into the market costs a
company an average of about $800 to $900 million. Some estimates show that patient
recruitment and medical personnel account for nearly 70 per cent of the clinical costs
that are required to bring a drug to market. The less expensive means to raise research
productivity is outsourcing research to low cost havens such as India and China. The
global pharmaceutical outsourcing market stands at $10 billion (2004). Pharma
multinationals have maintained a low-key presence in Indian market due to absence of
product patents and rigid price controls. Pharmaceutical industry did not receive
significant foreign direct investment (FDI). From August 1991 to December 1998 this
industry accounted for a meager 0.44% of the total FDI. Introduction of product
patents will see multinationals strengthening their presence in the country. The second
largest population in the world, a growing economy and rising income levels makes
Indian market difficult to ignore. Global companies would be reluctant to invest in a
country where there is no IPR protection. Eli Lilly (world's 7th Largest Pharma Firm)
has its clinical research focus in the country and had spent considerable amounts over
the last 2-3 years. But we would be only maintaining the quantum and will not expand
even though there is huge potential. Global companies face the same frustration. So
the main activity of the company in the country would be to introduce products from
the parent pipeline.mIn the domestic market, the share of Indian companies has
steadily increased from around 20 per cent in 1970 to 70 percent now. Ranbaxy
Laboratories is the market leader in terms of revenues followed by Cipla and Dr
Reddys Laboratories. Glaxo is the only multinational to figure among the top ten
pharma companies in India. In India, 97 per cent of drugs are off patent and are
manufactured by a vast number of companies. The key therapeutic segments include
anti-invectives’, cardio vascular and central nervous system drugs. Anti-infective
23
comprise the largest therapeutic segment in India, accounting for about 26 per cent of
the market. Globally, pharmaceutical industry grew at a compounded annual growth
rate of 9.1 per cent in the last 23 years to $491 billion propelled by a string of
innovative blockbusters. Multinationals were reshaped by mergers and acquisitions as
a way of fattening their research pipelines. This at best represents a short-term
solution. With a slew of brand name drugs losing patent protection in the next few
years and the pressure building for pharmaceuticals to cut price, these giants find
themselves under immense strain to find new drugs and reduce price. So, from the
above discussion it's very evident that before any proper IPR regime specially in the
absence of "Product patent" in India it was not a judicious decision for the
international Pharma companies to invest here in India. FDI cap was raised from 74%
to 100% in 2001 only but we didn't find any change in the pattern of FDI in Pharma
Sector.
Impact after 2005
India a signatory to the WTO resolution on TRIPS Agreement India was thus
committed to recognizing product patents by amending The Indian Patents Act 1970.
As per the minimum standards mentioned in the TRIPS agreement, patent shall be
granted for any inventions, whether products or processes, in all fields of technology
provided they are new, involve an inventive step and are capable of industrial
application without any discrimination to the place of invention or to the fact that
products are locally produced or imported. Accordingly, now patents will have to be
granted in all areas including pharmaceuticals and the effective period of protection is
for twenty years from the date of filing the application. With the implementation of
TRIPS agreement by most of the developing countries by 2005, a stronger patent
regime or product patents will be uniformly applicable on the pharmaceutical
innovations among the member countries of the World Trade Organisation.
The implications of TRIPS for the pharmaceutical sector are that: patents will be
granted both for products and processes for all the inventions in all fields of
technology; the patent term will be twenty years from the date of the application
(compared to the seven years under the 1970 Act), which is applicable to all the
member countries and thus rules out all the differences in the protection terms
prevailed in different countries; patents will be granted irrespective of the fact
24
whether the drugs were produced locally or imported from another country; though
the grant of the patent excludes unauthorized use, sale or manufacture of the patented
item, yet there are clauses which provide manufacturing or other such rights of the
patented item to a person other than the patent holder. In the case of a dispute on
infringement the responsibility (to prove that a process other than the one used in the
patented product has actually been used in the disputed product) lies with the accused
rather than with the patent holder (in the 1970 Act, the responsibility is with the patent
holder). This is the broad framework, which will guide the pharmaceutical industry of
India in the WTO regime ( i.e. post 2005 period).
