VIPRA DISSERTATION

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DECLARATION I, VIPRA RATHORE, a student of Institute of Management Education, Sahibabad hereby declare that the Dissertation titled A STUDY ON THE EFFECT OF PATENT ON INDIAN PHARMACEUTICAL INDUSTRYhas been completed by me under the guidance of Prof. TARUNA GUTAM as part of the course curriculum for the partial fulfillment of the PGDM course for the academic session 2009-11. I further declare that the contents of the report are authentic and specific references have been quoted with the secondary data for better cross check and verification. It is also declared that this work is original and has not been published or presented earlier. VIPRA RATHORE PGDM (2009-11) IME, SAHIBABAD

Transcript of VIPRA DISSERTATION

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DECLARATION

I, VIPRA RATHORE, a student of Institute of Management Education, Sahibabad

hereby declare that the Dissertation titled “A STUDY ON THE EFFECT OF

PATENT ON INDIAN PHARMACEUTICAL INDUSTRY” has been completed

by me under the guidance of Prof. TARUNA GUTAM as part of the course

curriculum for the partial fulfillment of the PGDM course for the academic session

2009-11. I further declare that the contents of the report are authentic and specific

references have been quoted with the secondary data for better cross check and

verification. It is also declared that this work is original and has not been published or

presented earlier.

VIPRA RATHORE

PGDM (2009-11)

IME, SAHIBABAD

CERTIFICATE OF COMPLETION

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DEPARTMNET OF MANAGEMENT

INSTITUTE OF MANAGEMENT EDUCAION,

SAHIBABAD GHAZIABAD

This is to certify that VIPRA RATHORE, a student of Institute of Management

Education, Sahibabad has successfully completed the Dissertation as partial

fulfillment of the PGDM course in the academic year 2009-11 . The title of the

Dissertation was “A STUDY ON THE EFFECT OF PATENT ON INDIAN

PHARMA INDUSTRIES”. This project was completed under the guidance of Prof.

TARUNA GUTAM Faculty, IME.

Date:

Signature

Place:

ACKNOWLEDGEMENT

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At the outset, I would like to thank my mentor Dr. TARUNA GUTAM, (Head of

placement cell IME, Institute of Management Education, Sahibabad), whose give

guidelines to complete the project.

It is my second time to give my report on research that is done by me. Here was very

typical confusing work of it. The research work requires co-operation of many people

and this work is no exception. It is difficult to thank individually all the person who

patronized this work. The researcher has asked for favors, borrowed ideas, expression

and facts from so many that it would require one volume to give credit to all. So, the

researcher wants to thanks all the patrons of this report.

I am very thankful to all the faculty members, the whole college staff for providing

me with necessary facilities and support, essential for bringing out this work in a short

time.

VIPRA RATHORE

PGDM, IME

AUTHORISATION

This is to certify that the project report entitled “A STUDY ON THE EFFECT OF PATENT

ON INDIAN PHARMA INDUSTRIES” done by the VIPRA RATHORE roll no. 9117, is an

authentic work carried out by her at ICICI prudential life insurance, under my guidance. The

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report is submitted as partial fulfillment of the requirement of PGDM program at IME. The

matter embodied in this project work has not been submitted earlier for the award of any degree

or diploma to the best of my knowledge and belief.

Dr.

TARUNA GUTAM

HOD- IME

EXECUTIVE SUMMARY

As a part of our study curriculum it is necessary to conduct a Dissertation report. It

provides us an opportunity to understand the particular topic in depth and which leads

to through to that topic. My topic for the Dissertation is titled as “A Study on the

effect of patent on Indian Pharmaceutical Industry”.

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To start with we will give brief information regarding Pharma sector then moving to

the main topic we will explain what is topic is all about.

With respect to the effect of Patent on Indian pharmaceutical Industry oriented. There

are certain theories narrated as operant conditioning and projective theory. Based on

secondary source certain theoretical aspects are also included as a part of study.

At last conclusion of report, findings and suggestions was given based on study of

secondary source as well as primary research

SL. NO. PARTICULARS PAGE NO:

1. INTRODUCTION

(1.1) Pharmaceutical Industry

(1.2) Indian Market Prospect

(1.3) Top 10 Pharmaceutical industries

2. RESEARCH METHODOLOGY

(3.1) Research Objective

(3.2) Research Method

(3.3) Methods of Data Collection

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3. Descriptive work of my Sub-Topics

(3.1) Introduction of patent

(3.2) History of patent law

(3.3) TRIPS

(3.4) Provision relating specifically to patents

4. DATA ANALYSIS AND INTERPRETATION

(4.1) Patent and Indian pharmaceutical Industry

(4.2) Classification of pharmaceutical Industry

(4.3) Generic drug

(4.4) challenging Patents

5. THE IMPACT OF WTO ON PHARMA PATENTS

6. PATENT & FUTURE OF THE INDIAN PHARMA INDUSTRY

7. THE GLEEVEE CASE

8. BIBILIOGRAPHY

CHAPTER-FIRST

INTRODUCTION

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Pharmaceutical Industry

Pharma refers to two types of products mainly i.e. Medicines and Surgical

instruments. Typically a consumer (patient) buy these product when they are not well.

The sector course a wide range of products such as analgesic, anti-bacterial, insulin,

bactericidal etc.

INDIAN MARKET PERSPECTIVE (PHARMA)

The Indian Pharmaceutical Industry today is in the front rank of India’s science-

based industries with wide ranging capabilities in the complex field of drug

manufacture and technology. A highly organized sector, the Indian Pharma Industry is

estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks

very high in the third world, in terms of technology, quality and range of medicines

manufactured. From simple headache pills to sophisticated antibiotics and complex

cardiac compounds, almost every type of medicine is now made indigenously.

The Indian Pharmaceutical sector is highly fragmented with more than 20,000

registered units. It has expanded drastically in the last two decades. The leading 250

pharmaceutical companies control 70% of the market with market leader holding

nearly 7% of the market share. It is an extremely fragmented market with severe price

competition and government price control.

The pharmaceutical industry in India meets around 70% of the country's demand for

bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets,

capsules, orals and injectibles. There are about 250 large units and about 8000 Small

Scale Units, which form the core of the pharmaceutical industry in India (including 5

Central Public Sector Units). These units produce the complete range of

pharmaceutical formulations, i.e., medicines ready for consumption by patients and

about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production

of pharmaceutical formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing for

most of the drugs and pharmaceutical products has been done away with.

Manufacturers are free to produce any drug duly approved by the Drug Control

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Authority. Technologically strong and totally self-reliant, the pharmaceutical industry

in India has low costs of production, low R&D costs, innovative scientific manpower,

strength of national laboratories and an increasing balance of trade. The

Pharmaceutical Industry, with its rich scientific talents and research capabilities,

supported by Intellectual Property Protection regime is well set to take on the

international market.

