Roche vs Cipla: Was Roche’s Legal Strategy Flawed?

Readers may recollect our earlier post on legal strategy in the context of the famous Novartis (Glivec) patent dispute. I compared the patent strategies of Roche and Novartis and noted:

“Compare and contrast Novartis’ aggressive and weakly thought out patent strategy with that of Roche, which has gone on to acquire four patents already. Its patent covering pegylated interferon (Pegasus) has now been challenged in a post grant opposition, but one hardly hears of this in the press. Roche has been strategic enough to play it quiet, increasing the chances of it’s patent applications being decided in a more objective manner. Novartis has only excacerbated the politicization of this dispute—and given that most adjudicators are not hermetically sealed off from society, it is likely that a steady stream of anti Novartis headlines pouring out of leading newspapers will have their desired impact.”

Well, from whatever little we’ve seen of Roche’s performance in their latest bout with CIPLA before the Delhi High Court, it appears that I’d spoken too soon. Folks watching this litigation closely will agree that Roche’s loss can be attributed in large part to flawed legal strategy. For our previous posts on this issue, see here.

Let me try and discuss some of them below. I hope our readers appreciate that this post centers around legal strategy (a topic that I am deeply interested in, given that I was an intellectual property practitioner, prior to making the transition to academia). It does not purport to deal with policy arguments or determine which side is right or wrong.

1. Failing to Produce Patent Claims In Court

We had already touched upon this in an earlier post, and I recapitulate:

“Apparently, Roche’s application for an ex-parte interim injunction did not even contain the complete specification of the patent! They merely filed a copy of the patent certificate issued–as anyone familiar with patents knows, the certificate merely lists the title of the invention and the inventor’s name etc. It does not contain the “claims”, “description of invention” or other substantive details of the patent. How did Roche expect to get an ex-parte injunction without submitting this, we wonder? Of course, CIPLA’s counsel immediately pointed to this, and on the next day of hearing, this complete specification was submitted. Bad foot to start off on, I think.”

2. Failure to Argue “Irreparable Injury”

Any decent law student will know that an injunction is not automatic in India, but can issue only if 3 conditions are satisfied:

1. Prima Facie case in favour of the plaintiff
2. Irreparable injury to the plaintiff, if injunction not granted
3. Balance of convenience is in favour of the plaintiff.

Roche merely set out to satisfy the first criterion above and assumed that once a “prima facie” case was made out, it would win the case. Not so, said the judge and took the counsel to task in his judgment:

“The last and also significant factor that has to be examined is the question of irreparable hardship. Strangely, the plaintiff did not even address the court on this issue – presumably on its assumption that an injunction would follow once a prima facie case was established. As discussed earlier, in the section concerning balance of convenience, irreparable hardship is a separate distinct head which the Court of necessity has to examine and be satisfied about, while considering interlocutory applications for injunction. The crucial aspect here is whether refusal of injunction would cause such irreparable hardship to the plaintiff as cannot be later compensated in mandatory terms. “

3. Misrepresenting the “Price”?

Roche’s counsel argued that its drug, Tarceva was priced at Rs 3200 per capsule. CIPLA’s counsel countered this by producing packaging belonging to Roche which showed the MRP as Rs 4800 per tablet. As stated in the judgment by Justice Bhat:

“The Defendant contests this and has produced packaging of the plaintiff and copies of bills disclosing the particulars of Tarceva, as costing Rs. 48,000/- per strip of 10 tablets.”

It was Roche’s word against what was stated on the packaging. No points for guessing which way the judge went. No doubt, this error must have cost Roche’s credibility dearly. Judges are human after all, and do not take too kindly to litigants that are seen to be taking it for a ride.

4. Failure to Publicise “Access” Program

Prashant posted earlier on a Mint report, where Mr Telang went on record to state that: “We have assistance programmes where we support patients, free of cost. I don’t have numbers but, whenever a patient needs assistance and the doctor requests us, we always provide it.”

Pray, why wasn’t this brought to the attention of the court? An access program would have sufficed to dispel the court’s concern that poor patients could not afford Roche’s expensive drug, Tarceva. Had this been publicised, the court would have been more likelier to find that the “public interest” was in favour of Roche being granted the injunction.

