Patently Drugged

Pharmaceutical patents constitute approximately 25% of the annual patent filings in India, which is about 10,000 patent applications in a year. The generic pharmaceutical companies from India contribute about 20-24% of the global generic drugs production. These two figures provide enough reasons for the Indian Patent laws to have caught the attention of the world and for India to be criticized as the ‘Robin Hood’ of the pharma world in recent times. While reiterating India's status as a generics hub, the recent decisions on Novartis & Bayer have not gone down too well with "Big Pharma”. Yellow Box analyses the facts, instances and thoughts of IP Jurists on the issue.

The Indian Patents Act was enacted in 1970 based on the recommendations of the Ayyangar Committee and offered protection to innovative processes, as well as products (except chemicals, food and pharma). After the economic liberalization in the early 90's, India signed the TRIPS (Trade Related Aspects of Intellectual Property Rights) Agreement on Jan 1, 1995. As part of the obligations under this Agreement, India was expected to offer patent protection in all areas of science and technology within a ten year transition period i.e., by Jan 1, 2005. These obligations were met by amending the Patents Act in three stages- 1999, 2002 and 2005. During the process, the Patents Rules, 2003 were also formulated.

Further, during the transition period, all patent applications in the fields of medicines and agro-chemicals were to be kept in a "black box" or "mail box". While such applications would not be taken up for examination before 2005, the applicant had the option to apply for and obtain an "Exclusive Marketing Right" (EMR), which would expire after a period of five years or after the date of grant or rejection (whichever was earlier). Novartis, Wockhardt and Eli Lilly obtained EMR's for their drugs Glivec, Nadoxin and Cialis respectively. Of the three, Novartis's application for Glivec generated a lot of attention, as explained below.

Novartis filed a patent application for Glivec in 1998 for a beta crystalline form of imatinib mesylate (imatinib mesylate was already known). The application was rejected in Jan 2006 by the Controller citing lack of novelty and lack of inventive step. Novartis appealed against the decision of the Controller before the Madras High Court. The Madras High Court, however, sent the application to the then newly formed Intellectual Property Appellate Board (IPAB). The IPAB upheld the decision of the Controller, but modified the decision of the Controller to state that the application had novelty and inventive step, but failed to pass Section 3(d) of the Patents Act, which states "a new form of a known substance, which does not result in an enhancement of the known efficacy of the substance" cannot be patented. Under a Special Leave Petition, Novartis appealed directly to the Supreme Court and simultaneously challenged the validity of Section 3(d) under the Indian Constitution as well as TRIPS Agreement before the Madras High Court.

The Madras High Court upheld the validity of Section 3(d) and ruled that it is fully TRIPS complaint. Further, the Court noted that Section 3(d) provides "easy access for Indian citizens to life saving drugs". The Supreme Court too ultimately rejected the patent application. In its ruling Court interpreted "efficacy" to mean "therapeutic efficacy".

The decision of the Supreme Court generated mixed responses from different sections of the society. President of the international non-governmental organization "Doctors without Borders" noted that "the Supreme Court decision now makes patents on medicines that we desperately need less likely". Pratibha Singh, a lawyer for drug make Cipla, and the then Commerce Minister Anand Sharma echoed similar sentiments in stating that the Court's judgment will ensure only substantial/genuine innovations are granted patent protection and that "repetitive patents will not be given for minor tweaks". However, Novartis called the ruling as a setback and stated that it would invest "cautiously" on R&D in India.

The Pharmaceutical Research and Manufacturers of America condemned the decision, stating that "This decision marks yet another example of the deteriorating innovation environment in India". Despite all the hue and cry, Novartis has recently indicated its intentions to move into a new campus in Hyderabad in 2015, following which around 4,000 jobs from Europe would be shifted to India.