Top 10 Pharmaceutical Companies in India

1. Ranbaxy

With a 2007 turnover of Rs 4,198.96 crore (Rs 41.989 billion) by sales, Ranbaxy

is the largest pharmaceutical company in India.

2. Dr   Reddy's   Laboratories

With the turnover of Rs 4,162.25 crore (Rs 41.622 billion), Dr Reddy's

Laboratories is the second largest pharmaceutical company in India.

3. Cipla

With the revenue of Rs 3,763.72 crore (Rs 37.637 billion) Cipla is the third largest

pharmaceutical company in India.

4. Sun Pharma Industries

Sun Pharma Industries is the fourth largest pharma company in India with the total

revenue of Rs 2,463.59 crore (Rs 24.635 billion) and led by Dilip Sanghvi.

5. Lupin Labs

Lupin Labs has the total revenue of Rs 2,215.52 crore (Rs 22.155 billion

6. Aurobindo Pharma

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Sales revenues stood at Rs 2,080.19 crore (Rs 20.801 billion) makes it the sixth

largest pharmaceutical company in India.

7. GlaxoSmithKline Pharma (GSK)

GSK is the seventh largest pharma company with the total sales revenue of Rs

1,773.41 crore (Rs 17.734 billion)

8. Cadila   Healthcare

Eight largest company has the total sale revenue at Rs 1,613.00 crore (Rs 16.13

billion)

9. Aventis Pharma

Aventis Pharma has the revenue of Rs 983.80 crore (Rs 9.838 billion) and the

ninth largest pharmaceutical company in India.

10. Ipca Laboratories

Revenue of Rs 980.44 crore (Rs 9.804 billion) makes Ipca India's 10th largest

pharma firm by sales.

RESEARCH METHODOLOGY

Research Objectives:

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1. To study the effect of patent on Indian pharmaceutical Industries.

2. To study the Implications of patent on Pharmaceutical Industry.

3. To study the classification of pharmaceutical industry.

Data collection Method:

(a) Secondary Data Collection method:

(b) Reference books.

(c) Internet.

(d) News paper

(e) Articles

CHAPTER – FIRST

Meaning of Patent

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A patent is a set of exclusive rights granted by a state (national government) to an

inventor or their assignee for a limited period of time in exchange for a public

disclosure of an invention.

PATENTS

The basic obligation in the area of patents is that, inventions in all fields of technology

whether products or processes shall be patentable if they meet the three tests of being

novel, involving an inventive step and being capable of industrial application. In

addition to the general security exception, which applies to the entire TRIPS

Agreement, specific exclusions are permissible from the scope of patentability. These

are available in the areas of inventions whose commercial exploitation is to be

prevented to protect public order or morality, human, animal plant life or health or to

avoid serious prejudice to the environment. In addition, we can exclude from

patentability diagnostic, therapeutic and surgical methods for the treatment of human

and animals, plants and animals other than microorganisms, and essentially biological

process for the production of plants and animals other than non-biological and micro

biological processes.

To meet our TRIPS obligations as on 1.1.2000, the Patents (Second Amendment) Bill,

1999 has been introduced in the Parliament in December 1999 and is before the Joint

Committee of the Houses.

In respect of plant varieties, there is an obligation to provide for protection either by

patents or by an effective sui generis system or by any combination thereof. The

Agreement does not spell out the elements of an effective sui generis system and it is

left to each Government to determine the elements, which could be deemed to be

providing effective protection. A decision has been taken to put in place a sui generis

system as it is perceived to be in our national interest. A Bill in this regard is before

the Joint Committee of the Houses of the Parliament.

INDIAN PATENT LAW AND TRIPS

Patent is a monopoly right granted by the State to an inventor for a limited period, in

respect of the invention, to the exclusion of all others. A system of patents serves

many useful purposes. If the invention is commercially utilized, the patent ensures

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just reward in terms of money and recognition for the inventor, for all the time and

effort, knowledge and skills, money and other resources invested to come up with the

invention. For the society, commercial exploitation of an invention means newer and

better products, higher productivity, and more efficient means of production. The

objective of granting the patent is to ensure that it is worked (utilized) in the country;

and it is not meant to block production or further research and development. A patent

system encourages technological innovation and dissemination of technology. This in

turn stimulates growth and helps the spread of prosperity and better utilization of

resources. In an age when technology and knowledge are the greatest generators of

wealth, the number of patents filed and granted nationally and internationally is a

good indicator of the health of science and technology in a country. Patent is granted

by a State and hence has territorial applicability. That is, it is valid only in the

country, which grants the patent. There is no mechanism to obtain a global patent and

you have to apply separately in all the countries where you want the invention to be

protected.

HISTORY OF PATENT LAW

Post independence, a committee headed by Dr Bakshi Tek Chand was set up to

examine the patent system prevailing under the Patents and Designs Act 1911, which

submitted its report on 30th April 1950. The report observed that — "The Indian

Patents System has failed in its main purpose, namely, to stimulate inventions among

Indians and to encourage the development and exploitation of new inventions for

industrial purposes in the country so as to secure the benefits thereof to the largest

section of the public.”

In 1957, Govt. of India appointed Justice N. Rajagopala Ayyangar examines and

review the Patent law in India who submitted his report September 1959

recommending the retention of Patent System despite shortcomings. The Patent Bill,

1965 based mainly on his recommendations incorporating a few changes, in particular

relating to Patents for food, drug, medicines, was introduced in the lower house of

Parliament on 21st September, 1965. The bill was passed by the Parliament and the

Patents Act 1970 came into force on 20th April 1972 along with Patent Rules 1972.

This law was suited changed political situation and economic needs for providing

impetus technological development by promoting inventive activities in the country.

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Under the new Act, a section 5 was introduced that stated that food, medicines, drugs

etc will be granted only process patents. While there will be both process and product

patents in the other fields of technology, there will only be process patents for

inventions in the fields of drugs, medicines, food, fertilizers and chemicals. The result

of implementation of Section 5 was to ensure the absence of product patents on drugs

and medicines; which meant every new drug patented elsewhere could be legitimately

reverse engineered and developed in India by way of any process that was not

patented. The impact on the Indian pharma scene and the health sector was immediate

and significant. It resulted in the presence of a number of pharmaceutical companies

that could quickly develop any drug new or old by every process that had not been

patented. Since the drugs were not on patent, these could be made available in

markets at very reasonable prices.

TRIPS- A Major Step Forward

The General Agreement for Tariffs and Trade (GATT) was set up in 1948 to deal with

the multilateral trade issues. The latest round of GATT negotiations, the Uruguay

Round was finally concluded in April 1994, and led to establishment of World Trade

Organization (WTO), which became operational on 1 January 1995. The agreement

on Trade Related Aspects of Intellectual Property Rights (TRIPS) was adopted as an

integral part of the Final Act of the Uruguay Round, so that all the countries which

become members of WTO must accept the provisions of the TRIP’s as a part of deal.

The TRIP’s agreement covers a whole range of intellectual property issues including

patents, trademarks, geographical indications, industrial designs, integrated circuits,

copyright and trade secret protection etc.