Roche ought to have carefully studied the Novartis EMR litigation, wherein Novartis publicised its access program (GIPAP) and used it effectively to procure an injunction against generic manufacturers. A little background to enable our readers to appreciate this point:

Novartis had procured an exclusive marketing right (EMR) covering Glivec in November 2003, subsequent to which the price of Glivec shot up around 30 times. Novartis sued generic drug makers such as Ranbaxy and Cipla before the High Courts of Madras and Bombay on the strength of its EMR. The Madras High Court upheld the EMR and injuncted the said drug producers on various grounds, including, inter alia, the fact that Novartis ran a free patient access programme titled “GIPAP” (Glivec International Patients Assistance Program) and undertook to make this programme even more user friendly to patients that could not afford the drug. This, the court held, was sufficient to take care of any “public interest” ground that might have militated against the grant of an injunction. (The Bombay High Court however disagreed with the ruling of the Madras High Court, noting that the validity of Novartis’ EMR had been seriously challenged by the generic manufacturers).

OPPI Nasscom Conference: Responding to Roche’s Counsel

I posted some weeks back on an OPPI-Nasscom conference that I had attended in New Delhi. Interestingly, during the course of my presentation, I was confronted by Roche’s company secretary, Shivkumar Laud. He was very upset with the fact that I attempted to demonstrate Justice Bhat’s decision as a perfectly reasonable one. He alleged that I hadn’t read the judgment and that I had my facts wrong.

Since the moderator didn’t give me a chance to respond (for reasons best known to him), I was unable to point Mr Laud to specific paragraphs in the judgment that would have made clear what the “facts” were. For the benefit of our readers and to throw more light on whether or not Roche got its strategy wrong, let me try and recount some of his contentions and compare them with the findings in Justice Bhat’s judgment.

1. Pricing

Mr Laud contended that Roche was selling at Rs 3200 per tablet. Also, in a recent interview, Roche’s MD in India, Girish Telang insisted that the cost per capsule is Rs 3200.

As I’d mentioned earlier in this post, the judge very categorically dismissed this figure of Roche in favour of figures asserted by Cipla and backed up with hard evidence (i.e Roche’s packaging produced in court). Unless CIPLA doctored the packaging produced in court or produced the wrong packaging, Laud’s “Rs 3200” version will not fly.

Laud further contended that Roche was hit with an import duty of 32%. His contention was that if we removed this “import duty” from the final price, then the price differential (between Roche’s Tarceva and Cipla’s Erlocip) is not that significant. Here again, Cipla effectively demonstrated to the court that Roche ought not to claim the benefit of this import duty in computing the price differential, as Cipla was also hit with a significant excise duty. The judge reproduced Cipla’s contention (as below) and appeared to agree with it:

“The Plaintiff justifies the huge price of Tarceva on the ground that it includes huge customs duties by the plaintiff. Counsel [for the Defendant] submits that Defendant also pays huge excise duties on the drugs manufactured by it and thus the price differential is extremely high despite the said duties paid by parties.”

Unfortunately, neither party nor the judge inform us as to what the excise duty faced by Cipla is. Does Cipla also get hit with a 32% excise duty? Hopefully, more light will be thrown on this during the trial.

2. Injunction Jurisprudence

Laud contended that since the Indian patent act did not speak about “public interest”, the judge was wrong to rely on it.

Perhaps Mr Laud needs to go back to law school. The principles governing the grant of injunctions are not found in the “Patents Act”. Rather, they’ve come out of case law, particularly American Cyanamid vs Ethicon Ltd, a case which Indian courts pledge allegiance to even today. The principles evolved through American Cyanamid and recounted in innumerable Indian decisions are again reproduced below:

1. Prima Facie case in favour of the plaintiff
2. Irreparable injury to the plaintiff, if injunction not granted
3. Balance of convenience is in favour of the plaintiff.

