Evaluation Of India’s Stand On Pharmaceutical Patenting

By Aakansha Bhola

Editor’s Note: Patents are intellectual property usually possessed by the industry. They usually protect the commercial right of the patent-holder. But before further elaboration on this, understanding the concept of intellectual property is necessary. Intellectual property is property possessed by virtue of the mind and intellect. It is not tangible, yet it’s importance has been on the rise in the recent years. Unprotected for a long time in comparison to physical property, the value of intellectual property has increased manifold over the recent years with the growth of the research and development sector in addition to the growing awareness among people about the protection of this property. The central reason to protect intellectual property is to promote creativity and encourage research by safeguarding the commercial interests of the inventor.

There are two types of intellectual properties

(i) Copyright: Copyrights usually protect creative intellectual property, usually relating to poems, books, music, textbooks, and etc. The copyright law generally provides to the owner of copyright the sole right to reproduce the work in any material form and for the use of any such work by another, this right is necessary.

(ii) Industrial Property: Industrial property is the intellectual property of industries. It can be defined as follows, “Industrial property shall be understood in the broadest sense and shall apply not only to industry and commerce proper, but likewise to agricultural and extractive industries and to all manufactured or natural products, for example, wines, grain, tobacco leaf, fruit, cattle, minerals, mineral waters, beer, flowers, and flour.”[i]

Thus, falling into this category are patents for inventions intended to protect innovations of a technical nature, designs and models aimed at protecting inventions of an aesthetic nature, plant variety rights for protecting creations in the agricultural domain, and also trade-mark law, which reserves for the owner of the trademark the designation under which goods and services are marketed.[ii]

As mentioned above, patents fall into the category of industrial intellectual property that grant the holder monopoly rights over his invention. But when the question of patenting in industries manufacturing necessaries is raised, the other party, that is, the consumer has to be considered.

Patenting of Pharmaceutical Products

Intellectual property rights are not limited to a single kind or inventor. They provide cover to a single person and to large companies alike, in all spheres. Patents are the main modes of safeguarding industrial inventions, especially those of the pharmaceutical industry.[iii] They are also the main issue in debates on the question of intellectual property rights pertaining to the pharmaceutical industry as they are much more likely to affect the consumers directly in comparison to other intellectual property rights granted to the industry. Patent means a monopoly right guaranteed to a person to exploit his invention for a specified period, which is 20 years in India[iv], in accordance with the TRIPS agreement[v].

The question of patenting of pharmaceutical products is often raised, as they are necessaries. These products are central to safeguarding the basic rights of the general public. If absolute rights to this effect are provided to these companies, they may exploit them at the expense of the wellbeing of the entire society. But, on the other hand, denying these rights takes away the incentive and recognition of the inventor, which in turn reduces the much-needed research and development in this field. The objective of this paper is to ascertain the position taken by India in this regard, to evaluate the alternatives to it, and to solve the conundrum of balancing patenting of pharmaceuticals and protection of public interest by careful consideration of all facts related to the issue.

Journey of the Patent Law in India

The first law regarding patenting of products in India came in the form of Protection of Inventions Act, 1856 which was largely based on the British Patent Law of 1852. This law granted exclusive privileges to inventors for a period of 14 years. Several new amendments to this Act and similar acts came in the following years, to be finally consolidated into a single Inventions and Designs Act, 1888. In 1911, a newer version of the 1888 Act, the Indian Patents and Designs Act was enacted. It permitted patenting both processes and products for 14 years.

But after India attained independence, it underwent several economic and political transitions. The Act of 1911 no longer resonated with the conditions of the Indian society. In 1948 the government appointed the Patents Enquiry Committee to review the working of the patent law in India, which submitted its report in 1950. The report was largely based on the UK Patents Act, 1949. The Bill based on the report could not be enacted due to the dissolution of the Lok Sabha. In 1957, Justice R. Ayyangar was appointed to review the patents law afresh. He submitted his report in 1959, which formed the basis of the Patents Bill, 1965.

