“Multinational drug makers would prefer China for investments in pharmaceutical research so long as India keeps the bar for patenting a drug so high, warns drug major Novartis on Monday after the Madras High Court turned down the company’s challenge to the country’s patent law.”
Evoking the name of China is a clever move and one aimed at jolting our Ministers and bureaucrats into action. I couldn’t help being amused at the paradox though. China’s IP regime being lauded by an MNC?? The sun must have risen in the West today!! Just a few months back, the US initiated WTO consultations with China over its poor IP enforcement record. In fact, a recent news item reveals what Novartis really thinks of the Chinese record on IP:
“The apprehension among industry players regarding IPR protection struck feverish high after a widely publicized incident involving the detention of Chinese employees from three pharmaceutical companies in France last October. They were accused of allegedly violating the intellectual property of a Sanofi-Aventis drug when showcasing an active pharmaceutical component. Cases like this do ring the alarm bell over China’s inefficient IPR policies.
Yi Yang, associate director of Novartis Pharmaceuticals Corporation cautioned earlier this month of a budding concern among MNCs that Chinese employees at mainland utilities would leave and establish their own companies using unauthorized duplicates of pharmaceutical expertise.”
The interesting question to pose is: why are Novartis and other MNC’s still investing in China, despite it’s not so glitzy IP regime. Are we missing something here? Or is it reflective of the simple truth that IP is not the sole or even a substantial determinant of FDI (foreign direct investment) inflow. Rather, R&D will be outsourced to countries like India and China, when such countries offer key advantages, such as low costs, highly skilled personnel, infrastructure, a good science/technology base etc. In short, as SpicyIP has often been reiterating, strong IP cannot by itself lead to “innovation”–rather it has to be combined with several other non IP factors. The fact that, of the emerging economies, China continues to attract the maximum FDI would seem to suggest that the non IP factors play a critical role in inducing more FDI.
Unfortunately, we don’t have any concrete data as yet that conclusively demonstrates the extent to which strong IP regimes spur the flow of increased FDI. Till we have such data, engaging in rhetoric of this sort is not going to help. And in a world that is coming to be more sensitive to the “butterfly effect“, getting to this data “holy grail” may prove more complicated than one thinks.
More importantly perhaps, the Novartis case does not stand for the proposition that India disfavours incremental innovation. Quite the contrary…. the Madras High Court decision supports the constitutionality of section 3(d)– a section that incentivises “incremental innovations” (innovations that are more effective improvements over what existed before), as opposed to mere trivial variants.
In essence, section 3(d) aims to prevent a phenomenon commonly referred to as “ever-greening” by requiring that, in order to patentable, new forms of existing pharmaceutical substances should demonstrate increased “efficacy”. The underlying assumption is that derivatives that are structurally similar to known pharmaceutical substances (such as salt forms, polymorphs etc), will, by and large, be functionally equivalent as well–and if this is not the case and the new form of an existing substance works better than the old form, it is up-to the patent applicant to demonstrate this and claim a patent.
1. Gleevec was and is being supplied for free by Novartis in India to most patients–of course, one may argue that there is some mismatch between the theory and practice of doling out free medicines–as the administrative hassles can prove quite onerous in some cases. But surely, there are still a substantial number of cases where this medicine does get supplied for free and with more “press”, we can get Novartis to completely close the gap between theory and practice!!. In a recent conversation with a reputed doctor from the All India Institute of Medical Sciences (AIIMS), I was informed that all of AIIMS’ supplies are from Novartis (free of charge).
2. More importantly, the issuance of a patent covering Gleevec does not stop generic supplies. Rather, under the Indian patent regime, generic companies, such as Natco and Ranbaxy that were manufacturing the drug before the advent of the product patent regime in 2005 can continue doing so–provided they pay a “reasonable royalty” to Novartis. The next round of patent litigations will likely hinge around what is “reasonable“–funny that in a case dripping with rhetoric, we will soon engage with what it means to be “reasonable”!!