As we noted in an earlier post, the judge creatively read in “public interest” into the “irreparable hardship” and the “balance of convenience” factors (the second and third factors) and held as below:

““ Court is of the opinion that as between the two competing public interests, that is, the public interest in granting an injunction to affirm a patent during the pendency of an infringement action, as opposed to the public interest in access for the people to a life saving drug, the balance has to be tilted in favour of the latter. The damage or injury that would occur to the plaintiff in such case is capable of assessment in monetary terms. However, the injury to the public which would be deprived of the defendant’s product, which may lead to shortening of lives of several unknown persons, who are not parties to the suit, and which damage cannot be restituted in monetary terms, is not only uncompensatable, it is irreparable. Thus, irreparable injury would be caused if the injunction sought for is granted.”

It is also important to point Mr Laud to the fact that “public interest” is not a far fetched idea in injunction jurisprudence. In fact, it is routinely deployed by the worlds most patent friendly nation–the US. What is paradoxical is that even as we speak, Roche is invoking “public interest” to avoid being injuncted by a court in a matter involving Amgen’s patent. In other words, while Roche admits that it infringes Amgen’s patent, it is asking the court to not injunct it since it is in the “public ” to make a cheaper and allegedly better product to the consumer. As we remarked in an earlier post: surely, what’s sauce for the goose is not sauce for the gander!

Laud also fails to appreciate the fact that Justice Bhat’s judgment does actually help patentees to some extent. This judgment categorically dispels the existing myth (reinforced through countless case law) that no injunction would issue if the patent is a recent one (the oft touted 6 year rule). This myth resulted in a scenario where there would be no injunction in a patent case, where the patent was in force for less than 6 years. Justice Bhat held as below:

Thankfully, Bhat dispelled this myth and found against this almost “per se” like rule. He held thus:

“One must confess bafflement at the “six-year” rule preventing courts in India from granting interim injunction. No provision of law or rule was brought to the notice of the court in support of this practice. The six-year rule appears to have crept in Manicka Thevar, and subsequently picked up in other judgments to be developed into a universal rule.”

3. Wrong Counsel:

Laud contended that the legal strategy and advise by Roche’s counsel were top of the line and that Roche did not suffer on this count.

As we noted earlier, Roche’s counsel went to court on the first day praying for an ex parte interim injunction without so much as producing the patent claims before the court. Secondly, Justice Bhat takes Roche to task in his judgment for failing to argue the “irreparable injury” factor.

If a court has to berate counsel for missing out on what are obvious points of law/arguments, this must be some indication of whether or not counsel is competent.

On a related note, it seems paradoxical that in two of the biggest patent litigations till date (Novartis first and now Roche vs Cipla), MNC’s with deep pockets picked incompetent counsels who botched up their cases. Whereas the home grown generic companies picked the smartest legal brains, who formulated a far superior legal strategy for them.

Can Roche Win the Case?

Justice Bhat’s order is under appeal now. I’d be very surprised, if an appellate bench overturns Justice Bhat’s nuanced findings. As I’ve repeatedly argued, given Roche’s flawed legal strategy and the facts on record that he had before him, the judge could not have decided any other way.

However, one has to remember that Justice Bhat’s order was in the context of a suit for an “interim injunction”—Roche prayed that till the matter was finally adjudicated upon, Cipla be injuncted. The matter will soon go to trial for a final adjudication–to determine whether or not Roche is entitled to prevent Cipla from manufacturing and selling Erlocip.

At the trial, Roche has two options if it desires to procure a permanent injunction against Cipla.

i) It ought to publicise its access program (if it does really exist) and not be coy about it. In fact, it has to successfully demonstrate to the court that its access program works reasonably well and that there are “objective” and “transparent” criteria for determining patient eligibility etc .

ii) The second option is to lower its prices. Readers will recollect our earlier post, where we have shown that the price of Tarceva in India is almost the same (or higher) than what it costs in the richer developed countries such as the US and UK.

As we noted in an earlier post, Justice Bhat’s finding on “public interest” could be transposed to the final stage as well—in other words, if the price differential between Roche and Cipla continues and if Roche’s price causes a serious access crunch, then “public interest” would weigh in favour of denying Roche the permanent injunction.