PROVISIONS RELATING SPECIFICALLY TO PATENTS

Articles 27-34 of TRIP’s require WTO member states to introduce strong patent

protection, the most important elements of which are:

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Patents to be available under essentially the same criteria of patentability as in the

European Patent Convention (EPC) for all fields of technology, including product

patents for pharmaceuticals (Article 27).

Patents rights to be without discrimination as to whether products are locally made

or imported (Article 27).

Provisions defining what constitutes infringements: this includes importation of a

patented product (Article 28.1(a)) and using, selling or importing the direct

product of a patented process (Article 28).

Compulsory licenses to be allowed only under strict conditions (Article 31).

Patent term to be at least 20 years from filing date (Article 33). According to the

Transitional provisions (Article 70.2) this should also apply to patents which are

already granted.

Reversal of onus of proof for process patents (Article 34).

These differences in patent systems led to disputes in the GATT negotiations on the

inclusion of IPRs in the WTO. The type of patent system that India established was

clearly against the global IP regime promoted by the US. The main objection of the

US is to the provision in India's patent law that allows for process but not product

patents in the area of food, drug or medicine. The United States terms the activities of

India to find alternative processes as “piracy”. According to the US, Indian firms are

copying technology developed by advanced nations. This is leading to large-scale

losses for the US. The Pharmaceutical industry in the US has been especially vocal on

this issue. Pharma, the association that represents US based pharmaceutical

companies’ points out, “Based on the refusal of the Government to provide

pharmaceutical patent protection, India has become a heaven for bulk pharmaceutical

manufacturers who pirate the intellectual property of the world’s research- based

pharmaceutical industry.”

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India is a signatory to the TRIPS Agreement hence it modified its patents law in

conformity with TRIPS Agreement. India was put under the contractual obligation to

amend its patents act in compliance with the provisions of TRIPS. India had to meet

the first set of requirements on 1- 1-1995. This was to give a pipeline protection till

the country starts giving product patent.

It came to force on 26th March 1999 retrospective from 1-1-1995. It lays down the

provisions for filing of application for product patent in the field of drugs or

medicines with effect from 01.01.1995 and grant of Exclusive Marketing Rights on

those products although the domestic industry in India began to mobilize to counter

India’s policy shift in on IPRs. Pharmaceutical companies and other interests were

totally against changing patent laws.

India amended its Patents Act again in 2002 to meet with the second set of obligations

(Term of Patent etc.), which had to be effected from 1-1-2000. This amendment,

which provides for 20 years term for the patent, Reversal of burden of proof etc. came

into force on 20th May, 2003.

The Third Amendment of the Patents Act 1970, by way of the Patents (Amendment)

Ordinance 2004 came into force on 1st January, 2005 incorporating the provisions for

granting product patent in all fields of Technology including chemicals, food, drugs &

agrochemicals and this Ordinance is replaced by the Patents (Amendment) Act 2005

which is in force now having effect 1.1.2005.

CHAPTER THREE

PATENTS AND INDIAN PHARMACEUTICAL INDUSTRY

(COMPETITION ISSUES)

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INDIAN PHARMACEUTICAL INDUSTRY- AN INSIGHT

The Indian pharmaceutical industry is a successful, high-technology-based industry

that has witnessed consistent growth over the past three decades. Indian

Pharmaceutical Industry has an important role in promoting public health. The net

worth of the industry is about 8 Billion Dollars with a growth rate of 8-9% PA. It is

4th in the world in terms of volume drug output and exports to nearly 212 countries.

The growth of an industry are highly dependent on the regulatory environment. India

had a product patent regime for all inventions under the Patents and Designs Act

1911. However, in 1970, the government introduced the new Patents Act, which

excluded pharmaceuticals and agrochemical products from eligibility for patents. This

exclusion was introduced to break away India’s dependence on imports for bulk drugs

and formulations and provide for development of a self-reliant indigenous

pharmaceutical industry and the same helped in-

Reduction in the manufacturing costs in terms of license fee.

Reduction in the costs involved in R&D.

Diffusion of technology and knowledge through reverse engineering.

The lack of protection for product patents in pharmaceuticals and agrochemicals had a

significant impact on the Indian pharmaceutical industry and resulted in the

development of considerable expertise in reverse engineering of drugs that are

patentable as products throughout the industrialized world but unprotectable in India.

As a result of this, the Indian pharmaceutical industry grew rapidly by developing

cheaper versions of a number of drugs patented for the domestic market and

eventually moved aggressively into the international market with generic.

Drugs once the international patents expired. In addition, the Patents Act provides a

number of safeguards to prevent abuse of patent rights and provide better access to

drugs. The Indian Patents (Amendment) Act, 2005 introduced product Patents in India

and marked the beginning of a new patent regime aimed at protecting the Intellectual

property rights of patent holders. The Act was in fulfillment of India’s Commitment

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to World Trade Organization (WTO) on matters relating to Agreement on Trade

Related Aspects of Intellectual Property Rights (TRIPS Agreement).

CLASSIFICATION OF PHARMACEUTICAL INDUSTRY

The global pharmaceutical industry structure can be divided into two:

• Bulk drugs (20%) The bulk drug segment of the market has increased in the past

decade at around 20% annual growth rate.

•Formulations (80%) Production of formulations has increased by around 15%

annually.

The Indian Pharmaceutical Industry among top five producers of bulk drugs in the

world. The largest firms account for the majority of the R& D investment in the

industry and hold the majority of the patents. A small number of multinational

enterprises (MNEs) dominate the global pharmaceutical industry, top twenty-five

MNEs having accounted for 64.5 percent of the world (2003) Firms can be either in

production of bulk drugs or formulations or may manufacture both. Firms in to

formulations may be further classified into innovating firms and non- innovating

firms. However, R&D is insignificant when compared to MNEs. There are about

8174 bulk drug manufacturing units and 2389 formulations units spread across India.

Total: 10563 units.

Anticompetitive Practices in Pharmaceutical Industry & Competition Act 2002

The pharmaceutical industry in India is gearing up to face new challenges. The

product patent regime is no longer the challenge - it is a reality that the Indian pharma

industry has accepted.

The new set of challenges stem from the deeper implications of the imminent product

patent regime. With the exception of a few, most Indian pharma companies are

unfamiliar with the nuances of complex patent prosecution strategies. The research-

based pharmaceutical companies, on the other hand, have firsthand knowledge of

successfully designing and implementing, sophisticated patent prosecution

strategies.27 Therefore, the first hurdle for the Indian pharma industry is unevenness

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in the domain knowledge on patents. The Generic Competition is also an important

issue where Brand-name drug companies have used a number of strategies to prevent

generic competition. Let take a look over on some of issues and Anti- Competitive

practices involved in it.

