[Ip-health] SpicyIP: The Novartis Dispute

[Mrinalini Kochupillai]

--
[ Picked text/plain from multipart/alternative ]
Spicy IP (http://spicyipindia.blogspot.com/) has been covering the Novartis
Dispute. Here is the latest post - it gives an interesting analysis of all
the reactions to the Madras High Courts decision holding Section3(d) of the
Indian Patents Act constitutional:

The Novartis Patent Dispute: Of "Spins" and Empty Rhetoric
by Shamnad Basheer

 A couple of days back, in a legal dispute involving the patentability of
Novartis's famed anticancer drug, Gleevec, the Madras High Court
ruled<http://www.lawyerscollective.org/%5Eamtc/%5EPatent_Oppositions/gleeve=
c/MADRAS%20HIGH%20COURT%20DISMISSES.asp>that
section 3(d) of the Indian Patents Act was constitutional. It also
held
that it lacked jurisdiction to rule on whether or not section 3(d)
contravened TRIPS--and that the appropriate forum to adjudicate this issue
was the WTO. I'd hinted at the excessive spin on this judgment
<http://www.lawyerscollective.org/%5Eamtc/current_issues/Judgement.pdf>by
interested stakeholders in an earlier blog
posting<http://spicyipindia.blogspot.com/2007/08/novartis-loses-at-high-cou=
rt-focus-now.html>.
Let me develop this further by starting with a statement from Novartis
to ET<http://economictimes.indiatimes.com/articleshow/2261510.cms>that
strategically uses the "C" word:

"Multinational drug makers would prefer China for investments in
pharmaceutical research so long as India keeps the bar for patenting a drug
so high, warns drug major Novartis on Monday after the Madras High Court
turned down the company's challenge to the country's patent law."

Evoking the name of China is a clever move and one aimed at jolting our
Ministers and bureaucrats into action. I couldn't help being amused at the
paradox though. China's IP regime being lauded by an MNC?? The sun must hav=
e
risen in the West today!! Just a few months back, the US initiated WTO
consultations
<http://www.ustr.gov/Document_Library/Press_Releases/2007/April/United_Stat=
es_Files_WTO_Cases_Against_China_Over_Deficiencies_in_Chinas_Intellectual_P=
roperty_Rights_Laws_Market_Access_Barr.html>with
China over its poor IP enforcement record. In fact, a recent news
item<http://gbcode.tdctrade.com/gb/www.tdctrade.com/englishchinanews/index.=
asp?type=3Dcontent&Path=3D&id=3D5238&CatID=3D>reveals
what Novartis really thinks of the Chinese record on IP:

"The apprehension among industry players regarding IPR protection struck
feverish high after a widely publicized incident involving the detention of
Chinese employees from three pharmaceutical companies in France last
October. They were accused of allegedly violating the intellectual property
of a Sanofi-Aventis drug when showcasing an active pharmaceutical
component. Cases
like this do ring the alarm bell over China's inefficient IPR policies.

Yi Yang, associate director of Novartis Pharmaceuticals Corporation
cautioned earlier this month of a budding concern among MNCs that Chinese
employees at mainland utilities would leave and establish their own
companies using unauthorized duplicates of pharmaceutical expertise."

The interesting question to pose is: why are Novartis and other MNC's still
investing in China, despite it's not so glitzy IP regime. Are we missing
something here? Or is it reflective of the simple truth that IP is not the
sole or even a substantial determinant of FDI (foreign direct investment)
inflow. Rather, R&D will be outsourced to countries like India and China,
when such countries offer key advantages, such as low costs, highly skilled
personnel, infrastructure, a good science/technology base etc. In short, as
SpicyIP<http://spicyipindia.blogspot.com/2007/07/ip-and-innovation-making-t=
rips-work-for.html>has
often been reiterating, strong IP cannot by itself lead to
"innovation"--rather it has to be combined with several other non IP
factors. The fact that, of the emerging economies, China continues to
attract the maximum FDI would seem to suggest that the non IP factors play =
a
critical role in inducing more FDI.

Unfortunately, we don't have any concrete data as yet that conclusively
demonstrates the extent to which strong IP regimes spur the flow of
increased FDI. Till we have such data, engaging in rhetoric of this sort is
not going to help. And in a world that is coming to be more sensitive to th=
e
"butterfly effect <http://en.wikipedia.org/wiki/Butterfly_effect>", getting
to this data "holy grail" may prove more complicated than one thinks.

More importantly perhaps, the Novartis case does not stand for the
proposition that India disfavours incremental innovation. Quite the
contrary.... the Madras High Court decision supports the constitutionality
of section 3(d)-- a section that incentivises "incremental innovations"
(innovations that are more effective improvements over what existed before)=
,
as opposed to mere trivial variants.

In essence, section 3(d) aims to prevent a phenomenon commonly referred to
as "ever-greening" by requiring that, in order to patentable, new forms of
existing pharmaceutical substances should demonstrate increased "efficacy".
The underlying assumption is that derivatives that are structurally similar
to known pharmaceutical substances (such as salt forms, polymorphs etc),
will, by and large, be functionally equivalent as well--and if this is not
the case and the new form of an existing substance works better than the ol=
d
form, it is up-to the patent applicant to demonstrate this and claim a
patent.