In order to increase the global prospects of the pharmaceutical industry in the post
2005 period, the Central Government has fixed the deadline of December 2003, to
comply with the Good Manufacturing Practices set by World Health Organisation.
Since this is mandatory for all the units, it means incurring expenditures that could
range from Rs. 15 lakhs to 1 crore per unit. In some cases, it would involve shifting to
new premises altogether. A few units might exit from business because of this. As
contract manufacturers it is essential that both the parent unit and the loan licensee
meet these requirements in cases where the production is meant for exports. While
these standards improve the quality on par with international standards, it will also act
as potential entry barriers for new firms to enter.
The strength of the Indian pharmaceutical industry is in reverse engineering. Such
units by utilising the provisions under compulsory licensing, exceptions to exclusive
rights and the Bolar exception should aim at producing the generic version of the
patented product and those that are nearing patent expiry. Such firms should also be
engaged in research leading to new drug delivery mechanisms and in identifying new
uses of existing drugs. In this context, it is also essential to protect the innovations
that have been introduced by the technology spillovers. It is suggested that in order to
develop domestic innovations, developing countries require utility models or petty
patents. These petty patents can be available for a shorter period of time for process
innovations made over an existing product. The TRIPS agreement leaves members to
introduce such legislation, as there are no specific rules on this subject. Such patents
will encourage the small firms.
25
One of the concerns regarding product patents is the access to patented products.
Some of the provisions within the TRIPS agreement clearly indicate that price
controls could be imposed on the patented products. However, exemptions from price
controls has been suggested by the government for the products that are produced
domestically using the domestic R&D and resources and are patented in India. Such
exemptions will keep the prices high and make access to the drugs difficult. It appears
that `who patents the product' matters more for the government than what is patented.
In the recently concluded Doha meeting, a separate declaration on the TRIPS
agreement has clarified that members have the right to grant compulsory licence in
the area of pharmaceuticals and that they have the freedom to determine the ground
upon which such licenses are granted, which can have a considerable impact on the
availability as well as on their prices. However, the amendments made by the
Government of India, make the procedures very cumbersome which needs to be
revised in the third amendment to the Patents Act. While parallel trade in
pharmaceutical may facilitate access to medicine, yet compulsory licence will be the
only course of option to facilitate flow of technology and R&D. Scherer and Watal
(2001) suggest that tax concessions should be provided to the pharmaceutical
manufacturers to encourage them to donate the high technology drugs to the less
developed and developing countries which is a viable option. A majority of the
population does not have access to the essential medicines (most of which are off
patent) either in the government or private health care systems because they are not
within their capacity to reach. Now that the percentage of drugs under price control
has been reduced drastically it is essential to keep the prices of the essential drugs
under check, especially those concerning the common diseases. Currently only a
handful of pharmaceutical firms in India invest in R&D which needs to be improved.
The Pharmaceutical Research and Development Committee (1999) has suggested that
a mandatory collection and contribution of 1 per cent of MRP of all formulations sold
within the country to a fund called pharmaceutical R&D support fund for attracting
R&D towards high cost-low-return areas and be administered by the Drug
Development Promotion Foundation. The domestic universities and other academic
institutions can play the role of research boutiques or contract research organisations
(CRO), which can supply the technical know-how and manpower. Units that already
have such facilities can also function as a CRO for other firms.
26
In the post TRIPS era, the government will have to probe in to factors that contribute
to the widening gap between the proposed FDI and the actual FDI and rectify these
bottlenecks. Similarly the difference between the number of patents filed and the
patents granted calls for a detailed analysis to figure out where the Indian firms are
lacking.
Governments at various levels should take active part in disseminating knowledge
about the IPRs and the possible strategies that can be adopted by the industry. This
will remove some of the impediments. Lessons should be drawn from the Chinese
experiences where systematic efforts were taken to educate the bureaucrats, policy
makers and the industry about the WTO and product patents in the pharmaceutical
industry. India will have to strengthen the patent examination process and speed up
the processing procedures. This will help in checking the products that may enter the
country utilising the import monopoly route provided by the EMR. Besides a strong
institutional and judicial framework will have to be set up for monitoring the prices,
to prevent infringement and trade dress cases of patented products respectively.