Generic Drugs

A generic drug (generic drugs, short: generics) is a drug which is produced and

distributed without patent protection. The generic drug may still have a patent on the

formulation but not on the active ingredient. A generic must contain the same active

ingredients as the original formulation. According to the U.S. Food and Drug

Administration (FDA), generic drugs `are identical or within an acceptable

bioequivalent range to the brand name counterpart with respect to pharmacokinetic

and pharmacodynamic properties. By extension, therefore, generics are considered

identical in dose, strength, route of administration, safety, efficacy, and intended use.

In most cases, generic products are available once the patent protections afforded to

the original developer have expired. When generic products become available, the

market competition often leads to substantially lower prices for both the original

brand name product and the generic forms. The time it takes a generic drug to appear

on the market varies from country to country.

Economics

Generic drugs can save patients and insurance companies substantial costs. The

principal reason for the relatively low price of generic medicines is that competition

increases among producers when drugs no longer are protected by patents. Companies

incur fewer costs in creating the generic drug, and are therefore able to maintain

profitability at a lower cost to consumers. The costs of these generic drugs are so low

that many developing countries can easily afford them. For example, Thailand has

imported millions of doses of a generic version of the blood-thinning drug Plavix

(used to help prevent heart attacks), at a cost of 3 US cents per dose from India, the

leading manufacturer of generic drugs.29 Generic manufacturers do not incur the cost

of drug discovery, and instead are able to reverse engineer known drug compounds to

allow them to manufacture bioequivalent versions.

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Generic manufacturers also do not bear the burden of proving the safety and efficacy

of the drugs through clinical trials, since these trials have already been conducted by

the brand name company.

Generic drug companies may also receive the benefit of the previous marketing

efforts of the brand-name drug company, including media advertising, presentations

by drug representatives, and distribution of free samples. Many of the drugs

introduced by generic manufacturers have already been on the market for a decade or

more, and may already be well-known to patients and providers (although often under

their branded name). For as long as a drug patent lasts, a brand name company enjoys

a period of “market exclusivity” or monopoly, in which the company is able to set the

price of the drug at a level which maximizes profitability. This price often greatly

exceeds the production costs of the drug, which can enable the drug company to make

a significant profit on their investment in research and development, thus enabling

them to fund the research and development of new medicines which most generic

companies cannot afford to do. The advantage of generic drugs to consumers comes

in the introduction of competition, which prevents any single company from dictating

the overall market price of the drug. Competition is also seen between generic and

name-brand drugs with similar therapeutic uses when physicians or health plans adopt

policies of preferentially prescribing generic drugs as in step therapy. With multiple

firms producing the generic version of a drug the profit-maximizing price generally

falls to the ongoing cost of producing the drug, which is usually much lower than the

monopoly price.

When can a generic drug be produced?

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When a pharmaceutical company first markets a drug, it is usually under a patent that

allows only the pharmaceutical company that developed the drug to sell it. Generic

drugs can be legally produced for drugs where:

1) The patent has expired,

2) The generic company certifies the brand company's patents are either invalid,

unenforceable or will not be infringed,

3) For drugs which have never held patents, or

4) In countries where a patent(s) is/are not in force.

The expiration of a patent removes the monopoly of the patent holder on drug sales

licensing. Patent lifetime differs from country to country, and typically there is no

way to renew a patent after it expires. A new version of the drug with significant

changes to the compound could be patented, but this requires new clinical trials. In

addition, a patent on a changed compound does not prevent sales of the generic

versions of the original drug unless regulators take the original drug off the market.

This allows the company to recoup the cost of developing that particular drug. After

the patent on a drug expires, any pharmaceutical company can manufacture and sell

that drug. Since the drug has already been tested and approved, the cost of simply

manufacturing the drug will be a fraction of the original cost of testing and developing

that particular drug.

Challenging patents

Brand-name drug companies have used a number of strategies to extend the period of

market exclusivity on their drugs, and prevent generic competition. This may involve

aggressive litigation to preserve or extend patent protection on their medicines, a

process referred to by critics as “evergreening”. Patents are typically issued on novel

pharmacological compounds quite early in the drug development process, at which

time the ‘clock’ to patent expiration begins ticking. Later in the process, drug

companies may seek new patents on the production of specific forms of these

compounds, such as single enantiomers of drugs which can exist in both “lefthanded”

and “right-handed” forms, different inactive components in a drug salt, or a specific

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hydrate form of the drug salt. If granted, these patents ‘reset the clock’ on patent

expiration. These sorts of patents may later be targeted for invalidation by generic

drug manufacturers. Large pharmaceutical companies often spend millions of dollars

protecting their patents from generic competition. Apart from litigation, companies

use other methods such as reformulation or licensing a subsidiary (or another

company) to sell generics under the original patent. Generics sold under the

exclusivity period as they fall under the patent holder's original drug application.

OBJECTIVES:

The main objectives of this policy are:-

a. Ensuring abundant availability at reasonable prices within the country of good

quality essential pharmaceuticals of mass consumption.

b. Strengthening the indigenous capability for cost effective quality production and

exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical

sector.

c. Strengthening the system of quality control over drug and pharmaceutical

production and distribution to make quality an essential attribute of the Indian

pharmaceutical industry and promoting rational use of pharmaceuticals.

d. Encouraging R&D in the pharmaceutical sector in a manner compatible with the

country’s needs and with particular focus on diseases endemic or relevant to India

by creating an environment conducive to channelising a higher level of investment

into R&D in pharmaceuticals in India.

e. Creating an incentive framework for the pharmaceutical industry which promotes

new investment into pharmaceutical industry and encourages the introduction of

new technologies and new drugs.

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THE IMPACT

OF THE WORLD TRADE ORGANISATION ON

PHARMACEUTICAL PATENTS

The establishment of the World Trade Organization (WTO) has led to a tremendous

paradigm shift in world trade. The agreement on Trade-Related (Aspects of)

Intellectual Property Rights (TRIPS) was negotiated during the Uruguay round trade

negotiations of the General Agreement on Tariffs and Trade (GATT) and “one of the

primary reasons for incorporating intellectual property issues into the GATT

framework was the pharmaceutical industry”. India signed the GATT on 15 April

1994, thereby making it mandatory to comply with the requirements of GATT,

including the agreement on TRIPS. India is thereby required to meet the minimum

standards under the TRIPS Agreement in relation to patents and the pharmaceutical

industry. India’s patent legislation must now include provisions for availability of

patents for both pharmaceutical products and processes inventions. Patents are to be

granted for a minimum term of 20 years to any invention of a pharmaceutical product

or process that fulfils established criteria. Compulsory licence provisions under Indian

law will be required to be limited and conditional to comply with the TRIPS

Agreement, and the government will grant such licences only on the merit of each

case after giving the patent holder an opportunity to be heard. In addition, there will

be no discrimination between imported and domestic products in the case of process

patents, and the burden of proof will rest with the party that infringes. India has

decided to avail itself of the full transition period for developing countries and has

until January 2005 to extend patent protection to pharmaceutical products. In keeping

with the TRIPS commitments, India has started on a process of amending the Patents

Act by providing exclusive marketing rights (EMRs) and creating a mailbox system

for patent applications for a period of five years or until the patent is granted or

rejected, whichever is earlier.

