Generic Drugs and Various Issues Around Patent Law in India

The cost of drug depends on the expenditure of the research and procedures of approval. Every newly launched drug is thus very expensive to begin with. Patent regime protects their investments of resources. After the patent is over, the same drug can be copied by anybody and the costs reduce drastically. Such medicines are called Generic drugs.  Generic drugs are comparable to brand/reference listed drug product in every functional aspect. India has 35% share in Generic Market.

Process Patent versus Product Patent

The basic principle of the Patent Law in our country is that patent is granted only for an invention which must be new and useful. There are several kinds of patents such as Product, Process, Utility and so on. Particularly with the Pharma Industry, the process patent and product patent are relevant. When we refer to a product patent, it implies that someone has developed a new product. When we refer to a process patent, this implies that someone has developed a new and improved process for producing a known product. In case of a process patent, one can have only claims for the process and not for the product. This is because, the product prepared by the said process is already known and therefore there is no novelty in such a product. This is how India’s generic drug industry flourished. This protection provided a favourable climate to Indian pharma companies which used their reverse-engineering skills to copy expensive drugs of multinational companies and manufacture generics at cheaper costs. The government has also provided support to the bio-pharma subsector by giving tax incentives, and grants to start-ups and existing companies for expansion.

Rationale behind a “process patenting regime” was that right since its colonial days, the prices of drugs / chemicals / fertilizers in India (and other countries with colonial past) were very high. The “process patents” not only led to low drug prices but also extended life expectancy and ended the regular famines.

However, being a WTO member meant that the Indian Patent Act had to be TRIPS compliant. In this backdrop, India and all other countries were forced to amend their respective domestic laws. Our country amended the law in 1999, 2002, 2005 and 2006. Out of them, the most discussed amendment is of 2005, when product patent was extended to all fields of technology like food, drugs, chemicals and micro organisms. 2005 was the final deadline for complete compliance with TRIPS. Further, the rules under Patent Act were also amended in 2012, 2013, 2014.

2005 Amendment of Patent Act

The 2005 amendment made it sure that:

  • India now gives product patent as well as process payment
  • Product payment is extended to products in sectors of drugs, foods and chemical.
  • Term for protection of product patent shall be for 20 years, instead of earlier 5 years.

Via this act, India also introduced a provision for enabling grant of compulsory license for export of medicines to countries which have insufficient or no manufacturing capacity. The intentions of this amendment were to make Indian drug and pharmaceutical industries competitive at par with multinational companies. Despite initial reservations, Indian pharmaceutical companies manufacturing generic drugs have flourished in the last decade. Also, MNCs have opened R&D Centres in India. Increased prices of products due to the new patent regime were considered to be a major hindrance during the time the amendment was passed. However, the government has taken proactive measures to ensure low prices for essential drugs, and has used compulsory licensing as a tool to keep exorbitant prices under check.

Section 3(d) of Patents Act

Section 3 of the Patents Act speaks of inventions which are not patentable Section 3(d) of the Patents Act was introduced by the 2005 Amendment. The section sets a ‘novelty’ standard. For a product to be patentable, something genuinely new should have been discovered or added to an existing product.

  • The section stipulates conditions under which the product will not be patentable:-
  • If the alleged ‘new product’ just involves the discovery of a new form of an existing substance, AND it does not enhance the efficacy of the older form of the product
  • Mere discovery of a new use for an already known substance
  • Mere discovery of any new property
  • Modified usage of an already existing and known process, machine or apparatus without it resulting in a new product or employing at least one new reactant

The part of section 3(d) that has been controversial is the part which prohibits granting of patents for mere discovery of new usage of known substance. To better illustrate through an example, Aspirin was initially used to alleviate headaches and other ailments. However, it was later discovered that Aspirin also serves as a blood-thinner and can be used in the treatment of cardio-vascular diseases. Now, a new patent for Aspirin cannot be filed just because a new use was discovered for the same product.

The above portion of section 3(d) along with the part prohibiting granting of patents for discovery of new form of a known substance has been exploited by pharmaceutical companies to evergreen patents.

Ever-greening of Patents

In India, a patent is granted for a period of 20 years. However, sometimes, minor modifications are made to the original product and another patent, this is done any number of time, thus extending the period for which the patent is applicable. This is called the ever-greening of patents. This phenomenon is commonly observed in the pharmaceutical industry. The pharmaceutical company’s patent for a medicine lapses after twenty years, when it loses the right to be the sole manufacturer, seller and distributor of the product. In such a scenario, pharmaceutical companies producing generic medicines can step in, and produce the same product. Since, the generic company does not invest in R&D to develop the product like the company that invented the medicine; it is able to offer the medicine at a much lower rate. Hence, when the patent lapses, the company that had initially invented the medicine stops making profits on it. To avoid this, such companies take to ever-greening of the patent so that they make continue earning high margin of profits. Section 3(d) of the Patents Act seeks to curb this by placing restrictions on getting patents for products without making changes that enhance its efficacy or add value to it in some way.

