The Dichotomy of IPR Protection and Social Welfare- An Analysis of the Indian Patents Act with respect to the Pharmaceutical Industry

Introduction

Intellectual Property Rights, in the simplest of terms, refer to rights over creation of the mind. In a world where knowledge economies are on the rise, IPR has become increasingly significant. Intellectual Property Rights entail several rights within its ambit- copyright, patent, geographical indication etc. In this article, we deal only with one form of IPR, i.e., Patent. We attempt to explain the development of Patent Law in the country and analyse the relevant provisions concerning the Pharmaceutical Sector. The famous case of Novartis is also discussed in detail. Finally, we try to make a case from either side of the debate, on whether there should be stronger IP protection, or whether social welfare is the Government’s primary responsibility. In conclusion, we dwell upon the possible legal solutions to solve the persisting challenges. 

Development of Patent Law in India

According to the Indian Patent Act, a patentable invention is defined as “a new product or process involving an inventive step and capable of industrial application”.[1] Hence for an invention to be patented it must qualify certain criteria such as:-

1) industrial applicability-utility

2) novelty

3) inventive step (non-obviousness)

In India, patent legislation has a long history commencing from 1856 with the patent law being revised several times to conform to the requirements of the various treaties the country entered into. 

Up to the 1960s about 85% of the medicines in India were provided by foreign multinational companies at exorbitant rates.[2] The Patent Act, 1970 was an attempt to protect the public interest by providing medicines at a cheaper rate and also to buoy domestic industries. The act provided an impetus to indigenous industries by allowing process patents thus helping the local players gain expertise in “reverse engineering” of existing medicines. Now by changing methods of manufacturing these companies could produce generic medicines which were available at a fraction of cost of the patented medicines of the MNC’s. 

India is a member of the WTO, signed the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement in 1995. This led to a series of amendments in the patents act with the first one being in 1999 with the provision for filing applications for product patents in the field of drugs and agrochemicals. To further the compliance with TRIPS obligations the second amendment was introduced in the form of the Patents (Amendment) Act, 2002. Through this Amendment provision of 20 years uniform term of a patent for all categories of inventions was introduced. Also, the definition of the term “invention” was made consistent with the TRIPS agreement. [3]

Finally, in 2005 through the third amendment the era of product patents was introduced in India. This means the thriving pharmaceutical industry which took advantage of the process patent could no longer take molecules patented by other companies.

They had to invest in their R&D to develop their molecules. This resulted in a new race for

innovation prima facie; but for most, it was the time to find loopholes in the new system.

Relevant Sections for Pharmaceuticals

The Indian Patents Act, as seen earlier, has changed over the years, especially after India signed the TRIPS agreement[4]. Recently in 2016, the government announced the New IPR Policy with 7 main objectives.[5] But they did not attempt to amend the provisions of the Indian Patent Act 1970[6], despite a lot of pressure from countries like the US. India reiterated that it complies with TRIPS, which lays down the minimum standards of IP Protection.[7]

The particularly contentious section in the Act is Section 3(d), which is also the most relevant for this article. The section prevents evergreening of patents in India, by providing that ‘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’ is not an invention, and hence cannot be patentable.[8] 

Usually, any invention can be patented for 20 years only. After a pharmaceutical company patents a product, it is valid for this period. After the period is over, other companies can produce these products at a much lower rate. Usually, pharmaceutical companies try to evergreen their patents by slightly modifying the original product, but under Indian law, the criterion is more stringent. This criterion was clearly explained by the case Novartis AG v. Union of India[9], which has been discussed in detail.

Another important and widely used provision is Section 84[10], which provides for compulsory licensing. Using this, the government can authorise a third party to produce any patented product without the consent of the patent holder, provided that certain conditions are fulfilled. The concept of compulsory licensing finds its legitimacy in the TRIPS agreement and is made use of frequently by various countries in the field of pharmaceuticals. The provision, however, has not been frequently used in India. Compulsory license discourages investment in R & D by companies and thus prevents innovation. 

Novartis AG v. Union of India

This is one of the most important cases of Section 3(d). The Supreme Court, in this case, rejected a patent grant for Swiss pharmaceutical company Novartis, for its anti-cancer drug Glivec.[11] Glivec is used to treat Chronic Myeloid Leukaemia. 

The patent office had denied Novartis’ claim on the ground that it was hit by Section 3(d) of the Indian Patents Act, and that the drug did not exhibit any known therapeutic efficiency over its earlier form. This was challenged by the company, and ultimately the case was argued before the apex court. The Court had to consider the following issues-

1. Whether the invention is hit by Section 3(d)?
2. How is Section 3(d) interpreted?

The apex court held that Glivec was a new form of the substance and not an entirely new substance. Thus, it failed to qualify the test under Section 3(d). The section mentions enhanced efficacy as a pre-requisite, which was not fulfilled. 

