In Re Novartis: Matters arising in the Indian Pharmaceutical Industry

One of the more significant developments in the Indian Pharmaceutical Industry in recent times has been the Patents Amendment Act 2005, amending the Patents Law of 1970, and extending Patent Protection to Pharmaceutical products – as opposed to processes as prescribed by the previous statute. This legislative change being in accordance with the deadline set by the WTO’s Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS), which mandated patent protection on both products and processes for a period of 20 years. The gravamen of the statute being to enforce recognition not only of new patents but also any patents filed after 1st January 1995.

The application of this Statute was tested in particular in the recent case of In Re Novartis- a Claim filed by Novartis in the New Delhi High Court, challenging refusal of a Patent application for its product Glivec. The essence of the Claim being for a Declaration that Section 3 (d) of the Patents Amendment Act 2005 was unconstitutional and non-compliant with India’s obligations under WTO/TRIPS.

The wording of Section 3(d) is thus: “The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use of a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant” The section is further explained thus: “ For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pre form, particle size, isomers, mixtures of isomers, complexes combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regards to efficacy”

The New Delhi High Court refused Novartis' Claim – deciding significantly that Section 3(d) was not unconstitutional and further ruling that TRIPS compliance and/or the lack of it was a matter for the WTO to determine, using its dispute resolution mechanism.

The import of this decision is two-fold based on the initial premise of there being two opposing views as to what should be the tenor of the Industry, whilst the Multinational school of thought is of the view that India should comply with TRIPS and ensure protection of entrant Patents, essentially giving Multi-nationals protection of their products -a la Novartis, on the other hand there is the Indigenous Industry view that local entities should be permitted to produce low cost forms as had been the case – a position championed most notably by Dr Hamied CEO- Cipla Laboratories India's third largest Pharmaceutical company and the Indian Drug Manufacturers Association- IDMA.

a. The TRIPS regime gives contracting countries the freedom to define the scope of patentability, which includes as described by Komal Shah of Innovar IP- “obviousness”, which in this instance would relate to “enhancement in efficacy”- as defined by Section 3(d).

b. By implication, the status quo post 1972 i.e the commencement of the Patents Act 1970 remains in reality since for a Patent application to succeed, there would have to be almost completely original Compound composition, unless enhanced efficacy is proven. It is noteworthy that the Delhi High Court decision did not define the parameters of enhanced efficacy as per S.3 (d) leaving the WTO to determine this.

The following facts are undeniable in the light of the present regime:

a. There are still unanswered questions as to the efficacy of the new Patent regime engendered by the Patents Amendment Act 2005, which is presently in a state of uncertainty pending a final determination on the subject both by the Indian Supreme Court and indeed the WTO, on India’s compliance with its obligations under TRIPS. The key questions being to determine what constitutes “enhanced efficacy” as per S.3(d) and the larger question being whether Section 3 (d) satisfies the threshold of compliance espoused by TRIPS.

b. The perspective of Multi-national Pharmaceutical companies on the application of India’s responsibilities under TRIPS differs substantially from that of Indian Pharmaceutical establishment as succinctly defined by Komal Shah of InnovarIP “the matter really pertains to the obviousness criteria and the scope of patentability…. In the U.S., obviousness is assessed based on various criteria including commercial success, motivation to combine, long-felt need, praise and skepticism, or unexpected results. In Europe, patentability is judged by applying the problem-solution approach”

What then are the implications of this decision for the Indian Pharmaceutical Industry, the simple answer being that there is no clear winner, there will always be opposing views of the way forward between what may be described as the globalist position and the Indigenous position. The following facts are however undeniable:

a. India's Pharmaceutical Industry possesses a highly skilled work-force, combining excellent training with a high level of motivation, a legendary work ethic and proficiency in English;

b. A comparatively well organized, increasingly sophisticated and forward-looking sector with over 20,000 Manufacturing entities;

c. Overall growth in the Indian economy with a highly proficient service sector and most importantly;

d. India is a liberal and progressive democracy, with an effective Judiciary in which entrepreneurship is not only actively encouraged, but actually forms an integral part of the indigenous eth

The combination of all these factors point to one thing- sustained growth regardless of what perspective the same assumes. In plain and simple terms if India maintained its 1972 Patents Act position, the indigenous Pharmaceutical Industry would continue to flourish based on the four factors listed above and continue- at least in terms of Generic drugs production- to be a formidable factor, whilst on the other hand if the TRIPS regime is determined ultimately in favour of the globalist position, India has positioned itself to take a leading role in Discovery and development, coupled with the attraction of India as an attractive investment option for multi-nationals equally based on the four factors listed, in essence a heads you win, tails you win situation.

I end this article with a quote from Santosh Bagrodhia- Head of the Indian Parliamentary Committee on Manufacturing and Trade (Pharma Technology India Winter 2006 issue), which in my view summarises the benefits of the polarised opinions on the future of India's Pharmaceutical Industry.- “India’s diverse gene pool offers an exciting opportunity for Genomic research. Its unique and diverse plant, animal and Microbial biodiversity also provides exciting research opportunities. The Indian Pharmaceutical Industry is globally competitive in fermentation-derived pharmaceuticals that can be sued for Biogenerics. India is a recent entrant in the global economy and the global trade regime does not create a level playing field for fresh participants. However India’s endeavour is to convert the challenges into opportunities. We can benefit from our cost advantages, skills and resources. While some global players may try to subvert the TRIPS agreement by “evergreening” their patents and undermining the promised free global competition, the International Industry will be able to share some of the rewards of India’s rapid growth”

© Edward Keazor

This is a short version of article published in the Indian Pharmaceutical Industry Special Report Supplement- Pharma Technology India Spring 2008