As far as India's pharmaceutical industry is concerned, various options are possible in
the WTO regime. These are to: (a) manufacture off patented generic drugs, (b)
produce patented drugs under compulsory licensing or cross licensing, (c) invest in
R&D to engage in new product development, (d) produce patented and other drugs on
contract basis, (e) explore the possibilities of new drug delivery mechanisms and
alternative use of existing drugs, and (f) collaborate with multinationals to engage in
R&D, clinical trials, product development or marketing the patented product on a
contract basis and so on. Besides these strategies, India's strength lies in process
development skills. This expertise utilized within the WTO framework with emphasis
on quality standards will provide India a competitive advantage over other Asian
countries. To conclude we can anticipate more FDI nature of investment in India in
the field of Pharma Sector? It's a question which requires more time to be answered,
but we can draw inferences from the facts & data discussed above. As from the above
discussion it is obvious that Pharma industry is high investment seeking industry, &
the other most important fact about it is that it requires enormous R&D. The new
Patent regime brings both opportunities and challenges to the domestic pharma
industry. Even larger Indian companies lack the financial muscle to be major
international player in basic R&D that involves discovery of new chemical entities
27
(NCEs). They would be helped by the government's decision not to restrict patenting
to NCEs. The Patent Ordinance issued recently defines the term patentability as per
the TRIPS guidelines but does not exclude patenting of incremental inventions like
new drug delivery systems, polymorphs etc, brightening the chances of Indian
companies to benefit from the patent regime, but it may act as a disincentive for the
international Pharma firms to invest in India
28
P A T E N T S A N D T H E F U T U R E O F T H E I N D I A N P H A R M A C E U T I
C A LI N D U S T R Y
The absence of product patent protection for pharmaceuticals and agrochemicals led
many multinationals to limit their portfolios to patent expired products or a few
selected patented products. This resulted in an erosion of their market share
because local manufacturers introduced the most advanced medicines through reverse
engineering. Foreign firms were required to pay royalties for international drugs,
while Indian companies could access the newest molecules from all over the world
and reformulate them for sale in the domestic market.
Thus, this resulted in the systematic weakening of patent rights for pharmaceutical
products in India and led to the exodus of several international research-based
pharmaceutical firms. The obligations imposed on India under the TRIPS Agreement
are going to have a significant impact on India’s successful bulk and formulation-
oriented pharmaceutical industry. Indian companies will have to compete with the
multinationals by focusing on drug development and thereby producing their own
patented products. Alternatively, Indian companies could focus on producing patented
drugs under license from foreign companies or concentrate on generating revenues
from producing generic drugs. Currently, conflicting views exist within the Indian
drug companies with regard to India’s transition absence of product patent protection,
and it will increase competition in the domestic market
29
CONCLUSION
The strength of the Indian pharmaceutical industry is in reverse engineering. Such
units by utilizing the provisions under compulsory licensing and exceptions to
exclusive rights under the TRIPS agreement should aim at producing the generic
version of the patented product and those that are nearing patent expiry. Such firms
should also be engaged in research leading to new drug delivery mechanisms and in
identifying new uses of existing drugs. In this context, it is also essential to protect the
innovations that have been introduced by the technology spillovers. In order to
develop domestic innovations, developing countries require utility models or petty
patents. These petty patents can be available for a shorter period of time for process
innovations made over an existing product. The TRIPS agreement leaves members to
introduce such legislation, as there are no specific rules on this subject. Such patents
will encourage the small firms.
It is true that the impending WTO regime has stimulated the R&D investment in
India. Some of the big units have started strengthening their R&D and have also filed
number of applications for patents. There is some evidence available regarding the
mergers and amalgamations to pool the human and financial resources to strengthen
the R&D in new product development. These firms will definitely benefit by the
stronger protection. Some of the R&D and manufacturing facilities set up in these
firms meet the international standards, and they have already been approached by
multinationals for conducting research and undertaking manufacturing on their behalf.
Besides the R&D investment in traditional chemical based screening, some of the
R&D firms are looking for breakthroughs in biotechnology research.