Yet another Indian decision that was criticized by Western nations was the order of the Controller General to issue a compulsory license to Natco Pharma to manufacture generic versions of Bayer's patented anti-cancer drug "Nexavar". The order, which was subsequently upheld by the IPAB and is currently under appeal in the Bombay High Court, facilitated a 97% reduction in the price of the drug. Doctors Without Borders welcomed the decision as one that would "pave the way for compulsory licenses to be issued on other drugs, now patented in India and priced out of affordable reach", while Bayer said the decision "endangers pharmaceutical research" and called the compulsory license as "essentially theft".

In light of the above decisions, the US Trade Representative, under pressure from US Pharmaceutical companies (especially Pfizer) conducted a hearing titled "Trade, Investment and Industrial Policies in India: Effects on the US Economy". At the hearing, Pfizer strongly condemned the Indian IP framework and stated that "India has systematically failed to interpret and apply its IP in a manner consistent with recognized global standards and Pfizer has seen a growing trend of anti-IP developments".

On the other hand, India's IP framework was strongly defended by aviation giant Boeing, Honeywell and pharma major Abbott. Boeing, in its statement said "India's legal framework is adequate with no known cases of IP violation involving Boeing's activities in the defense and aviation sector". Abbott, which has more than 100 granted patents in India till date, said in a five page statement that it has had a positive experience in India. It further stated that it is committed to a long-term presence in India and that India is a priority country for investment. Honeywell stated that India's IPR framework was one of the "key enablers in the establishment of its engineering and technology presence in India".

Ultimately, the USTR decided not to downgrade India's status to "Priority Foreign Country", a tag that is given to the worst offenders of IP. More than the defense that India's IP framework received, the decision had to more to do with the prospects of straining ties immediately with a newly elected Government in India (exit polls strongly favored the BJP-led NDA to come to power). However, the USTR said that it would conduct an "out-of-cycle" assessment of India's IP laws later in the year, which was welcomed by The Pharmaceutical Research and Manufacturers of America, which stated "Such a review provides a needed avenue for constructive engagement with the incoming Indian Government on how to resolve the deteriorating IP environment in India".

The EU, on its part, has been pressing for a Free Trade Agreement (FTA) with India for the last five years. Despite fifteen rounds of negotiations, the Agreement still has not been signed because the EU has not conceded to India's demands. The FTA covers, among other aspects, greater IP protection for European firms in India. However, India has stuck to the stance that it "cannot go beyond the parameters of the TRIPS Agreement and its own laws on IP".

These tactics by Western nations, especially the US are nothing more than "pressure tactics". India's status as "the pharmacy of the world" is well-known. Generic medicines worth billions of dollars are exported from India to the US, EU, Africa and other nations. In fact, the Supreme Court judges acknowledged this in their ruling when they stated that "The Court was reminded that an error of judgment by it will put life-saving drugs beyond the reach of the multitude of ailing humanity, not only in this country, but in many developing and under-developed countries, dependent on generic drugs from India". Thus, Indian pharmaceutical companies were eating into profits of "Big Pharma" and the latter was looking into ways to target the generics industry, which includes Cipla, Dr. Reddy's, Ranbaxy and Glenmark. It's quite surprising to note that it is rather the US companies and the US Government have been more active in reacting to the Novartis (a Swiss-based company) and Bayer (a German-based company) decisions than the EU and European companies.

A peek into the statistics of pharmaceutical patents granted by the Indian Patent Office between 2010 and 2013 shows that for every pharmaceutical patent granted to an Indian applicant, at least three patents are granted to foreign applicants. The pack is led by Eli Lilly, with 36 granted patents. Second in the list is none other than Pfizer, which has 32 granted patents. As CH Unnikrishnan of "Livemint" rightly put it, "Pfizer has been one of the top patent winners in pharma in the country (India)". Moreover, there have been several instances where the IPAB has overturned the decision of the Controller in rejecting a pharmaceutical patent for a foreign applicant. For example, the IPAB overturned the Controller's decision in rejecting a patent for the base form of Tykerb (Glaxo). All along, transparency has been maintained in the system, whether it be at the level of the Patent Office, the IPAB, the High Courts or the Supreme Courts. This is unlike what has been done in the US, which used executive powers of the President to overturn a ruling from the International Trade Commission (ITC) to protect the interests of its home-grown company.