Novartis tried arguing otherwise but to no avail. The court held that in case of pharmaceuticals, efficacy referred to therapeutic efficacy, and only because it was beneficial to some patients does not mean that the medicine had met this standard. 

The court also observed that in cases of life-saving drugs, a more stringent condition needs to be applied while granting a patent, to protect the lives of the masses.[12] As far as possible, evergreening must be prevented. 

Impact/Result of Novartis

The case had a huge impact in the country and the rest of the world. As the patent for Glivec was rejected, its price fell from Rs. 1,50,000 to Rs 6,000.[13] This fall in price helped save the lives of close to 5,00,000 patients in India, according to YK Sapru, Head of Cancer Patients Aid Association.[14]

The usage of Section 3(d) increased after the case. Section 3(d) was raised in 69% of the cases in which exceptions to patentability were cited to reject secondary patent grants. This was a result of the judgement, which provided an element of certainty for the patent office to reject claims based on Section 3(d).[15]

However, Section 3(d), according to a recent report, remains underutilised in India. Indian Patent Office has not laid down the Novartis guidelines clearly, and hence the guidelines are not properly adhered to. While 72% of the patents granted in India between 2009 and 2016 was secondary patents, only 15% was subjected to elaborate scrutiny.[16] In most cases, patents were either granted by mistake, or relevant exceptions were not cited.

Applicants usually bypass Section 3(d) by disguising secondary patents as formulations or combinations. This enables the company to receive patents because proving synergy under 3(e) is easier than proving therapeutic efficacy under 3(d).[17] Since the applications are not scrutinised in detail, such a strategy proves to be successful. 

Internationally also, Novartis created a huge uproar. A report by the UN Secretary-General encourages other WTO members to utilise the flexibility under TRIPS and set stringent conditions for patentability, because of increasing access to medicines. NGOs in countries like South Africa and Thailand were encouraged by the case and rallied for similar standards in their respective countries.[18]

India continues to face international pressure by MNC’s and developed nations. They want India to follow more relaxed criteria for granting patents to pharmaceutical companies. But India has maintained that it has adhered to the TRIPS agreement and has not given in to this pressure. 

The Need for Cheap Medicines

“About 55 million Indians were pushed into poverty in a single year because of having to fund their healthcare mainly due to spending on medicines alone”. [19]

The above figure was provided by experts at the Public Health Foundation of India and published in the British Medical Journal.[20] Though the government promises to provide cheap medicines via the Jan Aushadhi stores they too are plagued by their fair share of problems.[21] They are now 2100 in number which constitutes just 0.4% of the roughly 5 lakh pharmacies in India. In addition to it, they have only about 200 medicines instead of the promised 600 which still lies far behind a private pharmacy which boasts of 2400 formulations. [22]

In the west where most people are covered by health insurance, the patent system works well; consumers pay a premium to insurance companies in exchange for coverage thus not incurring the exorbitant cost of medication.

Such is not the case in developing and underdeveloped countries where the majority of the population is not covered by health insurance. It is virtually impossible for a patient in a country like India where 276 million people living below $1.25 per day on purchasing power parity paying to pay for such expensive medication. Hence it is not surprising that medicines need to be sold at a much lower cost in India.[23]

The poor pay a disproportionately higher per cent of their income towards out-of-pocket medical expenses than the rich.[24] 

The Round National Sample Survey of 1955 through 1956 showed that 40% of all people sell or borrow assets to pay for hospitalization.[25] Half of the bottom two quintiles go into debt or sell their assets.[26] About half the households that drop into the lower classes do so because of health expenditures.[27]

40% of people that are hospitalized are pushed either into lifelong debt or below the poverty line.[28] Furthermore, over 23% of patients don’t have enough money to afford treatment and 63% lack regular access to necessary medications.[29]These data bear testimony to the fact that financial ability to afford medicines distorts the healthcare sector and the need for affordable medicines is not only an essential but an urgent one. 

Problems with the Novartis Regime

Supreme Court’s decision to not grant patent to Novartis ushered in a new era for the Indian patent industry transcending from a regime which favoured incremental innovations (i.e. granted patents on any improvement irrespective of its ‘efficacy’ ) to broader breadth regime which favoured significant innovation; the yardstick being of distinction being “enhanced therapeutic efficacy”. [30]

The ramifications of this decision were far-reaching and across all spheres from activists and indigenous companies to intellectual property lawmakers and big pharmaceutical companies abroad.