One of the concerns regarding product patents is the access to patented products.
Some of the provisions within the TRIPS agreement mentioned in the above
paragraphs clearly indicate that price controls could be imposed on the patented
products. However, exemptions from price controls has been suggested by the
government for the products that are produced domestically using the domestic R&D
and resources and are patented in India. Such exemptions will keep the prices high
and make access to the drugs difficult.
30
A majority of the population does not have access to the essential medicines (most of
which are off patent) either in the government or private health care systems because
they are not within their capacity to reach. Now that the percentage of drugs under
price control has been reduced drastically it is essential to keep the prices of the
essential drugs under check, especially those concerning the common diseases.
Also the government should probe in to factors that contribute to the widening gap
between the proposed FDI and the actual FDI and rectify these bottlenecks. Similarly
the difference between the number of patents filed and the patents granted calls for a
detailed analysis to figure out where the Indian firms are lacking.
The real impact will be seen only over the next 2-3 years in the field of innovative
drug discoveries: estimated to be only 3 per cent of the global formulations market.
Foreign brokerage Refco Global Research commenting on the new product patent
regime says, "The average developing time for such drugs is 10-12 years, so the
earliest drugs are not likely to come through until 2006-07." Thus firm conclusions of
the impact of the new IPR regime must await further implementation of the Act.
As far as India’s pharmaceutical industry is concerned, various options are possible in
the WTO regime. But ultimately, the path currently being followed by international
standards for patent protection moves inevitably toward a clash between public health
and intellectual property. Despite the Doha Declaration’s affirmation of public health
as the paramount concern, it is not clear how such an objective would be achieved,
because generic substitution is so instrumental in the effort to improve drug
accessibility. Stringent intellectual property protection for pharmaceuticals would
only retard public health initiatives in the coming years. Given the rapid evolution of
the AIDS crisis throughout the world, with more than 35 million cases alone in India ,
a twenty-year term of market exclusivity for new treatments is not reasonable if we
expect to make real progress in containing the disease. It might well be appropriate
for a governing body to clearly define a list of essential medicines, such as
antiretroviral (ARV) agents, that would be subject to somewhat more relaxed patent
protection compared to other drugs.
The critical point is that the pharmaceutical industry and trade negotiators alike
should not forget the true goal of drug innovation: saving lives. Profit should always
be a means to this end, not vice versa. Only by keeping this principle in mind and
31
achieving a better understanding of the modern world health situation can we hope to
effectively ensure the safety and well-being of the people of India and the world’s
population as a whole in the twenty-first century and beyond.
32
The Gleevec Case
Gleevec (Beta Crystalline Salt of Imatinib Mesylate) is an anti-cancer breakthrough
drug, used to treat chronic myeloid leukemia (blood cancer). Gleevec is also known to
be effective against gastrointestinal stromal tumour (stomach tumours) and other
forms of cancers. Gleevec however does not cure cancer but keeps the same under
check hence making patients dependent on it for a prolonged period of time. Although
the compound STI571, from which Gleevec was eventually developed, was
synthesized by Ciba Geigy, much of the research and development involving the drug
Was carried out in the laboratory of Dr. Brain Ducker of the Oregon Health and
Science University. And when Dr Ducker was developing the drug, the funding
pattern of his laboratory was as follows: 50% by the National Cancer Institute, 30%
by Leukaemia and Lymphoma Society, 10% by Novartis and 10% by the Oregon
Health and Science University. Imatinib Mesylate is regarded as the most effective
drug for Chronic Myeloid Leukaemia, a form of leukaemia. In India, annually around
25,000 people become the victims of Chronic Myeloid Leukaemia. Novartis holds the
patent for the drug and markets it under the brand name of Gleevec. Imatinib
Mesylate was granted marketing approval in the US in 2001. Subsequently, the
USFDA also approved Imatinib Mesylate for the treatment of gastrointestinal stromal
tumours. Novartis applied for a product patent application in India under the mailbox
provisions that India was obligated to introduce in its Patents Act following the
country’s accession to the WTO. The patent applicant also claimed “Exclusive
Marketing Rights”, which was included in the first amendment of the Patents Act,
1970 in Chapter IVA, to meet the requirements of Article 70.9 of the TRIPS
Agreement. The Drug Controller General of India (DCGI) gave the marketing
approval for Gleevec in 2001. Novartis started the marketing of the drug through
importation. In 2003, an Indian firm, Natco Pharma, launched generic version of
Imatinib Mesylate. Besides Natco, five other firms Camlin, Cipla, Sun Pharma,
Ranbaxy and Intas are also in the market with their generic versions of Imatinib
Mesylate. In November 2004 Novartis obtained an Exclusive Marketing Right (EMR)
for Gleevec having applied for it in 1998. In its application, Novartis indicated that
Gleevec qualified for the grant of EMRs since it had been granted marketing approval
in Australia. Even though Novartis got the patent and marketing approval from the US
33
but did not rely on US approval and patents for EMR in India. The decision to grant
EMR was challenged by one of the generic manufacturers in the High Court of Delhi.