The findings of the report indicated that foreigners held up to 95% of patents in the field of pharmaceuticals. It thus, incorporated changes with regards to food, drugs, and medicines. Both the Houses of the Parliament passed the Bill in 1970 and it came into force on 20 April 1972.[vi] India adopted a different patent law in 1972 to facilitate the acquisition of indigenous industrial capability. Under this law, the life of a patent was limited to between five to seven years. This new law was mainly geared towards the pharmaceutical sector and it significantly weakened the Intellectual Property Regime.[vii]

Other than shortening the life of the patents, the Act was very particular in keeping the food and pharmaceutical industry entirely away from the patent system. It also granted only process patents and not product patents, that is, the act only monopolized the process and kept the product from being monopolized.

In case of product patents, the inventor of the product has the absolute to the product, whereas, in case of patenting of the process, the product may be produced by another but not through the same process. The concept of social justice was underlined in the Act in intending to keep the necessaries of society away from the patent monopoly.[viii]

This Act was not popular with several capitalist nations all over the world. But the provision of process patenting was not unique to India, and also practiced in many other developing nations such as Egypt, Cuba, Argentina, Iran, Iraq, Angola, and Zambia[ix], countries where poverty was widespread. But the developed nations contended that by granting merely the process patent, reverse engineering[x] was encouraged. By slightly changing the process, certain manufacturers may undermine the inventor’s work. As a result of such contentions, the Trade-Related Aspects of Intellectual Property Rights (TRIPS), a part of the General Agreement on Tariffs and Trade (GATT) negotiations was signed by the member states of the World Trade Organization (WTO), of which India was one.

The agreement was signed on 1 January 1995. This agreement provided for a uniform system of patenting in the world. Instead of applying for patents all in different countries separately, the manufacturers could apply once, for all the nations that had ratified the TRIPS. Another feature was the granting of product patents, rather than process patents. In many ways, it was similar to the Act in force in 1911 in India. India amended its laws in 1999, to grant exclusive marketing rights to pharmaceutical companies, and further in 2003 and 2005 to implement the provisions of the TRIPS. The law was enforced in accordance with the agreement in 2005, with retrospective effect from 2004. The present patent laws regarding the pharmaceutical industry in India are in accordance with the TRIPS agreement relating to patents.

Compulsory Licensing

The developing countries accepted the terms of the TRIPS regarding the pharmaceutical industry even though countries such as India and Brazil had a fast-growing generic pharmaceutical industry of their own. This is because, in return, these countries were given greater access to developed markets for traditional manufactured goods plus a commitment of the developed countries to stop imposing unilateral trade sanctions for allegedly inadequate protection of foreign intellectual property rights.[xi]

Thanks largely to the fortitude and analytical skills of the Indian delegation,the right of governments to grant compulsory licenses on any ground — including public interest, abuse or anticompetitive conduct, or for non-commercial government use, among others — issued stronger and clearer from the TRIPS Agreement that had previously been the case under any other convention.[xii] Also, the Doha Declaration of 2001 addressed the concerns of the developing countries regarding the provision of compulsory licensing and the pharmaceutical industry when it was affirmed that, “that the Agreement does not and should not prevent Members from taking measures to protect public health.”[xiii]

The concept of ‘compulsory licensing’ is mentioned in Article 31 of the agreement. According to Article 31 of the agreement, compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner. [xiv]

The Article also lists certain conditions to be met before granting of a compulsory license. The essential conditions among others are as follows: “The person or company applying for a license must be tried to negotiate a voluntary license with the patent holder on reasonable commercial terms. Only if that fails can a compulsory license may be issued. Even when a compulsory license has been issued, the patent owner must receive payment; according to the TRIPS Agreement, “the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization.”

It cannot be given exclusively to licensees, that is, the patent-holder or another person or company can produce The license should be subject to legal review in the country.[xv]

Other than the conditions listed by the TRIPS agreement, different nations may issue the license on grounds cited by the authorities in the nation. In India, for example, the patents law provides certain situations when a compulsory license may be issued. Sections 84 to 92 of the Patents Act, 1970 (amended in 2005), lists them as follows:

  • Reasonable requirements of the public with respect to the patented invention have not been satisfied
  • The patented invention is not available to the public at a reasonably affordable price
  • The patented invention is not worked in the territory of India.