Novartis had responded to the SC by stating that it discouraged innovative drug discovery essential for advancement in medical science. They also warned this will lead to heavy disinvestment from big pharmaceutical companies abroad as India’s growing non-recognition of intellectual property rights is coming into light. [31]

It is essential to note here that India saw a major boom in the pharmaceutical sector only after accepting WTO norms (TRIPS) and allowing foreign stakeholders.

According to the United States Trade Representative, the Novartis decision created special, additional criterion for select technologies including pharmaceuticals that block the issuance of a patent even if the application is new, non-obvious, and has industrial application hence it remains on the Priority Watch List of the USTR.[32]

Also, there exists plenty of allegations over the sub-standard products of the generic drug industry. India needs to regulate the country’s $ 26 billion generic drug industry which will only spur up into motion rapidly after the Novartis decision. What needs to be emphasized here is that cheap and substandard products can’t be touted and promoted in the name of affordability. A quality check needs to be upheld sooner or later if the integrity of the industry is to be preserved. 

In addition to this as the economies of emerging markets grow, the countries’ refusal to pay higher premiums for newer drugs could significantly reduce the money needed for innovation. [33]

For pharmaceuticals it means impeding of improvements in existing drugs as companies who invest in such fields might shy away from doing so since they will be sceptical of – (a) not receiving patent protection on their product,(b)facing infringement suits because of higher patentability standards. 

Instead of a weak IPR regime, many believe that India should focus on other factors which plague the healthcare industry and move beyond IPR protection. The government should increase its spending on healthcare, which is currently meagre, at 1.5% of the total GDP.[34] They should also ensure a proper supply chain, as most of these generic medicines do not even reach the poor. Controlling the cartelisation of Indian Pharma companies and allowing free competition would automatically help in controlling the prices of essential medicines, along with encouraging
innovation in the drug industry.

Conclusion and Suggestions

The Indian Healthcare Industry is riddled with a lot of issues. The country has to find a way to balance innovation with affordability. Although there are alternatives to a weak IP regime, as explained in the last section, low-cost medicines are still a necessity. Increased spending and improved supply mechanism are indeed desirable, but even then, if generics do not exist, the price of these medicines would be exorbitant. 

But there are problems within the existing system as well. As explained earlier, Section 3(d) remains underutilised in India. The Novartis guidelines are often not applied correctly. To prevent this, the government needs to spell out the guidelines in a concise manner and provide them to the officials. They should also conduct awareness drives, so that patent claims can be subjected to elaborate scrutiny.

The government should also use Section 84 effectively. Therefore, even if patents are wrongfully given, the government can ensure its low-cost availability before the patent life is over.

Finally, a robust distribution system should be put in place. Only these steps will ensure access to low-cost medicines for the poor.

Although other problems persist, the argument that the state should solve those first instead of addressing this issue is a bad one. With concerted efforts, our country will hopefully reach a stage where it can provide a strong IP protection to pharmaceutical companies, but until then, they should focus on improving the current system.

About Authors

This article has been written by Laksh Kawatra and Vishal Choudhury both  are 1st-year students pursuing the five-year law degree at West Bengal National University of Judicial Sciences. Our interest in Intellectual Law aided by our interest to solve problem prevalent in the world prompted us to write this article. In case of any queries please contact/write back to Niharika, at niharika@khuranaandkhurana.com.

References:

[1] The Patents Act, 1970.

[2] Md Rahmatullah, Intellectual Property and Indian Pharmaceutical Industry in WTO regime, 20 ALJ (2012-2013) 170.

[3] Vipin Mathur, Patenting of Pharmaceuticals: An Indian Perspective, Int. J. Drug Dev. & Res., July 11, 2012, available at www.ijddr.in/drug-development/patenting-of-pharmaceuticals-an-Indian-perspective.php?aid=4994(Last visited on December 29,2019).

[4] The Agreement on Trade-Related Aspects of Intellectual Property Rights, April 15, 1994, 1869 U.N.T.S. 299.

[5] YourStory, Everything you need to know about the new IPR policy, May 16, 2016, available https://yourstory.com/2016/05/new-ipr-policy-india?utm_pageloadtype=scroll (Last Visited on December 27, 2019).

[6] The Patents Act, 1970.

[7] Economyria, THE NEW INTELLECTUAL PROPERTY RIGHTS POLICY EXPLAINED, December 5, 2017, available http://economyria.com/new-intellectual-property-rights/ (Last Visited on December 27, 2019).

[8] The Patents Act, 1970, § 3(d).

[9] Novartis Ag v. Union of India, (2013) 6 SCC 1.

[10] The Patents Act, 1970, § 84. 