3. Apart from the above “compulsory licensing” provision, the government can deploy “government use” provisions to manufacture and supply the drug at low costs. In the wake of the bird flu scare (a hype to which I very easily succumbed), I co-authored a paper detailing the various compulsory licensing and government use provisions that the government could invoke to ensure a cheap and affordable supply of Tamiflu, a drug that was expected to work well in those circumstances. If the recent enthusiasm of the NPAA (National Pharmaceutical Pricing Authority) is anything to go by, price controls are likely to get stronger in India.
4. Most importantly perhaps, the patent only covers the beta crystalline form of Imatinib Mesylate–one of the many polymorphic forms in which Imatinib Mesylate exists. Generic manufacturers are free to use other polymorphic forms–and indeed, I’ve been informed by a friend who works in a leading Indian generic company that Hetero seems to have a version of the drug that relies on such a different polymorphic form.
Also, amidst all the euphoria around the Madras High Court judgment, it bears reiteration that the case hasn’t been finally decided as yet i.e. it is still possible that Novartis might be awarded the patent (though I think it unlikely). All the High court did was to defend the constitutionality of section 3(d). The IPAB (Intellectual Property Appellate Board) will still have to decide whether Novartis’ claimed invention entails some “added efficacy” over an earlier known substance under section 3(d) and therefore merits a patent.
Unfortunately, this new IP appellate body has been mired in controversy owing to the appointment of Chandrasekharan, who, as the Controller of Patents, had filed an affidavit before the High Court, supporting the initial rejection of Novartis’ patent by the Patent Office. As SpicyIP has been reiterating, this violation of a cardinal principle of natural justice creates a hole in an otherwise strong case for the government!!
Amidst all the “spinning” generated by the Novartis case, it is heartening to see that the government has not succumbed to rhetoric and is beginning to constructively engage with the “real” issue that this dispute raises. An ET report notes:
While lawyers would battle it out as Novartis’ appeal continues, the government is working on a new patents manual that is expected to reduce subjectivity in deciding what is “significantly more effective that the already known”.
Drawing on earlier case law and ignoring the bard’s dictum that “brevity is the soul of wit”, the court held that Parliament may introduce undefined terms such as “efficacy” and leave it to the administrative agencies to flesh it out. To this extent, there is a distinction between “discretion” conferred on an administrative agency and an “arbitrary” exercise of such discretionary power and one does not automatically follow from the other. There are two safeguards that could rein in any potential abuse of discretion. Firstly, the wordings of section 3(d) and its explanation provide some clues on how to interpret “efficacy” and thereby control/guide the “discretion”. I’ve read and re-read section 3(d) and am at a loss to understand how the wordings of this convoluted section could help anyone!! Secondly, the possibility of an appeal serves as an important safeguard against the potential for abuse of discretionary power.
In short, the court held that since section 3(d) did not confer “uncanalised” discretionary power on the patent controller, it was constitutionally valid.
The above dictum is sound from constitutional law perspective. However, from the perspective of a patent office that is faced with a term (“efficacy”) that does not find mention in any other patent regime in the world, wouldn’t it be more sensible if the scope for subjectivity were reduced by laying down some broad guidelines. Such guidelines would also have the added advantage of providing some amount of legal certainty to patent applicants who needn’t litigate each time to determine the ambit of this term.
So how exactly do we define the term “efficacy”? Given that India borrowed a large part of section 3(d) from a drug regulatory directive in Europe, should we define this in a drug regulatory sense? Doing so would not only impose an extremely high patentability hurdle, but also make a patent applicant run into serious problems with the “novelty” test–one of the cardinal pre-requisites for obtaining a patent. Since the drug would have been administered to volunteers during clinical trials, there is likelihood that it will be construed as “known” substance at the time of submitting a patent application.