When a notification issued by the Central Government that there is either a “national emergency” or “extreme urgency” or in cases of “public non-commercial use”.[xvi]

There have been several instances of the use of compulsory licenses, all in the developing world, for the protection of whose interests such a provision was included. In the period 2006–2007, for example, Thailand’s public health authorities issued two compulsory licenses on AIDS drugs and one on cardiovascular treatment. In April 2007, the president of Brazil signed an order for a compulsory license for government use of Merck’s patent on an antiretroviral drug.[xvii] In March 2012, India granted a compulsory license to Hyderabad-based Natco Pharma to sell a generic version of Nexavar.[xviii]

The question, from the above instances, arises that whether India (and other such countries) is right in using the tool of compulsory licenses in non-emergency situations. That whether the issuance of these licenses is overtaking the very object of the TRIPS agreement- safeguarding intellectual property.

Position in India

India, from the very Preamble to its Constitution, is a socialist country. Being a socialist nation, it puts the welfare of the society before the welfare of an individual. This was reiterated by the Patents Act, 1970, in force before the amendments made in accordance with the TRIPS. But, as mentioned before, the agreement gave developing countries such as India access to the global markets, which after the 1991 economic debacle[xix] was essential for India. The provision of compulsory licensing in the agreement safeguarded India’s social interests. The critics, on the other hand, contended that such a provision would be misused. Whereas, what these middle-income countries feared was the misuse of product patents on a necessary like pharmaceuticals. Foreign pharmaceutical companies could charge exorbitant prices for their drugs, which the people would have had to pay.

Compulsory licensing became a part of the agreement due to the efforts of middle-income countries, amongst which the efforts of India stood out. The critics of this provision feared that once a compulsory license is issued, it would become an unstoppable trend. Contrary to the beliefs of the critics, India has issued only one compulsory license till date in Bayer Corporation v. Union of India & Others[xx]. The license was issued in 2012, and no other compulsory license has been granted since. Apart from this being an isolated incidence of the issuance of a compulsory license, all conditions mentioned in the Patents Act, as well as the TRIPS agreement have been complied with.

Bayer Corporation v. Union of India & Others[xxi]

Bayer Corporation is a reputed US-based pharmaceutical research company. In 2008 it got a patent from the Indian Patent Office (IPO), for its drug ‘sorafenib tosylate’, marketed as Nexavar. The drug is used for treating cancer of the kidney and of the liver. The cost of the one-month therapy of patented Nexavar was Rs. 2,80,380. In December 2010, the petitioner, Natco Pharma, applied for a voluntary license to manufacture the drug under its brand name in under Rs. 10,000. The application for the license was rejected by Bayer, following which, Natco Pharma applied for a compulsory license in 2011.[xxii] The office of the Controller granted the license. Bayer appealed to the Intellectual Property Appellate Board (IPAB), which upheld the Controller’s decision. An appeal to the Bombay High Court also yielded the same result.

The Bombay HC upheld the decisions of both the Controller and the Tribunal, holding that all the conditions mentioned under Section 84 of the Patents Act, 1970 (as amended in 2005), which made the granting of a compulsory license necessary were met with, along with the requirements of Article 31, of the TRIPS agreement. Bayer further appealed its case in the Supreme Court that found nothing wrong with the decisions of the lower courts and the high court.

Thus, for the first time under the Act amended in accordance with the TRIPS, a compulsory license was granted in India in 2012. This decision, and the validity it got from higher courts, created uproar in the pharmaceutical industry world-over. But this decision did not set a precedent for other pending petitions of a similar nature, contrary to the worries of critics, pacifying to some extent the fears of the developed world.

