Is the Indian law hurting innovation

Updated: Apr 9 2013, 06:45am hrs
The Indian law doesnt give patents unless there is a significant additional invention, but if this prevents pharma firms from spending on R&D, this affects the welfare of patientsexcessive other controls, like on prices, add to the problem

Biswajit Dhar

The landmark judgment of the two-judge bench of the Supreme Court of India striking down the application of the Swiss firm Novartis for the grant of patent on an anti-cancer medicine, the beta crystalline form of Imatinib Mesylate (sold under the brand name Glivec) is significant for it raises several questions about the functioning of the patent system. The judges gave their ruling against Novartis since, in their view, the product in question was not an invention as elaborated in section 3(d) of the Indian Patents Act. This section identifies a number of actions that may not qualify as inventions. These include: (1) mere discovery of a new form of a known substance not resulting in the enhancement of the known efficacy of the substance; (2) mere discovery of any new property; (3) new use for a known substance; and (4) mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

By ruling that the beta crystalline form of Imatinib Mesylate does not qualify as an invention as elaborated in section 3(d), the judges have strengthened the foundations of the patent system, which was introduced to provide statutory monopoly to the inventors in order to reward them for the intellectual contribution they were making to enhance public welfare.

The justification for the patent system lay in the fact that unless the inventors were protected from copycats, they would have no incentive to make further investments to produce useful products for the society. The monopoly was granted so that the inventors can use their exclusive marketing rights to recoup the investments made in producing the invention. Over time, the period of monopoly was increased as inventors (mostly large global conglomerates in the case of pharmaceuticals) claimed that their R&D expenditure had sky-rocketed. The claim of these pharmaceutical giants has been that new drug molecules require a billion dollars of investment and this claim became the basis for extending the patent term to 20 years, counting from the date of application for the grant of patent.

Importantly, the 20-year patent term was introduced in the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), being administered by the WTO. All members of the WTO are required to implement the TRIPS agreement: the extended patent term has become the global norm.

The extension of the patent term clearly implies that only major technological breakthroughs could qualify for the grant of patent rights. Minor innovations, i.e. those that do not need investments as large as a billion dollars, should not therefore qualify for the grant of patents. The objective of section 3(d) of the Indian Patents Act is precisely to rule out the grant of patent monopoly on minor improvements of known substances. This is a ploy that the global firms have often used to extend their patent monopoly, a phenomenon that has come to be known as ever-greening of the patent.

Ever-greening militates against consumer welfare since it prevents the generic firms to produce cheaper versions of a pharmaceutical product once its patent term has expired. In many jurisdictions in the developed world, the patent holder is able to get the term of patent extended by introducing products that represent only minor improvements of an older product. In some cases, patent term of an existing product is extended merely because the patent holder has claimed that this product has a new use. These patent term extensions violate the spirit of the patent system since they end up encouraging rent-seeking activity instead of encouraging inventors.

The drafters of the Indian Patents Act were mindful of the problems that ever-greening could result in. The inclusion of section 3(d) was a clear message that lawmakers in India were unwilling to allow firms like Novartis to exploit the consumers by selling a life saving medicine like Glivec at R1.2 lakh (for a months treatment) when a domestic firm like Cipla can sell a similar product for R8,000. The highest judiciary of the land has now endorsed the public policy objective of section 3(d) by denying the unjustified claim of Novartis to seek patent on a product that is merely a reworked version of an existing product.

The author is director general, Research and Information System for Developing Countries, New Delhi

Ranjit Shahani

Developing new medicines is not easy. It is certainly not quick. And certainly comes with high costs. The road to an approved medicine for patients is long, arduous and risky. Estimates show that only 1 out of 10,000 compounds eventually makes it to the market. The various steps involved in research, right from identifying a promising molecule to taking it through the various phases of trial, take between 10-15 years on an average. It is said that only 1 out of 3 approved drugs generates enough profit to cover the cost of the many that failed. Those that failed in turn incur huge costs but generate no revenue.

Drug development time takes much longer than it did in earlier years for a variety of reasons including the availability of fewer easy targets, need for larger clinical trials and testing against comparator drugs. Further, costs have increased dramatically with the regulatory authorities asking for increasing amounts of clinical data before going on to approve a medicine.

Breakthrough innovations are rare in medical research and step-by-step innovation is the major means by which medicines are improved to the benefit of patients all over the world. There are times when other forms of a basic chemical structure may actually be the foundation for life-changing medicines in the future and these need to be protected by patents.

Patents are the lifeblood of the pharmaceutical industry. They stimulate research and provide an incentive to the pharmaceutical industry to invest in the development of new medicines to treat diseases that are currently untreatable, incurable or in need of new treatment options, and also provide treatment when patients develop resistance to older drugs. They go a long way in improving the quality of life for the many patients who otherwise have no recourse. The patent system has been widely recognised for the role it plays in providing an impetus to research. Once a patent is granted, the disclosure helps others to further their own research helping the knowledge cycle. The global pharmaceutical industry invests more than $65 billion per year in R&D, offering the single most important source of investment in research. This is far different from what the local pharmaceutical industry spends in India, which is just about 2% of their total turnover. Like other companies, the products produced by pharmaceutical companies must return a profit not only to grow but also for their investors.

The recent ruling in the Glivec case has added to the risk faced by innovative companies in India where there is lack of an ecosystem that fosters and encourages innovation.

It is a challenge to balance the need for patents and the need for public health. It must be recognised that the challenges posed by public health globally are complex and the economic challenge is even greater. Around 3 billion people in the world live on less than two dollars a day with a billion barely managing to get by on less than one dollar a day. As per estimates, about 10 million children die due to malnourishment each year with about three-quarters of a billion people receiving inadequate nourishment. These people cannot afford medicines at any price. Affordability and accessibility are part of a complex puzzle and destroying patents is certainly no solution.

There are numerous economic and health related benefits to supporting patents. The income generated from marketing pharmaceutical products goes back into research into new therapies. Innovations that are patented go on to become less expensive over time and once they expire they lead to high quality generics, which in turn helps lower the overall cost of healthcare. This is a virtuous cycle of discovery, development, commercialisation and then loss of market exclusivity.

I am of the firm belief that innovation is clearly in the interest of the patient and that India has the potential to be a leader in innovation. We are fortunate to have a highly skilled workforce and exceptional scientists. It is time for us to move from imitation to innovation. It will indeed be a proud moment for me when we have a product that is innovated in India.

We need to think hard about the role we want to play in a global world. We must aspire to be innovators to the world. We certainly have the capability. All we now need is the will.

The author is vice-chairman and managing director of Novartis India Ltd, and president of Novartis Group of Companies in India