Naturally, Roche ought to be concerned about this. If Roche does lower Tarceva prices (or demonstrates effectively that no patient is denied access to the drug despite its high price), a judge is more likely to find in its favour on the “public interest” count. Most judges and policy makers are not likely to be bothered about where the drugs are coming from, so long as they are reasonably priced. In other words, if the drugs are affordable, then there is no reason to prefer Cipla over Roche, in a patent infringement context. That would smack of pure jingoism!

Concluding Remarks: Pricing, Number Crunching and Perception

I hope the above points on strategy offer some food for thought to those of our readers who are interested in legal strategy. I would love to hear from you on what you think.

On a broader note, in view of the prevailing political climate in India, big pharma needs to be concerned about its pricing strategy. The recent BJP victory in Karnataka and the onset of national elections is bound to spur the Congress to pursue more populist policies. It is likely that it will favour measures aimed at lowering drug prices. Therefore, big pharma needs to introspect and carefully rethink pricing strategies.

Granted that its extremely difficult to determine what constitutes an “affordable” price. Or to determine the extent to which pricing impacts access. Till date, I’m not sure how many extra patients have availed of CIPLA’s lower priced version, Erlocip. In other words, how many patients can afford Erlocip (at Rs 1600 a capsule) as opposed to Roche’s Tarceva (Rs 4800 a capsule). More importantly, what is the number of patients that cannot afford either of these drugs? And in such a case, who bears the burden of ensuring access? Interesting issues to mull on—lets hope that some numbers emerge once the matter goes to trial–numbers that will help throw more light on the ever contentious “patents vs public health” debate.

Difficulties in “affordable price” determination notwithstanding, it seems unfair that India pays the same price as the richer and better insured countries such as the US and UK. As a friend of mine quipped once: when a McDonald burger costs less in India than in the US, why should Indians pay the same price for drugs as their richer counterparts in the US or EU? I agreed and replied that it ought to be the other way around—drugs ought to cost less and burgers and junk food ought to cost more!

Abhishek Manu Singhvi, Congress spokesperson, was on television (NDTV) last night attempting to explain the Congress’s defeat in the Karnataka elections. He contended that the Left parties failed to appreciate the value of public “perception” i.e. the public saw the Congress-Left coalition as a terribly divided government that could never work together. Take the nuclear deal for instance. Singhvi’s remarks were in response to a statement by the Left spokesperson (Raja) that all that the Left offered was “constructive criticism” of the Congress’ economic policies.

My point is not to delve deeper into these political spins—but to merely highlight a key word used by Singhvi, who also happens to be counsel for Roche and had argued the case on their behalf before Justice Bhat. Throughout his interview, Singhvi stressed the word, “perception”.

I want our readers to try and imagine what transpires in the mind of an Indian judge, when he/she is informed by a very persuasive counsel that a drug costs the same in India, as it does in richer countries such as the US and UK. “Perception” matters! At least from the point of view of legal strategy and courtrooms.

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15 thoughts on “Roche vs Cipla: Was Roche’s Legal Strategy Flawed?”

  1. There is a particular query I had with regard to your post.

    It has been the defense of CIPLA as you point out in your post, that the excise duty paid by them nullifies the customs duty paid by Roche.
    Now imports presently not only pay the basic customs duty which is 32%but also an amount equal to the excise paid by local producers as CVD plus additional import duties to offset local sales tax.
    So what the importer is actually paying is

    Basic Customs plus CVD plus Additional Customs Duty.

    So, CIPLA’s argument is not really making sense. While this itself is a very small part of the entire puzzle, was their an oversight on the part of the lawyers.

  2. @Sagnik: Thanks for your comment. I am still searching for more data on what the respective “import” and “excise” duties were for Roche and Cipla respectively. Hopefully more information will come to light during the trial. In the interim, if you come across the true rates, please do let us know.

    @Anon: Unfortunately, there was no previous comment from you.