 In much the same way as the rest of the world, India is keen on
incentivising more R&D and attracting more FDI --but in areas where it
matters. By introducing section 3(d) in its patent regime, India
demonstrates a clear preference for R&D and FDI flows that are likely to
spur genuine "incremental" advances and not the creation of trivial
derivatives that do not provide any added "efficacy" over and above what
existed before.


Therefore, reading the Novartis case to suggest that India does not support
innovation is unwarranted. In the same way, viewing the Madras High Court
judgment as something that will cure all our public health woes is
misguided. Just as "patents" alone are not sufficient to enhance our
innovative capabilities, "patents" are not the sole reason for lack of
access to important medication. Rather, some very substantial "non" IP
factors contribute to our access crunch. This is more than borne out by the
fact that, despite the absence of a product patent regime till 2005, and th=
e
existence of some of the most well known generic companies that supply low
medications to the rest of the world, we have an atrociously low level of
"access" to HIV medication. Interestingly, a recent news item
<http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=3D104&STORY=3D/www/story=
/08-08-2007/0004642215&EDATE=3D>states
that CIPLA is being castigated for charging higher prices for its HIV drugs
in India than in Africa.

 This is not to suggest that Novartis ought to be granted a patent without
further examination on merits. Rather, it is to suggest that pharmaceutical
patents are not "bad" per se, as some of the statements in the press would
have us believe=97rather, as with most other things in life, they are
susceptible to "abuse". In this regard, it is important to strike a
distinction between the grant of a patent and the regulation of its "use".
Our fears of a prospective abuse of a patent and excessively high prices
should not cause us to deny patent protection to an invention that otherwis=
e
merits it--particularly since we've already created a fairly high threshold
in the form of section 3(d).


In the specific context of Gleevec, let's rationally assess the prospective
(ex-post) impact of the patent, without caving in to emotional rhetoric:

1. Gleevec was and is being supplied for free by Novartis in India to most
patients--of course, one may argue that there is some mismatch between the
theory and practice of doling out free medicines--as the administrative
hassles can prove quite onerous in some cases. But surely, there are still =
a
substantial number of cases where this medicine does get supplied for free
and with more "press", we can get Novartis to completely close the gap
between theory and practice!!. In a recent conversation with a reputed
doctor from the All India Institute of Medical Sciences (AIIMS), I was
informed that all of AIIMS' supplies are from Novartis (free of charge).

2. More importantly, the issuance of a patent covering Gleevec does not sto=
p
generic supplies. Rather, under the Indian patent regime, generic companies=
,
such as Natco and Ranbaxy that were manufacturing the drug before the adven=
t
of the product patent regime in 2005 can continue doing so--provided they
pay a "reasonable royalty" to Novartis. The next round of patent litigation=
s
will likely hinge around what is
"reasonable<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=3D764066>"--=
funny
that in a case dripping with rhetoric, we will soon engage with what it
means to be "reasonable"!!

3. Apart from the above "compulsory licensing" provision, the government ca=
n
deploy "government use" provisions to manufacture and supply the drug at lo=
w
costs. In the wake of the bird flu scare (a hype to which I very easily
succumbed), I co-authored a
paper<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=3D889868>detailing
the various compulsory licensing and government use provisions
that the government could invoke to ensure a cheap and affordable supply of
Tamiflu, a drug that was expected to work well in those circumstances. If
the recent enthusiasm
<http://www.businessworld.in/content/view/2174/2242>of the NPAA
(National Pharmaceutical Pricing Authority) is anything to go
by, price controls are likely to get stronger in India.

4. Most importantly perhaps, the patent only covers the beta crystalline
form of Imatinib Mesylate--one of the many polymorphic forms in which
Imatinib Mesylate exists. Generic manufacturers are free to use other
polymorphic forms--and indeed, I've been informed by a friend who works in =
a
leading Indian generic company that Hetero seems to have a version of the
drug that relies on such a different polymorphic form.

Also, amidst all the euphoria around the Madras High Court judgment, it
bears reiteration that the case hasn't been finally decided as yet i.e. it
is still possible that Novartis might be awarded the patent (though I think
it unlikely<http://spicyipindia.blogspot.com/2007/08/novartis-loses-at-high=
-court-focus-now.html>).
All the High court did was to defend the constitutionality of section 3(d).
The IPAB (Intellectual Property Appellate Board) will still have to decide
whether Novartis' claimed invention entails some "added efficacy" over an
earlier known substance under section 3(d) and therefore merits a patent.

Unfortunately, this new IP appellate body has been mired in controversy
owing to the appointment of Chandrasekharan, who, as the Controller of
Patents, had filed an affidavit before the High Court, supporting the
initial rejection of Novartis' patent by the Patent Office. As
SpicyIP<http://spicyipindia.blogspot.com/2007/08/novartis-moves-high-court-=
to-remove.html>has
been reiterating, this violation of a cardinal principle of natural
justice creates a hole in an otherwise strong case for the government!!