Interestingly enough, the Madras High Court judgment relied on a medical dictionary definition to hold that the term “efficacy” in section 3(d) meant “therapeutic” efficacy. Would increased “bioavilability” (which is what Novartis claims for its beta crystaline form) count as “therapeutic” efficacy? What about salt forms that provide more heat stability and enable the drug to be transported to various parts of rural India without refrigeration? It seems that under the Madras High Court’s “therapeutic” efficacy construction, this may not count. But should this be the case? If the intention behind section 3(d) is to provide incentives to new forms of pharmaceutical substances that come with genuine advantages, then ought not heat stable forms to qualify? The US and EU provide that salt forms with “unexpected properties” are “inventive” and therefore merit patent protection–and such unexpected properties would include not just “therapeutic” efficacy, but any other other significant advantage as well, such as heat stability. Should India be interpreting section 3(d) to reach a similar result?
Clearly, defining “efficacy” is no easy task–but we have to begin somewhere. Let not the various spins put on the case by interested stakeholders blind us. Spins should be deployed where we need it most—to help improve our international record in cricket!!
Thanks for the great, thought provoking post, Shamnad.
I think it might make a great deal of sense to redraft section 3(d) to clarify the term.
I have nono problem with vague terms which allow the court to fit the legal test to the situation (‘skilled addressee’, ‘obvious’, etc). These are useful and allow the law to move with the times and situation.
However, they have unfortunately chosen a term which has another, specific (and narrow) meaning in this industry.
(PS – as to the cricket – on the field Spin (bowling) is fine, off the field, not sure it will help that much. Australia’s infamous but extremely successful spin bowler being a case in point…)
Cheers
Duncan
duncanbucknell.com
Dear Duncan,
Thanks very much for your comments and kind words. As you rightly sugegst, terms such as “non obviousness” and utility come with a great bunch of case law that one can turn to. The term “efficacy” originates in a drug regulatory directive–and if we confer the same meaning to it in a patenting context, we will not only have a very restrictive patentability criteria but also run into problems with novelty.
Let’s see how the further “spins” unfold…
Dear Duncan,
Thanks very much for your comments and kind words. As you rightly sugegst, terms such as “non obviousness” and utility come with a great bunch of case law that one can turn to. The term “efficacy” originates in a drug regulatory directive–and if we confer the same meaning to it in a patenting context, we will not only have a very restrictive patentability criteria but also run into problems with novelty.
Let’s see how the further “spins” unfold…
Hi Shamnad
I agree with you that it there are substantial “non” IP factors that contribute to the access to medicines. In this regards there is a really nice column in Economic Times dated August 13, 2007 by A Van Gelder and P Steven, analysts at International Policy Network, a think-tank based in London. They have provided some statistics which are are quite an indicator of the non-IP factors. I do not know where they may have got the statistics and I do not vouch for the accuracy either. What I can definitely vouch for is that being an Indian myself, I know without my own facts and figures that they are not way off the mark. Some of points culled out are as below
(a) About 60% of Indian do not have access to basic, off patent (generic) medicines;
(b) Despite pumping cheap generic AIDS drugs for years, only 5.5% of India’s AIDS sufferer were receiving any drugs by end of 2006
(c) According to a 2005 report by Transparency International, the health system is the most corrupt service sector in India. The transport network is so bad that rural people struggle to get to a clinic, even if one exists within 200 kms of their home
(d) An estimated 400, 000 Indian children under five die each year from preventable diarrhea.
(e) Children are going without routine vaccinations
(f) Simple anti-infectives are out of reach of the majority of rural poor
The “efficacy” question needs to sorted out and it seems the standard of “surprising and unexpected properties” is the correct test. Easier said then done, but as you say, it has to start somewhere.
regards
Vaibhav
Dear Vaibhav,
Thanks for your comments. I’m not a big fan of the IPN generally, as their views can be pretty extreme too–a very romanticized notion of patents that might suggest to us that Eritrea could cure all of its poverty, if only it instituted a patent regime like the US–a regime that follows the sub solar approach (everything under the sun can be patented)..