Novartis AG v. Union of India & Others[xxiii]

This case was not one of a compulsory license, but still very important with respect to the global reaction. On 1 April 2013, the Supreme Court of India rendered judgment on an appeal by Novartis against rejection by the India Patent Office of a product patent application for a specific compound, the beta crystalline form of ‘imatinib mesylate’, marketed as Glivec and used to treat chronic myeloid leukemia. Affirming the rejection, the Supreme Court confirmed that the beta crystalline form of ‘imatinib mesylate, failed the test of Section 3(d) of the Patents Act.[xxiv]

According to this section, “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 for 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 Court clarified that efficacy, as contemplated under Section 3(d), is therapeutic efficacy. The SC refused to grant an injunction against the generic companies producing the drug till Novartis obtained a patent, as according to the court, the company could lengthen the life of the patent, by slightly altering the drug. Other than this, the generic version of the drug was selling at a much lesser price.

This judgment attracted worldwide press coverage. It has received severe criticism from a number of originator pharmaceutical companies, including Novartis, and from the US Chamber of Commerce to the effect the judgment of the Indian Supreme Court has dealt a harsh blow against the future of innovation, particularly in India.[xxv] The US began pressuring India to amend its patent laws after the judgment that granted the compulsory license. But this pressure, to amend the Indian laws more liberally and in accordance with the standards of the US and the European Union, was amplified after the immediate case. The US is pushing to ensure more transparency, accountability, and guarantee IPR protection.[xxvi]

Lately, the Indian government appears to be relenting to this pressure. Following the Drug Price Control Order in 2012, which brought 348 drugs under an essential list of medicines, the new government capped the prices of another 108 medicines in July 2014. The decision, despite stiff resistance from the pharmaceutical industry, brought down the prices by at least 25%. But in a later decision, the government has, to some extent, done something contrary to the previous decision, by removing the price controlling powers of the National Pharmaceutical Pricing Authority (NPPA), which had capped the prices of 108 drugs.

The Department of Pharmaceuticals of the union government has instructed the NPPA to revoke the guidelines issued on 29 May that gave it the power to fix prices of drugs that are not on the national list of essential medicines.[xxvii] Last year, the Indian PM had also agreed to form a working group to re-evaluate the country’s patent policy. This working group will have participants of the US as well, including the National Academy of Sciences, the National Science Foundation or the National Institute of Health.[xxviii]

The decision seems to be aimed at inviting investment in India through the Foreign Direct Investment (FDI) route. Though this is essential for the development of the Indian economy, the effect of this decision on millions of Indians who are unable to afford even the generic versions of the patented drugs is at best questionable. India has maintained a strong pro-people stance in its patent law, before and after the TRIPS. But the alternate, towards which the pharmaceutical companies are pushing India, also needs to be evaluated.

The Alternate

The alternate of India’s position on the patenting of pharmaceuticals is embodied by the US. A nation that was well developed, economically, at the time of and before the TRIPS, the US had almost the same provisions relating to the patenting of pharmaceuticals before TRIPS. The effect of the TRIPS was not felt as much in the US, as in the developing world, including India.

The patent system in the US favors the private sector to a great extent. When a drug is developed in the US, it has to meet the standards of the United States Food and Drug Association (USFDA), before it can be patented. But when the National Patent Office grants the patent, its life is increased to more than twenty years to provide for the time spent in the USFDA testing. The nation has never issued a compulsory license, even though threats to issue the same have been made at occasions[xxix] to make the pharmaceutical companies reign in their prices. The intellectual property of these companies is well protected in the US that has given the private sector freedom that the developing world is not able to provide.

The liberal patent laws in the US have not been fruitless. The country has benefitted greatly in many spheres ranging from research to the widespread economic development. There has been a great shift of investments of the pharmaceutical industry from the rest of the world, including Europe, to the US. As a result of this shift, the employment by this industry has increased manifold. In the year 2011, the US pharmaceutical sector was employing more than 8,10,000 workers and was supporting a total of 3.4 million jobs. The overall economic impact of the pharmaceutical sector on the US economy totaled about $790 billion on an annual basis when direct, indirect and induced effects are considered, in 2011.[xxx]

Other than the impressive economic development due to the pharmaceutical sector, there has also been extensive research on various new drugs. In 2001 the pharmaceutical industry pipeline contained 402 new cancer medicines, 123 new treatments for heart disease and stroke, 83 new AIDS treatments and 176 new medicines for neurological diseases. None of the new drugs in the pipeline would have come into existence without the patent incentive and the prospect of a return on investment provided by that incentive.[xxxi]