[11] IPLeaders, Analysis Of Novartis A.G. vs. Union Of India, February 5, 2016,available https://blog.ipleaders.in/analysis-novartis-g-vs-union-india/ (Last Visited on December 27, 2019).

[12] Id. 

[13] Intellectual Property Watch, Five Years After the Indian Supreme Court’s Novartis Verdict, May 20, 2018, available https://www.ip-watch.org/2018/05/20/five-years-indian-supreme-courts-novartis-verdict/ (Last Visited on December 27, 2019).

[14] Id.

[15] Dr Feroz Ali, Rejected in India: WHAT THE INDIAN PATENT OFFICE GOT RIGHT ON PHARMACEUTICALS PATENT APPLICATIONS (2009–2016), December 2017, available https://accessibsa.org/media/2017/12/Rejected-in-India.pdf. 

[16] Dr Feroz Ali, Pharmaceutical Patent Grants in India: How our safeguards against evergreening have failed, and why the system must be reformed, April 2018, available https://accessibsa.org/media/2018/04/Pharmaceutical-Patent-Grants-in-India.pdf. 

[17] Id.

[18] Intellectual Property Watch, Five Years After the Indian Supreme Court’s Novartis Verdict, May 20, 2018, available https://www.ip-watch.org/2018/05/20/five-years-indian-supreme-courts-novartis-verdict/ (Last Visited on December 27, 2019).

[19]Times Of India, Health spending pushed 55 million Indians into poverty in a single year: Study, June 13, 2018, available at https://timesofindia.indiatimes.com/india/health-spending-pushed-55-million-indians-into-poverty-in-a-year-study/articleshow/64564548.cms (Last visited on December 30, 2019). 

[20] The Guardian, ‘This scheme is a lifesaver’: India’s drive to provide cheap drugs June 25, 2018, available at https://www.theguardian.com/global-development/2018/jun/25/this-scheme-is-a-lifesaver-india-drive-to-provide-cheap-medicine-jan-aushadi (Last visited on December 30, 2019).

[21] Id.

[22] Times Of India, How India can make cheap and quality medicines available to all, November 28, 2017.

[23] The News Minute, India is fighting at WHO to make medicines cheaper, but the drug quality is the real problem, May 26, 2017, available at https://www.thenewsminute.com/article/india-fighting-who-make-medicines-cheaper-drug-quality-real-problem-62679 (Last visited on December 30, 2019).

[24] Bhardwaj, Geeta; Monga, Anuradha; Shende, Ketan; Kasat, Sachin; Rawat, Sachin (1 April 2014). “Healthcare At the Bottom of the Pyramid An Assessment of Mass Health Insurance Schemes in India”. Journal of the Insurance Institute of India. 1 (4): 10–22.

[25] Duggal, Ravi (August 2007). “Healthcare in India: Changing the Financing Strategy”. Social Policy and Administration. 41 (4): 386–394

[26] Duggal, Ravi (August 2007). “Healthcare in India: Changing the Financing Strategy”. Social Policy and Administration. 41 (4): 386–394

[27] Balarajan, Y; Selvaraj, S; Subramanian, SV (5 February 2011). “Health care and equity in India”. The Lancet. 377 (9764): 505–515.

[28] Bhardwaj, Geeta; Monga, Anuradha; Shende, Ketan; Kasat, Sachin; Rawat, Sachin (1 April 2014). “Healthcare At the Bottom of the Pyramid An Assessment of Mass Health Insurance Schemes in India”. Journal of the Insurance Institute of India. 1 (4): 10–22.

[29] Dutta, Sabitri; Lahiri, Kausik (1 July 2015). “Is provision of healthcare sufficient to ensure better access? An exploration of the scope for public-private partnership in India”. International Journal of Health Policy and Management. 4 (7): 467–474.

[30]Sadhvi Sood, Taking Patentability a notch higher: Law and Economic Effect of Therapeutic Efficacy, (2013) 6 NUJS L Rev 481.

[31] The Economic Times, Why was Novartis denied a patent for Glivec in India? April 2, 2013, available at https://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/why-was-novartis-denied-a-patent-for-glivec-in-india/articleshow/19337942.cms (Last visited on December 30, 2019).

[32]  Supra note 18.

[33] The New York Times, Low-Cost Drugs in Poor Nations Get a Lift in Indian Court April 1, 2013 available at https://www.nytimes.com/2013/04/02/business/global/top-court-in-india-rejects-novartis-drug-patent.html?ref=world (Last visited on December 30, 2019).

[34]  The Wire, India Must Move Beyond IPR-Protection to Focus on Better Health Outcomes October 3 2018, available at https://thewire.in/economy/india-must-move-beyond-ipr-protection-to-focus-on-better-health-outcomes (Last visited on December 30, 2019).