The TRIPS Agreement and the Doha Declaration do allow countries certain flexibilities in developing their patent laws. This was well pointed out in the joint testimony to the USTR by Professor Srividhya Ragavan, Professor Brook Baker and Professor Sean Flynn. They stated that "The TRIPS Agreement allows a great deal of lawful pluralism among WTO members about standards of patentability and about key flexibilities, including both patentable subject matter and grounds for compulsory licenses". The Indian Government made full use of these flexibilities in developing a patent law that balances protection with "right to access affordable medicines" viz. Section 3(d) and the compulsory licensing provisions. Section 3(d) is not unique to India alone. Argentina and The Philippines, both signatories to the TRIPS Agreement from Jan 1, 1995 (just like India) have similar provisions in their patent legislations.

As clearly laid out in Section 83 of the Patents Act, patents are granted "to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay" and not to let the "patentees to enjoy a monopoly for the importation of the patented article". However, most (if not all) Western drug manufacturers do not have any manufacturing facilities in India and merely import the drug. This was well highlighted by advocate Anand Grover (advocate for the Cancer Patients Aid Association in the Novartis case) in his statement to the press after the Supreme Court judgment. He said "Since 2000, all multinational pharmaceutical companies started disinvesting in India. Most companies no longer produce in India, they import drugs. So, the rationale of not investing on R&D in India does not hold good".

The comment of Bayer CEO stating that Nexavar was developed for Western patients who could afford the drug only drives home the point and shows the company's indifference and lack of interest in setting up manufacturing facilities in India. However, Bayer still wanted the patent for the drug so that it could hold a monopoly over the drug in the Indian market (India is a very lucrative market that no pharmaceutical company can afford to miss). This is not allowable under Indian Patent law. Unlike countries like South Africa which were entirely at the mercy of the US during the AIDS crisis of the 90's, the Indian Government has taken a proactive approach which has taken Big Pharma by surprise.

The US very conveniently forgets the fact that it was the same Bayer which was threatened with the issue of a compulsory license by the US Secretary of Health during the anthrax crisis of the early 2000's. This has repeatedly been pointed out by several experts, including Professor Srividhya Ragavan in her book titled "Patent and Trade Disparities in Developing Countries" and Professor Shamnad Basheer in his article titled "Patent Lies and Convenient Truths". From the overturning of the ITC ruling and this case, it is very clear that the US is very adept at playing the hypocrisy game. This was brought out by Shamnad Basheer in his conclusion to the above mentioned article, where he wrote "If there is one consistent theme in the global IP and trade wars, it is that of 'hypocrisy'!"

Compulsory licensing does not amount to "theft", as has been pointed out by Bayer. All Governments have a duty to protect their citizens. Most Constitutions, in some form or another, have a clause that guarantees their citizens the "right to life"/ "right to affordable medicines". In India, this is given in Article 14 of the Constitution. If compulsory license was "theft", then why would TRIPS allow developing countries the flexibilities? And why would several developed countries have such provisions in their law?

In conclusion, the strong words of Justice Prabha Sridevan (former Chairman, IPAB) come to mind. In her article titled "Defending Indian Patent Law", she argued that "No one can attack India's well-founded IP regime as being weak merely because a drug that is claimed to be an invention fails the test of law. The pharmaceutical industry's anxiety behind the clamor against Indian law cannot be on account of any inherent weakness in our law, but only because other countries will follow it". The Indian Government cannot and should not give into pressure to change its patent laws, just because it is unacceptable to "Big Pharma", which does not want to adapt its R&D/business model to Indian patent legislation.