This provision was introduced in the Patents (Amendment) Act 1999, which grants

the inventors what is known as “pipeline protection”. If the applicant has already filed

an application for his or her invention in any convention country and a patent or EMR

has been granted in that country on or after 1 January 1995, the applicant would be

Eligible to file for patent to pharmaceutical and agrochemical products in India. These

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patent applications will be kept pending. When India changes its patent law as per

WTO recommendations, the pending patent application will be eligible for product

patent. Until such patent is granted or rejected or for a period of five years (whichever

is less), the applicant will be granted EMRs in India if the application is found

eligible. The amended Patents Act also provides for compulsory license for the EMR

on the same lines as patents and also omits a provision that prohibited Indian

inventors the product patent regime. Some of the existing pharmaceutical companies

believe that product patents will pave the way for innovation in India, while others

hold the view that the high cost of R&D will stifle the growth of the Indian

pharmaceutical Industry.

With a regulatory system focused only on process patents, helped to establish the

foundation of a strong and highly competitive domestic pharmaceutical industry

which in the grip of a rigid price control framework transformed into a world supplier

of bulk drugs and medicines at affordable prices to common man in India and the

developing world. Introduction of product patents will, however, mark the end of a

golden age for IPI (Indian Pharmaceutical Industry). The new regulations will reshape

the landscape of IPI forcing significant changes and divide within the industry. A look

into organization of pharmaceutical producers of India (OPPI) directory shows only

300 units out of 10,000 registered companies are in the organized sector. While

process patent helped to flourish IPI into a world-class generics industry, product

patent regime will filter the best from the pack and would be favorable to players with

built-in scientific and technical resources. The impact of the new regulations will not

deter the Indian pharma majors as they are already doing roaring business in the very

countries where these patent laws are strictly in force. Export markets increasingly

drive IPI: in a turnover of US$5 billion, exports constitute $3.2 billion and the

industry is poised to grow to $25 billion by 2010. The share of IPI in world

pharmaceutical market is 1.0% (ranks 13th) in value and 8% (ranks 4th) in volume

terms. The global market for generic drugs is estimated at $27 billion (2001) and the

expiry of patents on drugs will be worth $80 billion (2005) offers a huge opportunity

to IPI. India today has the largest number of US Food & Drug Administration (FDA)

approved drug manufacturing facilities outside the US. In addition, Drug Master Files

(DMFs) filed by Indian companies with the FDA is 126 higher than Spain, Italy,

China and Israel put together. DMF has to be approved by FDA for a drug to enter the

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US market. Research & Development (R&D) is a key to the strength of

pharmaceutical industry especially in the product patent period. The global

pharmaceutical industry spent $30.4 billion (2001) on R&D. The R&D expenditure

(as a percentage of turnover) by the IPI is low (1.9%) when compared global giants

(1016%). With transition into the new regime many Indian companies are mobilizing

their resources war chest with an increase in their R&D budget. Government of India

(GOI) encouraged the R&D in pharmaceutical companies by extending 10 year tax

holiday to this sector. Besides, planning commission has earmarked $34 million

towards drug industry R&D promotion fund for the tenth plan. FDI in India was low

in prior Product Patent era. Why? Bringing a new drug into the market costs a

company an average of about $800 to $900 million. Some estimates show that patient

recruitment and medical personnel account for nearly 70 per cent of the clinical costs

that are required to bring a drug to market. The less expensive means to raise research

productivity is outsourcing research to low cost havens such as India and China. The

global pharmaceutical outsourcing market stands at $10 billion (2004). Pharma

multinationals have maintained a low-key presence in Indian market due to absence of

product patents and rigid price controls. Pharmaceutical industry did not receive

significant foreign direct investment (FDI). From August 1991 to December 1998 this

industry accounted for a meager 0.44% of the total FDI. Introduction of product

patents will see multinationals strengthening their presence in the country. The second

largest population in the world, a growing economy and rising income levels makes

Indian market difficult to ignore. Global companies would be reluctant to invest in a

country where there is no IPR protection. Eli Lilly (world's 7th Largest Pharma Firm)

has its clinical research focus in the country and had spent considerable amounts over

the last 2-3 years. But we would be only maintaining the quantum and will not expand

even though there is huge potential. Global companies face the same frustration. So

the main activity of the company in the country would be to introduce products from

the parent pipeline.mIn the domestic market, the share of Indian companies has

steadily increased from around 20 per cent in 1970 to 70 percent now. Ranbaxy

Laboratories is the market leader in terms of revenues followed by Cipla and Dr

Reddys Laboratories. Glaxo is the only multinational to figure among the top ten

pharma companies in India. In India, 97 per cent of drugs are off patent and are

manufactured by a vast number of companies. The key therapeutic segments include

anti-invectives’, cardio vascular and central nervous system drugs. Anti-infective

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comprise the largest therapeutic segment in India, accounting for about 26 per cent of

the market. Globally, pharmaceutical industry grew at a compounded annual growth

rate of 9.1 per cent in the last 23 years to $491 billion propelled by a string of

innovative blockbusters. Multinationals were reshaped by mergers and acquisitions as

a way of fattening their research pipelines. This at best represents a short-term

solution. With a slew of brand name drugs losing patent protection in the next few

years and the pressure building for pharmaceuticals to cut price, these giants find

themselves under immense strain to find new drugs and reduce price. So, from the

above discussion it's very evident that before any proper IPR regime specially in the

absence of "Product patent" in India it was not a judicious decision for the

international Pharma companies to invest here in India. FDI cap was raised from 74%

to 100% in 2001 only but we didn't find any change in the pattern of FDI in Pharma

Sector.

Impact after 2005

India a signatory to the WTO resolution on TRIPS Agreement India was thus

committed to recognizing product patents by amending The Indian Patents Act 1970.

As per the minimum standards mentioned in the TRIPS agreement, patent shall be

granted for any inventions, whether products or processes, in all fields of technology

provided they are new, involve an inventive step and are capable of industrial

application without any discrimination to the place of invention or to the fact that

products are locally produced or imported. Accordingly, now patents will have to be

granted in all areas including pharmaceuticals and the effective period of protection is

for twenty years from the date of filing the application. With the implementation of

TRIPS agreement by most of the developing countries by 2005, a stronger patent

regime or product patents will be uniformly applicable on the pharmaceutical

innovations among the member countries of the World Trade Organisation.