Meanwhile, Novartis obtained stay from the High Court of Madras and prevented all
other generic firms from producing and marketing generic versions of Imatinib
Mesylate. After the third amendment of Patents Act, the affected pharmaceutical
firms and public interest groups used the provisions relating to pre-grant opposition to
challenge the product patent application on Gleevec. Patent application was
challenged on the following grounds:
(i) prior publication,
(ii) lack of inventive step,
(iii) Insufficient description,
(iv) last priority date and
(iv) subsequent patenting of known substance.
According to petitioners, Novartis had disclosed the substance in an application filed
in the US in 1994 taking priority from a Swiss patent application filed in 1992. The
USPTO granted patent on this application in 1996. The US application stated that
owing to the close relationship between the novel compounds in free form and in the
form of their salts, including those that could be used as intermediaries, any reference
to the free compounds should be understood as including the corresponding salts
where appropriate and expedient. Hence, Novartis’ claim for beta crystal salt format
of Imatinib Mesylate has been anticipated through publication. Further, petitioners
also pointed out that the steps stated in the patent application for creating the beta
crystal form of Imatinib Mesylate is an obvious step and lacks inventive step. It was
pointed out that the patent application failed to describe the steps involved for the
manufacture of beta crystal form of Imatinib Mesylate. Patent application was also
opposed on the ground of loss of priority date. The application in question was filed in
1998 taking priority from a Swiss application of 1997. However, on the date of filing
in India, Switzerland was not recognized as Convention Country in India and
therefore the date of application in Switzerland could not be considered as the
“priority date”. And, finally, under the Indian Patents Act, salts are not patentable
unless the applicant the patent claim is not based on the enhanced efficacy. Novartis
failed to provide any evidence on the enhanced efficacy of the beta crystal form of
34
Imatinib Mesylate. Considering these objections, Indian Patent Office rejected
Novartis’ patent application on 27th January 2006. In response, Novartis in May 2006
took the case to the High Court of Madras, challenging the validity of Section 3(d) of
the Indian Patents Act (which makes the patentability of new forms of known
substances dependent on the proof of enhanced efficacy of the known substance). In
particular, Novartis declaration petitioned before the High Court to declare Section
3(d) of the Patents Act unconstitutional and to direct the Controller General of Patents
to allow the patent application filed by it. Amongst other submissions Novartis
submitted that while amending Section 3 of the Act to include Section 3(d), the
legislature did not pay heed to the essence of Articles 253 and 51(c) of the
Constitution of India. Novartis asserted that when a particular legislation is being
amended in pursuance of an international obligation that has been ratified without
reservations then such an amendment must comply with the treaty obligations. They
extended this assertion to Section 3(d) of the Act to state that it is not in consonance
with the provisions of the TRIPS Agreement and submitted that the same is in
violation of the constitutional mandate of the Indian government to respect
international commitments In light of the aforementioned submission Novartis
submitted that Article 27 of the TRIPS Agreement mandates that patents are to be
made available for any inventions in all fields of technology, provided that they are
new, involve an inventive step and are capable of industrial application. In its
submission Novartis argued that the provisions of Section 3(d) are narrower than
those of Article 27 of the TRIPS Agreement. The same is true because section 3(d)
mandates that a new form of a known substance is an invention only if it results in the
enhancement of the known efficacy of the substance. Therefore, the petitioners
contend that Section 3(d) contravenes Article 1(1) of the Agreement which requires
members to give effect to the provisions of the TRIPS Agreement and prohibits
members from providing protection that contravenes the provisions of the agreement.