The average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billion.[xxxii] This huge cost has to be recovered by the company. It is usually borne by consumer world-over. But in truth, many of these consumers are unable to afford these drugs, developed for their benefit. And in today’s era of welfare states, it should be the responsibility of the government to provide for the same. While in many parts of the world there is no source of public financing, in the United States Medicaid provides a safety net for those without health insurance or other means to pay for drugs. xxxiii

More recently, the Medicaid was expanded with the introduction of The Patient Protection and Affordable Care Act, popularly known as ‘ObamaCare’, which was signed into law on March 23, 2010, by President Barack Obama. The Affordable Care Act performs a number of important functions including the expansion of Medicaid, which provides subsidized health insurance, which enables the Americans to afford drugs.[xxxiv] The number of provisions available to safeguard the interests of the American consumer balance, to a certain extent, the effect of the policy of liberal patenting followed in the US. It would, thus, be incorrect to say that the US sacrifices the interests of its consumers to appease the pharmaceutical industry.

A Solution

Given that the rights of the patentee, who spends a large amount in developing the drugs, can also not be violated, a solution would be the development of the indigenous pharmaceutical industry. The research and development in the Indian pharmaceutical industry are negligible compared to the foreign multinational industry. If there is innovation at the domestic level, the cost of providing the fruits of this innovation in India will be lower, even when a patent is granted.

One such example is the Council for Scientific and Industrial Research (CSIR). After India entered into the WTO regime, CSIR-IICB followed CSIR for maximum benefit by securing Intellectual Property Rights (IPR), so that the advantage of research can be extended up to the needs of the common people of India. During the period of 2008-09, 12 patents were granted to CSIR and during 2009-10, 10 patents. In the year 2013, there were thirteen patents of the CSIR in force in India, and fourteen outside India. Since the year 2003, there have been a total of nineteen patented drugs in India.[xxxv]

The organization commercializes the efforts of its scientists and provides drugs at an affordable rate in India. Its drugs are also patented abroad. Not only are the drugs less expensive than their foreign counterparts, but they are also aimed at diseases which are more prevalent in India. This process of patenting domestically developed drugs clears India’s stand on pharmaceutical patenting. It declares that India intends to follow the TRIPS diligently but in doing so, it will not sacrifice the welfare of its people.

Given that all internationally invented drugs cannot cease to become a part of the Indian market, it is essential that enough chances be given for the invention of domestic drugs. Patenting of domestic innovations not only reduces the dependency on the products of foreign pharmaceutical industry but also increases the credibility of the Indian pharmaceutical industry in the world. This helps India strike the balance between the needs of the people and the protection of intellectual property, which has become a need in today’s globalized world.

Conclusion

From the facts mentioned, it is clear that India maintains a position, regarding the patenting of pharmaceuticals, which is pro-people. Even though the US has an opposite stance regarding the issuance of compulsory licenses, it attempts to protect the interests of its people by various other modes. But these systems in place in the US and other developed countries are not found in India. The absence of these systems is, to a great extent, the result of the demographics of India. For example, the literacy rate in India is much lower than that of the US. The population of India is 1.25 billion, as compared to the US’s 316.1 million.[xxxvi] A major part of India’s population does not have access to modern medications and is not aware about the concept of insurance.

From the demographics mentioned above, it is clear that implementing a policy akin to the one present in the US is a mammoth task for India. Implementation is impossible but the process will be long and slow. Thus, the tool of compulsory licensing cannot be done away with in India. It is an essential support to the millions who are not able to afford life-saving drugs. And these millions far outnumber the complete populations of developed countries. By strict patenting, India does not aim to disregard the TRIPS, but only to protect its own. Relenting to the pressures would harm India’s own. Motives behind this pressure, especially that of the US, are not only to protect the Intellectual Property Rights of the pharmaceutical industry. They also involve protecting their own interests. The pressures of the developed world to amend the patent laws are not only impractical but also against the public interest in today’s India.

Formatted on 15th February 2019.

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