The implications of TRIPS for the pharmaceutical sector are that: patents will be

granted both for products and processes for all the inventions in all fields of

technology; the patent term will be twenty years from the date of the application

(compared to the seven years under the 1970 Act), which is applicable to all the

member countries and thus rules out all the differences in the protection terms

prevailed in different countries; patents will be granted irrespective of the fact

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whether the drugs were produced locally or imported from another country; though

the grant of the patent excludes unauthorized use, sale or manufacture of the patented

item, yet there are clauses which provide manufacturing or other such rights of the

patented item to a person other than the patent holder. In the case of a dispute on

infringement the responsibility (to prove that a process other than the one used in the

patented product has actually been used in the disputed product) lies with the accused

rather than with the patent holder (in the 1970 Act, the responsibility is with the patent

holder). This is the broad framework, which will guide the pharmaceutical industry of

India in the WTO regime ( i.e. post 2005 period).

In order to increase the global prospects of the pharmaceutical industry in the post

2005 period, the Central Government has fixed the deadline of December 2003, to

comply with the Good Manufacturing Practices set by World Health Organisation.

Since this is mandatory for all the units, it means incurring expenditures that could

range from Rs. 15 lakhs to 1 crore per unit. In some cases, it would involve shifting to

new premises altogether. A few units might exit from business because of this. As

contract manufacturers it is essential that both the parent unit and the loan licensee

meet these requirements in cases where the production is meant for exports. While

these standards improve the quality on par with international standards, it will also act

as potential entry barriers for new firms to enter.

The strength of the Indian pharmaceutical industry is in reverse engineering. Such

units by utilising the provisions under compulsory licensing, exceptions to exclusive

rights and the Bolar exception should aim at producing the generic version of the

patented product and those that are nearing patent expiry. Such firms should also be

engaged in research leading to new drug delivery mechanisms and in identifying new

uses of existing drugs. In this context, it is also essential to protect the innovations

that have been introduced by the technology spillovers. It is suggested that in order to

develop domestic innovations, developing countries require utility models or petty

patents. These petty patents can be available for a shorter period of time for process

innovations made over an existing product. The TRIPS agreement leaves members to

introduce such legislation, as there are no specific rules on this subject. Such patents

will encourage the small firms.

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One of the concerns regarding product patents is the access to patented products.

Some of the provisions within the TRIPS agreement clearly indicate that price

controls could be imposed on the patented products. However, exemptions from price

controls has been suggested by the government for the products that are produced

domestically using the domestic R&D and resources and are patented in India. Such

exemptions will keep the prices high and make access to the drugs difficult. It appears

that `who patents the product' matters more for the government than what is patented.

In the recently concluded Doha meeting, a separate declaration on the TRIPS

agreement has clarified that members have the right to grant compulsory licence in

the area of pharmaceuticals and that they have the freedom to determine the ground

upon which such licenses are granted, which can have a considerable impact on the

availability as well as on their prices. However, the amendments made by the

Government of India, make the procedures very cumbersome which needs to be

revised in the third amendment to the Patents Act. While parallel trade in

pharmaceutical may facilitate access to medicine, yet compulsory licence will be the

only course of option to facilitate flow of technology and R&D. Scherer and Watal

(2001) suggest that tax concessions should be provided to the pharmaceutical

manufacturers to encourage them to donate the high technology drugs to the less

developed and developing countries which is a viable option. A majority of the

population does not have access to the essential medicines (most of which are off

patent) either in the government or private health care systems because they are not

within their capacity to reach. Now that the percentage of drugs under price control

has been reduced drastically it is essential to keep the prices of the essential drugs

under check, especially those concerning the common diseases. Currently only a

handful of pharmaceutical firms in India invest in R&D which needs to be improved.

The Pharmaceutical Research and Development Committee (1999) has suggested that

a mandatory collection and contribution of 1 per cent of MRP of all formulations sold

within the country to a fund called pharmaceutical R&D support fund for attracting

R&D towards high cost-low-return areas and be administered by the Drug

Development Promotion Foundation. The domestic universities and other academic

institutions can play the role of research boutiques or contract research organisations

(CRO), which can supply the technical know-how and manpower. Units that already

have such facilities can also function as a CRO for other firms.

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In the post TRIPS era, the government will have to probe in to factors that contribute

to the widening gap between the proposed FDI and the actual FDI and rectify these

bottlenecks. Similarly the difference between the number of patents filed and the

patents granted calls for a detailed analysis to figure out where the Indian firms are

lacking.

Governments at various levels should take active part in disseminating knowledge

about the IPRs and the possible strategies that can be adopted by the industry. This

will remove some of the impediments. Lessons should be drawn from the Chinese

experiences where systematic efforts were taken to educate the bureaucrats, policy

makers and the industry about the WTO and product patents in the pharmaceutical

industry. India will have to strengthen the patent examination process and speed up

the processing procedures. This will help in checking the products that may enter the

country utilising the import monopoly route provided by the EMR. Besides a strong

institutional and judicial framework will have to be set up for monitoring the prices,

to prevent infringement and trade dress cases of patented products respectively.

As far as India's pharmaceutical industry is concerned, various options are possible in

the WTO regime. These are to: (a) manufacture off patented generic drugs, (b)

produce patented drugs under compulsory licensing or cross licensing, (c) invest in

R&D to engage in new product development, (d) produce patented and other drugs on

contract basis, (e) explore the possibilities of new drug delivery mechanisms and

alternative use of existing drugs, and (f) collaborate with multinationals to engage in

R&D, clinical trials, product development or marketing the patented product on a

contract basis and so on. Besides these strategies, India's strength lies in process

development skills. This expertise utilized within the WTO framework with emphasis

on quality standards will provide India a competitive advantage over other Asian

countries. To conclude we can anticipate more FDI nature of investment in India in

the field of Pharma Sector? It's a question which requires more time to be answered,

but we can draw inferences from the facts & data discussed above. As from the above

discussion it is obvious that Pharma industry is high investment seeking industry, &

the other most important fact about it is that it requires enormous R&D. The new

Patent regime brings both opportunities and challenges to the domestic pharma

industry. Even larger Indian companies lack the financial muscle to be major

international player in basic R&D that involves discovery of new chemical entities

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(NCEs). They would be helped by the government's decision not to restrict patenting

to NCEs. The Patent Ordinance issued recently defines the term patentability as per

the TRIPS guidelines but does not exclude patenting of incremental inventions like

new drug delivery systems, polymorphs etc, brightening the chances of Indian

companies to benefit from the patent regime, but it may act as a disincentive for the

international Pharma firms to invest in India

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P A T E N T S A N D T H E F U T U R E O F T H E I N D I A N P H A R M A C E U T I

C A LI N D U S T R Y

The absence of product patent protection for pharmaceuticals and agrochemicals led

many multinationals to limit their portfolios to patent expired products or a few

selected patented products. This resulted in an erosion of their market share

because local manufacturers introduced the most advanced medicines through reverse

engineering. Foreign firms were required to pay royalties for international drugs,

while Indian companies could access the newest molecules from all over the world

and reformulate them for sale in the domestic market.