  3. Dear Shamnad,

    Following is the comment I tried to post yesterday…

    The final decision has to be based on the merits of the patent. Even if Roche publicises its access program and lowers down the drug prices, the arguments which it is going to submit in view of the objections raised for the validity of the patent matters the most right now. I am doubtful if the merits of the patent will be decided based on these two points i.e. access program and lowering the drug prices. Although these points were considered for not granting temporary injunction, it would be interesting to see how these things influence the validity of the patent.

    As you rightly said that it is difficult for the appellate bench to overturn Justice Bhat’s findings taking into account flaws from Roche’s counsel. If at this stage Roche lowers drug prices and initiates the access program, are there any chances that the appellate bench gives the decision in Roche’s favor?


  4. I think this makes an ideal situation for writing to the RTI.

    Found a 2002 article…(which is pre-2005 amednment would not be accurate in terms of % etc.)..but lays down various duties and taxes which were levied at that time atleast. the hypotehtical values taken do sort of show how the generic drug is far cheaper than the imported. (besides..its obvious..generic pharmas are also here to make its not like they are not making profits. But when their investment is lesser, the margin for making profit increases i suppose?)

    “For most other pharmaceuticals, the duty structure would be roughly as below:

    Rupies (Rs.)

    * C.I.F. value of the imported item (say): Rs.10.00

    * Basic duty: 30% of c.i.f value Rs.3.00

    * Countervailing duty 16% of c.i.f. value plus basic duty plus surcharge Rs.2.08
    (equal to the rate of excise duty if the item was made in India)

    * Special additional duty 4% of the total of all the above Rs.0.60

    * Total landed cost Rs.15.68

    * Effective duty rate 56.8%

    Note 1.: c.i.f. value is based on supplier’s invoice, which if in foreign currency is converted to Indian currency at a standard rate.

    Note 2.: duties are paid by Indian importer in Rupees. Supplier can be paid in foreign currency: US$ etc.

    Duty on Local Manufacture

    6.2 In case the product is manufactured in India, the primary tariff structure would be as below:

    * Ex-factory sale price of the item (say) Rs.10.00

    * Excise duty: 16% of the above value Rs.1.60

    * Total ex-factory price Rs.11.60

    * Effective duty rate 16%

    Sales Taxes

    6.3 For both imports and local manufacture, after this point, there is a further sales tax levied mainly at the point of sale from the retailer to the customer. This tax is a percentage of the sale price and such percentage is the same for domestic or imported items. It may vary depending on the type of product. There may be other local duties which vary depending on the item and in which State of India the sale transaction takes place. Sales and local taxes vary from 4 to 10% of the price depending on item and location. Sales tax is chargeable upon sale by manufacturer to stockist/ wholesaler, from stockist/ wholesaler to retailer and from retailer to customer. In some cases there are setoffs.”

    1. Can the court give directions to regulate price under the Drugs (Prices Control) Order 1995 instead of refusing the interim injunction (considering prima facie case etc have been shown)?

    2. there was a demand before the 2008 budget for exemption of life savings drugs from VAT..and some other duties etc. If such measures are possible (like the decrease in excise duty from 16% to 8%) then is it fair to hold the inventor alone answerable on public interest?


  5. Shamnad,

    This should likely be placed on an earlier section but your post reminded me of this issue.

    I’m no Con law guy, but based on my recollection, the entire point of a Democracy is to ensure that certain Constitutional rights are granted even if they go against the will of the “oppressive majority.”

    From that perspective, does the Roche case, their weak substantive arguments aside, hint at what may be a disturbing lean towards politicization? Perhaps, at least in the realm of Indian patent law? My lack of knowledge of Indian Patent law pales in comparison to my lack of knowledge about the rest of Indian law.

    I agree with your prior assertions that Japan, Germany and the US adapted their interpretations of patent law while they were developing. I also agree that whats good for the goose is good for the gander. However, in a country with the broad spectrum of ethnic diversity found in India, a Judiciary which so easily bends to the popular will or what seems morally right as opposed to legally correct obscures the separation between the various branches of the government. Though I do anticipate/see your point that Indian Patent laws do give creative judges the flexibility to do the right thing. Just thought I’d throw it out and get your feedback. Is the set of Roache decisions more political than precedent based? Moreover, if keeping a low profile or pulling some superficial PR move is the key to winning a patent infringement case, this seems to contradict notion we all like to harbor about an impartial judiciary. Indeed, in the U.S., and I’m sure India too, judges must often make painfully unpopular decisions to ensure that all are give their Constitutionally granted rights. I assume the same should apply to Indian IP cases.

