India’s booming $26 billion generic drug industry and public health sector rejoiced over the Indian Supreme Court’s recent decision to reject a patent filed by the Swiss pharmaceutical giant, Novartis for their landmark leukemia drug, Gleevec. Novartis received a patent for an earlier variation of Gleevec in 40 countries including Russia, China, and Taiwan. However, India’s troubled IP regime applies an ambiguous standard to patentability, the so-called “enhanced efficacy” for new forms of known substances. India only applies their “efficacy” requirement to the chemical and pharmaceutical drug industry as a protectionist measure. India codified the efficacy requirement in section 3(d) of their patent code and this may contravene with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) as set forth by the World Trade Organization (WTO).
In the Novartis decision, the Indian Supreme court asserted that the legislative history of India’s patent code wanted to prevent evergreening. Evergreening is when patents are granted due to incremental changes to known substances. According to the Indian Supreme Court, evergreening allows, “[a] trifling change [to be] made to an existing product, and claimed as a new invention” (Novartis AG vs. Union of India and Others, Supreme Court of India, Civil Appeal Nos. 2706-2716 of 201, 1 April 2013, pg. 55).
Interestingly, India did not afford patent protection to pharmaceuticals until 2005, which violated international agreements on intellectual property. In the Novartis patent application for Gleevec, they contended that Gleevec exhibited valuable properties that allow the drug to be absorbed more quickly and have improved stability as compared to the original drug, as well as, novelty, inventiveness and industrial applicability. In the pivotal decision, the Indian Supreme Court denied Novartis a patent for Gleevec because “the mere change of form with properties inherent to that form would not qualify as “enhancement of efficacy” of a known substance” under section 3(d) of the Indian Patents Act 2005 (Novartis AG vs. Union of India, Supreme Court of India, Civil Appeal Nos. 2706-2716 of 201, 1 April 2013, pg. 91). The Indian Supreme Court did not rule on whether or not the Indian patent law was TRIPs compliant. Incidentally, India remains on the Priority Watch List of the United States Trade Representative (USTR) under section 301 of the Trade Act of 1974 due to insufficient Intellectual Property Right (IPR) protection or enforcement.
In Novartis’ wake, the media speculated that Big Pharma may pull out of research and development in India. This may be a useful proposition, as Indian generic drug makers will exploit the Novartis decision to increase sales locally and with exports, and continue to provide counterfeit medicines as the world’s pharmacy.
On an international level, Novartis, as a Swiss company, may seek a bilateral remedy by enlisting the country of Switzerland to take India to the WTO Dispute Settlement Body. A panel at the WTO would determine whether or not section 3(d) of the Indian Patent Act is TRIPs compliant. The first phase of the WTO dispute settlement procedure takes one year if there is no appeal. If the dispute is not resolved bilaterally, the WTO director-general will appoint a panel to adjudicate the matter. WTO remedies could include recommendations from the panel, rewriting of the domestic Indian patent law, and arbitration. The WTO dispute settlement process historically favors the challenging country and rules against the targeted law. In contrast to their global economic position, India is very active in WTO litigation. According to the WTO, India has filed a complaint 21 times, been a respondent 22 times, and a third party 85 times in trade disputes. Notably, Switzerland has only been a complainant four times and a third party in eleven disputes.
Following India’s enactment of section 3(d), several emerging economies, many of whom are weak on IP protection, have enacted provisions or are drafting revisions to their domestic patent laws that will limit the patentability of innovations based on known substances. Argentina and the Philippines have provisions echoing India’s section 3(d) in their patent codes to require enhanced efficacy. Brazil, China, Indonesia, Malaysia, and Thailand are contemplating amending their patent laws with flexible provisions to include enhanced efficacy requirements that make it harder for newly tweaked formulations of existing drugs to receive a patent.
South Africa is under pressure from Médecins Sans Frontières/Doctors Without Borders and other non-profit groups to reform their patent laws to facilitate access to medicine. The Department of Trade and Industry (DTI) that is responsible for developing South Africa’s IP policy previously indicated that the current leaders would contemplate reforming their patent laws to include public health provisions into South African national law. However, Minister Davies of DTI recently stated that the IP policy of South Africa would not be released soon, despite promises over the past two years.
In the 2012 Special 301 Report, the USTR expressed that they are concerned with respect to India’s prohibition on patents for certain chemical forms absent a showing of increased efficacy. The Special 301 Report stated, “The U.S. is concerned that the recent decision by India’s Supreme Court with respect to prohibition on patents for certain chemical forms absent a showing of ‘enhanced efficacy’ may have the effect of limiting the patentability of potentially beneficial innovations.” According to the USTR, the Novartis decision created special, additional criterion for select technologies including pharmaceuticals that blocks the issuance of a patent even if the application is new, non-obvious, and has industrial application.
Recent trade negotiations suggest that the U.S. will continue to support an IP policy balanced on innovation and access to medicines. Based on leaked drafts of the Trans-Pacific Partnership Agreement (TPP Agreement), the U.S. plans to limit the flexibility of the TRIPs agreement in the proposed multilateral treaty. The TPP Agreement is a US-led regional trade agreement under negotiation between Australia, Brunei, Canada, Chile, New Zealand, Malaysia, Mexico, Peru, Singapore, the U.S., and Viet Nam. In March 2013, Japan announced their intent to join the TPP Agreement despite robust opposition from their agricultural sector. The negotiations of the TPP Agreement remain secret except for the White House, USTR, and President Obama’s handpicked 600 corporate advisers. There is little transparency between the USTR and Congress, as U.S. Senator Ron Wyden (D) who is the chairman of the Senate Finance Subcommittee on International Trade was denied access to some negotiation texts of the TPP Agreement. Further, the USTR is requesting that the negotiation texts remain secret for four years after the agreement is signed. It is unclear on whether or not intellectual property rights should be secretly addressed and what is the acceptable level of intellectual property protection in international trade agreements.
What is obvious from this debate is that emerging economies are demanding a greater access to medicines. Since it is not economically feasible for them at this time to develop drugs, their legislatures are reacting by ‘reforming’ their domestic patent laws with little regard to the safety or efficacy standard that they tout. At the WTO, there has been very little public reaction regarding the Novartis decision, which may force Novartis and Big Pharma to move their drug manufacturing facilities out of India to cheaper countries. Although the current U.S. administration proposes striking a balance between innovation and access to medicines, their clandestine trade agreements may conceal their reaction to India’s Novartis case for many years. Let’s hope that pharmaceutical companies continue to make new medicines as worldwide patent protection changes.