Thus, this resulted in the systematic weakening of patent rights for pharmaceutical

products in India and led to the exodus of several international research-based

pharmaceutical firms. The obligations imposed on India under the TRIPS Agreement

are going to have a significant impact on India’s successful bulk and formulation-

oriented pharmaceutical industry. Indian companies will have to compete with the

multinationals by focusing on drug development and thereby producing their own

patented products. Alternatively, Indian companies could focus on producing patented

drugs under license from foreign companies or concentrate on generating revenues

from producing generic drugs. Currently, conflicting views exist within the Indian

drug companies with regard to India’s transition absence of product patent protection,

and it will increase competition in the domestic market

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CONCLUSION

The strength of the Indian pharmaceutical industry is in reverse engineering. Such

units by utilizing the provisions under compulsory licensing and exceptions to

exclusive rights under the TRIPS agreement should aim at producing the generic

version of the patented product and those that are nearing patent expiry. Such firms

should also be engaged in research leading to new drug delivery mechanisms and in

identifying new uses of existing drugs. In this context, it is also essential to protect the

innovations that have been introduced by the technology spillovers. In order to

develop domestic innovations, developing countries require utility models or petty

patents. These petty patents can be available for a shorter period of time for process

innovations made over an existing product. The TRIPS agreement leaves members to

introduce such legislation, as there are no specific rules on this subject. Such patents

will encourage the small firms.

It is true that the impending WTO regime has stimulated the R&D investment in

India. Some of the big units have started strengthening their R&D and have also filed

number of applications for patents. There is some evidence available regarding the

mergers and amalgamations to pool the human and financial resources to strengthen

the R&D in new product development. These firms will definitely benefit by the

stronger protection. Some of the R&D and manufacturing facilities set up in these

firms meet the international standards, and they have already been approached by

multinationals for conducting research and undertaking manufacturing on their behalf.

Besides the R&D investment in traditional chemical based screening, some of the

R&D firms are looking for breakthroughs in biotechnology research.

One of the concerns regarding product patents is the access to patented products.

Some of the provisions within the TRIPS agreement mentioned in the above

paragraphs clearly indicate that price controls could be imposed on the patented

products. However, exemptions from price controls has been suggested by the

government for the products that are produced domestically using the domestic R&D

and resources and are patented in India. Such exemptions will keep the prices high

and make access to the drugs difficult.

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A majority of the population does not have access to the essential medicines (most of

which are off patent) either in the government or private health care systems because

they are not within their capacity to reach. Now that the percentage of drugs under

price control has been reduced drastically it is essential to keep the prices of the

essential drugs under check, especially those concerning the common diseases.

Also the government should probe in to factors that contribute to the widening gap

between the proposed FDI and the actual FDI and rectify these bottlenecks. Similarly

the difference between the number of patents filed and the patents granted calls for a

detailed analysis to figure out where the Indian firms are lacking.

The real impact will be seen only over the next 2-3 years in the field of innovative

drug discoveries: estimated to be only 3 per cent of the global formulations market.

Foreign brokerage Refco Global Research commenting on the new product patent

regime says, "The average developing time for such drugs is 10-12 years, so the

earliest drugs are not likely to come through until 2006-07." Thus firm conclusions of

the impact of the new IPR regime must await further implementation of the Act.

As far as India’s pharmaceutical industry is concerned, various options are possible in

the WTO regime. But ultimately, the path currently being followed by international

standards for patent protection moves inevitably toward a clash between public health

and intellectual property. Despite the Doha Declaration’s affirmation of public health

as the paramount concern, it is not clear how such an objective would be achieved,

because generic substitution is so instrumental in the effort to improve drug

accessibility. Stringent intellectual property protection for pharmaceuticals would

only retard public health initiatives in the coming years. Given the rapid evolution of

the AIDS crisis throughout the world, with more than 35 million cases alone in India ,

a twenty-year term of market exclusivity for new treatments is not reasonable if we

expect to make real progress in containing the disease. It might well be appropriate

for a governing body to clearly define a list of essential medicines, such as

antiretroviral (ARV) agents, that would be subject to somewhat more relaxed patent

protection compared to other drugs.

The critical point is that the pharmaceutical industry and trade negotiators alike

should not forget the true goal of drug innovation: saving lives. Profit should always

be a means to this end, not vice versa. Only by keeping this principle in mind and

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achieving a better understanding of the modern world health situation can we hope to

effectively ensure the safety and well-being of the people of India and the world’s

population as a whole in the twenty-first century and beyond.

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The Gleevec Case

Gleevec (Beta Crystalline Salt of Imatinib Mesylate) is an anti-cancer breakthrough

drug, used to treat chronic myeloid leukemia (blood cancer). Gleevec is also known to

be effective against gastrointestinal stromal tumour (stomach tumours) and other

forms of cancers. Gleevec however does not cure cancer but keeps the same under

check hence making patients dependent on it for a prolonged period of time. Although

the compound STI571, from which Gleevec was eventually developed, was

synthesized by Ciba Geigy, much of the research and development involving the drug

Was carried out in the laboratory of Dr. Brain Ducker of the Oregon Health and

Science University. And when Dr Ducker was developing the drug, the funding

pattern of his laboratory was as follows: 50% by the National Cancer Institute, 30%

by Leukaemia and Lymphoma Society, 10% by Novartis and 10% by the Oregon

Health and Science University. Imatinib Mesylate is regarded as the most effective

drug for Chronic Myeloid Leukaemia, a form of leukaemia. In India, annually around

25,000 people become the victims of Chronic Myeloid Leukaemia. Novartis holds the

patent for the drug and markets it under the brand name of Gleevec. Imatinib

Mesylate was granted marketing approval in the US in 2001. Subsequently, the

USFDA also approved Imatinib Mesylate for the treatment of gastrointestinal stromal

tumours. Novartis applied for a product patent application in India under the mailbox

provisions that India was obligated to introduce in its Patents Act following the

country’s accession to the WTO. The patent applicant also claimed “Exclusive

Marketing Rights”, which was included in the first amendment of the Patents Act,

1970 in Chapter IVA, to meet the requirements of Article 70.9 of the TRIPS

Agreement. The Drug Controller General of India (DCGI) gave the marketing

approval for Gleevec in 2001. Novartis started the marketing of the drug through

importation. In 2003, an Indian firm, Natco Pharma, launched generic version of

Imatinib Mesylate. Besides Natco, five other firms Camlin, Cipla, Sun Pharma,

Ranbaxy and Intas are also in the market with their generic versions of Imatinib

Mesylate. In November 2004 Novartis obtained an Exclusive Marketing Right (EMR)

for Gleevec having applied for it in 1998. In its application, Novartis indicated that

Gleevec qualified for the grant of EMRs since it had been granted marketing approval

in Australia. Even though Novartis got the patent and marketing approval from the US

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but did not rely on US approval and patents for EMR in India. The decision to grant

EMR was challenged by one of the generic manufacturers in the High Court of Delhi.

Meanwhile, Novartis obtained stay from the High Court of Madras and prevented all

other generic firms from producing and marketing generic versions of Imatinib

Mesylate. After the third amendment of Patents Act, the affected pharmaceutical

firms and public interest groups used the provisions relating to pre-grant opposition to

challenge the product patent application on Gleevec. Patent application was

challenged on the following grounds:

(i) prior publication,

(ii) lack of inventive step,

(iii) Insufficient description,

(iv) last priority date and

(iv) subsequent patenting of known substance.

