“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!!