    Hopefully you and your readers can enlighten me on this topic.

  6. Dear Anon,

    You raise very valid points. One–the more important issue at trial will of course be “validity”. If invalid, then we don’t really need to go into issues such as public interest. The points re: access programs and prices were raised on the assumption that the patent will be held valid–an assumption that is fairly obvious from the post.

    But like you, I’m a little wary of a judge deploying the “pricing” stick once he finds the patent “valid”. A temporary order (in the context of patent validity being questioned) which uses the framework of “pricing” and “public interest”, particularly since the drug is a life saving one seems reasonable. However, at the final stage, if the patent is held valid, if “pricing’ is to be factored in–then what are the likely parameters. How does one determine what an “affordable” price is? Unfortunately, the way Justice Bhats order reads now, the pricing and public interest argument can be invoked even if the patent is held valid.

    As I queried in my post: what if a number of patients cannot afford both drugs (both generic and innovative). Can the generic show that even one person will fall out of “affordability” bracket and therefore one life will be saved, if the injunction is not granted? Assuming that such a statistic can be procured as definitive proof. And if so, should this be the yardstick?

    Thanks for pointing to data on the customs duties etc. Very helpful–it’ll be great to see a judicial determination on this count that settles the issue.

    And lastly: yes, if Roche does bring down prices now or publicise its access program, it might win the appeal. As you may know, a couple of hearings (before the appellate court) have already gone by–and none of this has been done.

  7. Dear Sid,

    Thanks for your comment.

    You’re right—patents are very very politicized in India—given our history with pharma patents. So from the point of view of counsel and legal strategy, a patentee has to be aware of the political dynamics and strategise accordingly. Of course from the point of view of optimal policy and an independent judiciary, the last thing you want is populist patent decision making.

  8. Dear Shamnad,

    Thanks for replying. Section 3 (d) issue is going to pop up during the invalidation trial. Lets see if this too goes the Glivec way.

    Ps: It was not me who gave the data on custom duties.

  9. Add one more to the MNC loss side:
    Zydus winning on Trademark issues for Penegra against Pfizer’s Viagra….

    Pfizer tried to bring it Patent related issues but could never go ahead since the patents were not held by/ assigned to Pfizer India.

    At that time, we felt that Pfizer’s loss was more on account of bad Lawyers than its weak position.

  10. Again..
    Cant the court (instead of measures like judge made CL etc.)- give directions to regulate price under the Drugs (Prices Control) Order instead of refusing interim injunction simply on price issues(considering prima facie case etc have been shown)? Is it fair to penalize an “inventor” and hold him responsible for public health? (please dont say its corporate social responsibility!)


  11. The ‘couple of hearings’ before the DB ..were not argued as the judges had another important matter to take up..and they adjourned Roche to a later date. so it hasnt really come up for arguments yet.

  12. Dear Anon,

    Thanks for comments on the Pfizer: Zydus case. I wasnt aware of this. If you’re willing and have time, we’d love to have a guest post from you on this issue (subject to our editorial inputs etc).

  13. Dear Anon,

    Thanks for the factual correction on the state of “appeal”. Are you a litigator? My understanding is that even if Roche lowers its prices (which does not seem to be the case, to the best of my knowledge) and brings this up in the appeal (again, from the pleadings so far, I don’t believe this to be the case), the appellate court is likely to remand the case back to the trial court. So that the trial court can then apply its mind to the “new” facts and come to a finding. to this extent, it can grant permission to Roche to amend its plaint etc and ask for an injunciton on this new lower “price” ground.

  14. Dear Anon,

    Your idea of a court passing the matter on to a price control authority is an interesting one. After all, this authority is better placed than most to decide whether or not a price is exorbitant.

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