On the issue of patents and access, the IPN tend to discount the role of patents altogether. I wouldn’t go this far–as patents do increase prices and its only natural that it would have some impact on purchashing power. I therefore tend to believe that patents have some impact on access, though their role has been overhyped by the activists–since “patents” are an easier target and everyone loves big pharma bashing!! Try taking on the government and its appalling public health infrastructure (which plays a greater role in lack of access)–and you’ll find that you sound half as sexy and have quite an uphill task really!!
Thanks Shamnad for this very useful analysis of ex-post situation. I fully agree with this line of argument that the decision should be construed in a realistic context, avoiding unnecessary euphoria which may give this impression that it would resolve all problem associated with global access to medicine campaign. I think most of the international organizations working in this area now comprehend this aspect and they are really talking in terms of hitting broader public policy hurdles instead of focusing patents only. You have rightly highlighted the need of defining “efficacy” and your analysis in this regard is simply the suburb. However I think that the matter may turn up again before the High Court after the outcome of IPAB appeal though on somewhat different grounds.
It is important, not only for India but for many other developing countries as well which have modelled their patent laws on Indian legislation, to set certain criteria of “efficacy” which can help us striking a fine balance between the risk of ever greening and reward of a real incremental innovation. We are facing this difficulty because India has decided to be innovative by not following established patent practices developed elsewhere. Had that been the case India might have not faced any problem given the availability of wealth of persuasive jurisprudence on all aspects of novelty and non-obviousness (Further thanks to “technical support” of WIPO and other agencies until recently!) . No doubt that it is difficult but yet a leading role and the world can learn a lot from Indian experience especially in the back drop of global debates about reforms in patent practices.
While Novartis is clearly spinning the whole matter and the beta crystal form is marginal innovation at best do you think that this ruling could hurt some Indian pharma companies like Sun Pharma? The Indian newspaper The Economic Times reports that Sun Pharma is working on several newer formulations of compounds such as the epilepsy medicine Neurontin. Could their patents be challenged on the basis of the Indian Patent Board’s opinion that these things are not innovative enough?
Thanks for your Informative article.
1.Please cite the specific Drug Regulatory Directive in Europe and any Cases in Europe and US hinging on EFFICACY
2. What are the other forms of EFFICACY you like to cite other than therapeutic efficacy?
Best regards
Dear Hafiz,
Thanks very much for your thoughtful comments. You’re right–India is really in a difficult position since with “efficacy”, we don’t really have any precedent to go by. I had noted in an earlier blog posting, that the pharmaceutical patent debate in India has generally revitalised international discussion on patents and access–a point that you rightly make. Also, I’ve just finished an article for an Indian newspaper, where my conclusion is as follows:
“India is neither ‘developed’ nor ‘developing’. It is what I would call a ‘technologically proficient’ developing country.
We’re strong in certain technology sectors and therefore need to find ways to add incentives to encourage innovation in these areas. Yet 26 per cent of our people live below poverty line and we are “developing” to that extent.
The age-old IP rules that were premised on this neat distinction between developed versus developing countries don’t fit us anymore. This calls for ‘new’ norms, and we need to ‘innovate’ in our IP policy as well, without blindly copying norms created by the west.
Perhaps the time is ripe to constitute another committee to help us determine what the optimal ‘tautness’ of our patent/innovation policy string ought to be in today’s knowledge economy.”
Dear Pharmalyst,
Thanks for your comments. Unfortunately, I haven’t seen this ET article profiling Sun–can you please send this to me? Also, great blog!! I am going to link to it soon.
Dear Murti,
Thanks for your queries. Details of this drug regulatory directive and its wordings are mentioned in one of my articles. Please see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=764066. If you have problems downloading, please let me know.
Also, as I mentioned in the blog, an increase in stability might not exactly count as “therapeutic efficacy”. Therefore we need to ask whether we ought to limit our efficacy to only “therapeutic efficacy”. I hope this clarifies.