Compulsory licensing

  • Refers to the legal instrument designed to force intellectual property owners to license out their statutorily granted right to interested third parties capable of manufacturing the patented product at cheaper prices.
  • In 2012, Government of India granted Natco Pharma a compulsory license under Section 84 of Indian Patent Act 1970, for cancer treatment drug Sofranib tosylate (Nexavar) whose patent is owned by Bayer Corporation. Natco It will makes the drug cheaper by 90% than charged by Bayer for its patented drug.
  • The compulsory licensing is a TRIPS complied provision, under which government can allow a firm to produce a patented product without the Patent owners consent. The Indian Patents Act empowers the government to issue compulsory licenses to drug makers after 3 years of the grant of a patent on products not available at affordable prices.
  • Unlike many other countries like Brazil and Thailand (where it is the government that decides the portfolio of drugs for which compulsory licenses should be granted on the basis of the therapy’s affordability and accessibility), in India where, under Section 84 of the Patent Act, the compulsory license mechanism kicks in only when a generic company requests it.
The Novartis Case & Section 3(d)

In the Novartis case of 2013, the applicability of section 3(d) of the Patents Act was discussed. In this case, the SC upheld an order rejecting Novartis’ patent for its drug, Glivec, which helps fight cancer. The Court ruled that the alleged new drug Glivec was only a ‘beta-crystalline’ form of the already existing cancer drug Imatinib. Hence, Glivec was just a new form of a known substance, imatinib, and therefore the patent for Glivec was rejected under section 3(d) of the Patents Act.

Novartis brought up the issue of Article 27 of TRIPS which states that patents are available for inventions provided they are:-

  • new
  • involve an inventive step
  • capable of industrial applications

As a member of TRIPS, India is required to strictly adhere to comply with this. However, if a country deems it necessary it may go over and above the basic framework that TRIPS provides. In the case of section 3(d) that is what India has done. It has raised the benchmark for inventiveness provided by TRIPS by introducing the requirement of ‘enhanced efficacy’ in the new product. This was challenged by Novartis, but the SC ruled that India was well within its right to add this requirement. Also, section 3(d) has been approved by the WHO Public Health, Innovation and Intellectual Property Rights Report, 2006, which states that countries can adopt legislation and guidelines which require a level of inventiveness that would prevent ever-greening of patents.

However, despite this, section 3(d) of the Patents Act has attracted controversy and the ire of USA.

Novartis Decision and arguments in favour of / against it
In Favour:
  • The Novartis judgment was welcomed by WHO, MSF (Medecins sans Frontieres) and other groups for its efforts to curb ever-greening of patents.
  • The decision puts a stop to ever-greening of patents by pharmaceutical companies and limits their monopolistic tendencies.
  • Considering the widespread poverty and lack of affordable medicines in India, the decision provides relief to thousands of persons struggling to buy medicines because the rejection of the patent allows generic companies to produce cheaper alternatives.
  • Also, some experts believe that this high bar for ‘invention’ set by the Courts will spur the pharmaceutical companies to invest more in R&D because they are left with no option but to invent new medicines since ever-greening is strictly curbed.
  • Many critics have opined that this decision will curb innovation because it reduces the incentives for pharmaceutical companies to do so.
  • Lack of profits for pharmaceutical companies might lead to reduced expenditure on R&D, which will result in lack of progress in developing treatments/medicines for various diseases.
  • India is now perceived as a nation with a weak IPR (Intellectual Property Rights) regime. This might discourage MNCs from entering Indian markets.

Criticism against India’s patent regime

USA has been leading the charge against India’s Patent regime.  The Global Intellectual Property Centre, which is an affiliate of the US Chamber of Commerce, ranked India the lowest out of 25 countries in its International IP Index for having the weakest intellectual property environment. In May 2014, the US Trade Representative’s report, the Special 301, decided to conduct an out-of-turn review of India’s intellectual property regime. Also, there is a pending US International Trade Commission investigation to determine whether India applied its patent laws in a manner adversely affecting American pharmaceutical companies. Some of the specific areas in which India’s patent regime is criticized is given below.

  • Indian Patent Law allows for a mechanism termed pre-grant opposition, which allows a third party to challenge the validity of patent applications before it is granted. Such a procedure is not recognized in most countries. However, it gives a much-required opportunity to NGOs and other such public-spirited to bodies to present their case, and hence, plays a uniquely important role in India. Pre-grant opposition has led to the rejection of patents of many American companies, and hence, USA has expressed disapproval of this mechanism. Globally too, USA has taken measures to limit the employment of this mechanism by countries by including provisions in its trade agreements preemptively prohibiting countries from introducing pre-grant opposition.
  • Another controversial issue has been the granting of India’s first compulsory license to Bayer’s patented drug Nexavar. Critics fear that this will open the floodgates, leading to a plethora of compulsory licenses being issued. However, compulsory licensing is allowed by TRIPS itself and the Patents Act too. And in all these years, India has invoked this provision only once. Further, the move has forced the pharmaceutical companies to evolve new pricing strategies. After the compulsory license was granted, there was a deluge of price cuts across drugs. This brought some much needed relief to the people, and goes to prove effectiveness of the mechanism.

A major criticism of the patent regime in India is that it doesn’t adequately protect intellectual property. However, India is in full compliance with the clauses of TRIPS. Also, all the recent controversial decisions, be it regarding compulsory licensing or rejecting of patents has been done in accordance with the law, and the legality of these decisions has been established by the Courts of the country.


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