According to petitioners, Novartis had disclosed the substance in an application filed

in the US in 1994 taking priority from a Swiss patent application filed in 1992. The

USPTO granted patent on this application in 1996. The US application stated that

owing to the close relationship between the novel compounds in free form and in the

form of their salts, including those that could be used as intermediaries, any reference

to the free compounds should be understood as including the corresponding salts

where appropriate and expedient. Hence, Novartis’ claim for beta crystal salt format

of Imatinib Mesylate has been anticipated through publication. Further, petitioners

also pointed out that the steps stated in the patent application for creating the beta

crystal form of Imatinib Mesylate is an obvious step and lacks inventive step. It was

pointed out that the patent application failed to describe the steps involved for the

manufacture of beta crystal form of Imatinib Mesylate. Patent application was also

opposed on the ground of loss of priority date. The application in question was filed in

1998 taking priority from a Swiss application of 1997. However, on the date of filing

in India, Switzerland was not recognized as Convention Country in India and

therefore the date of application in Switzerland could not be considered as the

“priority date”. And, finally, under the Indian Patents Act, salts are not patentable

unless the applicant the patent claim is not based on the enhanced efficacy. Novartis

failed to provide any evidence on the enhanced efficacy of the beta crystal form of

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Imatinib Mesylate. Considering these objections, Indian Patent Office rejected

Novartis’ patent application on 27th January 2006. In response, Novartis in May 2006

took the case to the High Court of Madras, challenging the validity of Section 3(d) of

the Indian Patents Act (which makes the patentability of new forms of known

substances dependent on the proof of enhanced efficacy of the known substance). In

particular, Novartis declaration petitioned before the High Court to declare Section

3(d) of the Patents Act unconstitutional and to direct the Controller General of Patents

to allow the patent application filed by it. Amongst other submissions Novartis

submitted that while amending Section 3 of the Act to include Section 3(d), the

legislature did not pay heed to the essence of Articles 253 and 51(c) of the

Constitution of India. Novartis asserted that when a particular legislation is being

amended in pursuance of an international obligation that has been ratified without

reservations then such an amendment must comply with the treaty obligations. They

extended this assertion to Section 3(d) of the Act to state that it is not in consonance

with the provisions of the TRIPS Agreement and submitted that the same is in

violation of the constitutional mandate of the Indian government to respect

international commitments In light of the aforementioned submission Novartis

submitted that Article 27 of the TRIPS Agreement mandates that patents are to be

made available for any inventions in all fields of technology, provided that they are

new, involve an inventive step and are capable of industrial application. In its

submission Novartis argued that the provisions of Section 3(d) are narrower than

those of Article 27 of the TRIPS Agreement. The same is true because section 3(d)

mandates that a new form of a known substance is an invention only if it results in the

enhancement of the known efficacy of the substance. Therefore, the petitioners

contend that Section 3(d) contravenes Article 1(1) of the Agreement which requires

members to give effect to the provisions of the TRIPS Agreement and prohibits

members from providing protection that contravenes the provisions of the agreement.

Novartis further contended that while the discovery of a new property of a substance

is understandable, the discovery of a new form is not. They assert that the discovery

of a new form is a contradiction in terms as something, in order to be ‘discovered’,

must already exist. Section 3(d) is alleged to allow the patenting of a discovery of a

new form of a known substance, provided it satisfies the efficacy test. This is in direct

conflict with the definition of an invention in Section 2(1)(j) which requires a ‘new

product or process involving an inventive step and capable of industrial application’.

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Therefore, Section 3(d) is alleged to render Section 2(1) (j) redundant in determining

the patentability of inventions falling under Section 3(d), leaving ‘enhanced efficacy’

as the only criterion for the patentability of such inventions. The petitioners contended

that as the term ‘efficacy’ has not been defined in the Act, its inclusion in the

language of the statute is arbitrary. This, the petition argued, would give uncontrolled

as well as unguided powers to the Controller of Patents in India. The arbitrary

exercise of powers by the Controller of Patents would violate the right to equality

under Article 14 of the Constitution of India. A challenge to the constitutional validity

of a statute is maintainable only on two grounds in India, viz. legislative competency

and violation of fundamental rights. The court refused to examine whether Section

3(d) violates the obligations under the TRIPS Agreement and held that “ …this court

has no jurisdiction to decide the validity of the amended section, being in violation of

Article 27 of TRIPS, we are not going into the question whether any individual is

conferred with an enforceable right under TRIPS or not. For the same reason, we also

hold that we are deciding the issue namely, whether the amended section is

compatible to Article 27 of TRIPS or not”. In fact, the court urged the Novartis AG

( Switzerland) to approach the dispute settlement mechanism provided under WTO

framework. The very next day the Federal Councilor, Department of Economic

Affairs for the Swiss Confederation stated, “we must have a reliable TRIPS system

and the one in India is good enough. The Swiss government never gets involved in

any judicial pronouncements of other countries”. This effectively ruled out the

possibility of Switzerland approaching WTO dispute settlement body. On the issue of

Section 3(d) being violative of right to equality owing to the arbitrariness and

vagueness of the phraseology, the court held that “… in sum and substance what the

amended section with the explanation prescribes is the test to decide whether the

discovery is an invention or not is that the patent applicant should show the discovery

has resulted in the enhancement of the known efficacy of that substance and if the

discovery is nothing other than the derivative of a known substance, then , it must be

shown that the properties in the derivatives differ significantly with regard to

efficacy”. The court also clarified the meaning of the term efficacy. According to the

court “… the meaning of the word efficacy and therapeutic effect …. What the patent

applicant is expected to show is how effective the new discovery made would be in

healing a disease /having a good effect on the body?” Thus the court equated the

meaning of efficacy with the therapeutic effect on the body. While doing so the court

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also accepted the argument of the respondents that “… petitioner is not a novice to the

pharmacology field but it, being pharmaceutical giant, cannot plead that they do know

what is meant by enhancement of a known efficacy and they cannot show the

derivatives differ significantly in properties with regard to efficacy”. Hence it was

held that the patent applicant has to show enhanced therapeutic effect in order to

obtain a patent for a new form of a known substance or for its derivatives. Therefore

the court held that Section 3(d) is not violative of Article 14 of the Constitution of

India.

The Gleevec case has attracted attention of the public interest groups essentially

because the case would have deep rooted implications for access to medicines at

affordable prices in countries like India. The case will decide whether the citizens of

this country would see Novartis charge an unaffordable $ 2727 for a month’s supply

of the drug or whether generic firms would be able to sell the drug at a considerably

lesser price.

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BIBLIOGRAPHY

1. Google.com

2. Pharmapulse.com

3. Pharmabiz.com

4. Times of India

5. Healthmanagement.com

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