The Novartis case should be permitted to run its course before the
IPAB/courts. What credibility do we have left as a country if we introduce
terms such as "efficacy" not known to any other patent regime and then
expect interested stakeholders to desist from agitating the issue before
courts, hoping to gain clarity on how such terms are to be interpreted?

Amidst all the "spinning" generated by the Novartis case, it is heartening
to see that the government has not succumbed to rhetoric and is beginning t=
o
constructively engage with the "real" issue that this dispute raises. An ET
report notes:

*While lawyers would battle it out as Novartis' appeal continues, the
government is working on a new patents manual that is expected to reduce
subjectivity in deciding what is "significantly more effective that the
already known". *

Drawing out guidelines for determining "efficacy" is indeed the need of the
hour. While the Madras High Court judgment is being celebrated, it does com=
e
with certain problems--it wishes away the 'efficacy" problem as something t=
o
be defined in each specific fact situation. And interestingly enough, it
states that the term "enhancement of known efficacy" is not "indeterminate"=
,
since Novartis, being a pharmaceutical company knows what this means and ca=
n
determine its import. That strikes me as a puzzling proposition. Novartis
thought that it knew what "efficacy" and "enhancement of known efficacy"
meant---and alleged before the patent office that its new beta crystalline
form had an increased bio-availability of 30% and was therefore more
"efficacious". Guess what--the patent office didn't agree!! Unfortunately,
apart from a categorical statement that it did not agree, the patent office
did not really tell us as to what they thought the term "efficacy" meant an=
d
why Novartis' alleged invention did not demonstrate enhanced efficacy. Give=
n
this background, isn't it only fair for Novartis for plead that they are
clueless as to what the term means.

In all fairness, the court wasn't expected to rule on the ambit of
"efficacy"--but was merely addressing a constitutional issue i.e. did the
introduction of a term such as "efficacy", without corresponding guidelines
elucidating its scope, make section 3(d) vague, inherently "arbitrary" and
almost always prone to an "uncanalised" exercise of discretion? Was section
3(d) therefore likely to violate the "equality" clause enshrined in Art 14
of the Constitution?

Drawing on earlier case law and ignoring the bard's dictum that "brevity is
the soul of wit", the court held that Parliament may introduce undefined
terms such as "efficacy" and leave it to the administrative agencies to
flesh it out. To this extent, there is a distinction between "discretion"
conferred on an administrative agency and an "arbitrary" exercise of such
discretionary power and one does not automatically follow from the other.
There are two safeguards that could rein in any potential abuse of
discretion. Firstly, the wordings of section 3(d) and its explanation
provide some clues on how to interpret "efficacy" and thereby control/guide
the "discretion". I've read and re-read section 3(d) and am at a loss to
understand how the wordings of this convoluted section could help anyone!!
Secondly, the possibility of an appeal serves as an important safeguard
against the potential for abuse of discretionary power.

In short, the court held that since section 3(d) did not confer
"uncanalised" discretionary power on the patent controller, it was
constitutionally valid.


The above dictum is sound from constitutional law perspective. However, fro=
m
the perspective of a patent office that is faced with a term ("efficacy")
that does not find mention in any other patent regime in the world, wouldn'=
t
it be more sensible if the scope for subjectivity were reduced by laying
down some broad guidelines. Such guidelines would also have the added
advantage of providing some amount of legal certainty to patent applicants
who needn't litigate each time to determine the ambit of this term.

So how exactly do we define the term "efficacy"? Given that India borrowed =
a
large part of section 3(d) from a drug regulatory directive in Europe,
should we define this in a drug regulatory sense? Doing so would not only
impose an extremely high patentability hurdle, but also make a patent
applicant run into serious problems with the "novelty" test--one of the
cardinal pre-requisites for obtaining a patent. Since the drug would have
been administered to volunteers during clinical trials, there is likelihood
that it will be construed as "known" substance at the time of submitting a
patent application.

Interestingly enough, the Madras High Court judgment relied on a medical
dictionary definition to hold that the term "efficacy" in section 3(d) mean=
t
"therapeutic" efficacy. Would increased "bioavilability" (which is what
Novartis claims for its beta crystaline form) count as "therapeutic"
efficacy? What about salt forms that provide more heat stability and enable
the drug to be transported to various parts of rural India without
refrigeration? It seems that under the Madras High Court's "therapeutic"
efficacy construction, this may not count. But should this be the case? If
the intention behind section 3(d) is to provide incentives to new forms of
pharmaceutical substances that come with genuine advantages, then ought not
heat stable forms to qualify? The US and EU provide that salt forms with
"unexpected properties" are "inventive" and therefore merit patent
protection--and such unexpected properties would include not just
"therapeutic" efficacy, but any other other significant advantage as well,
such as heat stability. Should India be interpreting section 3(d) to reach =
a
similar result?

Clearly, defining "efficacy" is no easy task--but we have to begin
somewhere. Let not the various spins put on the case by interested
stakeholders blind us. Spins should be deployed where we need it most---to
help improve our international record in cricket!!