Novartis further contended that while the discovery of a new property of a substance
is understandable, the discovery of a new form is not. They assert that the discovery
of a new form is a contradiction in terms as something, in order to be ‘discovered’,
must already exist. Section 3(d) is alleged to allow the patenting of a discovery of a
new form of a known substance, provided it satisfies the efficacy test. This is in direct
conflict with the definition of an invention in Section 2(1)(j) which requires a ‘new
product or process involving an inventive step and capable of industrial application’.
35
Therefore, Section 3(d) is alleged to render Section 2(1) (j) redundant in determining
the patentability of inventions falling under Section 3(d), leaving ‘enhanced efficacy’
as the only criterion for the patentability of such inventions. The petitioners contended
that as the term ‘efficacy’ has not been defined in the Act, its inclusion in the
language of the statute is arbitrary. This, the petition argued, would give uncontrolled
as well as unguided powers to the Controller of Patents in India. The arbitrary
exercise of powers by the Controller of Patents would violate the right to equality
under Article 14 of the Constitution of India. A challenge to the constitutional validity
of a statute is maintainable only on two grounds in India, viz. legislative competency
and violation of fundamental rights. The court refused to examine whether Section
3(d) violates the obligations under the TRIPS Agreement and held that “ …this court
has no jurisdiction to decide the validity of the amended section, being in violation of
Article 27 of TRIPS, we are not going into the question whether any individual is
conferred with an enforceable right under TRIPS or not. For the same reason, we also
hold that we are deciding the issue namely, whether the amended section is
compatible to Article 27 of TRIPS or not”. In fact, the court urged the Novartis AG
( Switzerland) to approach the dispute settlement mechanism provided under WTO
framework. The very next day the Federal Councilor, Department of Economic
Affairs for the Swiss Confederation stated, “we must have a reliable TRIPS system
and the one in India is good enough. The Swiss government never gets involved in
any judicial pronouncements of other countries”. This effectively ruled out the
possibility of Switzerland approaching WTO dispute settlement body. On the issue of
Section 3(d) being violative of right to equality owing to the arbitrariness and
vagueness of the phraseology, the court held that “… in sum and substance what the
amended section with the explanation prescribes is the test to decide whether the
discovery is an invention or not is that the patent applicant should show the discovery
has resulted in the enhancement of the known efficacy of that substance and if the
discovery is nothing other than the derivative of a known substance, then , it must be
shown that the properties in the derivatives differ significantly with regard to
efficacy”. The court also clarified the meaning of the term efficacy. According to the
court “… the meaning of the word efficacy and therapeutic effect …. What the patent
applicant is expected to show is how effective the new discovery made would be in
healing a disease /having a good effect on the body?” Thus the court equated the
meaning of efficacy with the therapeutic effect on the body. While doing so the court
36
also accepted the argument of the respondents that “… petitioner is not a novice to the
pharmacology field but it, being pharmaceutical giant, cannot plead that they do know
what is meant by enhancement of a known efficacy and they cannot show the
derivatives differ significantly in properties with regard to efficacy”. Hence it was
held that the patent applicant has to show enhanced therapeutic effect in order to
obtain a patent for a new form of a known substance or for its derivatives. Therefore
the court held that Section 3(d) is not violative of Article 14 of the Constitution of
India.
The Gleevec case has attracted attention of the public interest groups essentially
because the case would have deep rooted implications for access to medicines at
affordable prices in countries like India. The case will decide whether the citizens of
this country would see Novartis charge an unaffordable $ 2727 for a month’s supply
of the drug or whether generic firms would be able to sell the drug at a considerably
lesser price.
37
BIBLIOGRAPHY
1. Google.com
2. Pharmapulse.com
3. Pharmabiz.com
4. Times of India
5. Healthmanagement.com
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