Indian Patents: Doing Just Fine

In the wake of the Madras High Court’s landmark ruling on Novartis, CHAN PARK and ACHAL PRABHALA disentangle some key myths around patent law

In early August, the Madras High Court dismissed Swiss pharmaceutical giant Novartis’ claim that a section of Indian patent law was unconstitutional. In the aftermath of the decision, one image stood out: the MNC pharmaceutical lobby, with its tropical agents in tow, raising a big stick to beat an errant country. In a situation rife with speculation, we should know that we have no reason to cower.

Patients are ecstatic on account of the decision, for continued access to medicines in India and around the world. This access hinges on a sensibly calibrated patent system, which — to an extent — we have, and whose validity the Madras HC affirmed. As much as we believe that the Indian patent system could do even more for patients, there is no doubt that it is already uniquely progressive.

Novartis and its MNC cohorts are understandably glum. This decision could throw a spanner in the works of an outdated business model whose hegemony owes more to brute force than market logic. And it doesn’t help that their Indian setback arrived closely on the heels of different but similarly inclined actions in South Africa, Thailand and Brazil.

Having failed in the courtroom, the MNC lobby immediately launched a PR blitz aimed at frightening policymakers in New Delhi into submission. Broadly speaking, two claims were advanced. One: India does not allow patents for “incremental innovation” to pharmaceuticals, and this will hamper its otherwise strong innovative potential. Two: Since India has chosen not to recognise incremental innovation, FDI in pharmaceutical research will be diverted to China.

There are only two problems with these claims. One: Indian law already allows patents for incremental innovation. Two: FDI in pharmaceutical research will go wherever there is an attractive cost/skill balance. It has nothing to do with the strength or weakness of local patent law. Take the first red flag: “incremental innovation.”

The section of Indian patent law that Novartis challenged, 3(d), clearly states that if an existing innovation is tinkered with to create something different, the resulting innovation can still qualify for patent protection — provided it exhibits increased “efficacy”. By our count, over 200 patents on drugs have been granted since India introduced section 3(d) in 2005, most of them for changes to existing drugs. Novartis is the proud owner of several of these patents. (That many of these might have been wrongly granted is another matter.) Novartis’ contention with 3(d) stems from the Indian Patent Office’s rejection of its application for a patent on Glivec. The base compound used in Glivec had been patented prior to 1995, thus making it ineligible for protection in India. The post-1995 “innovation” they claimed was deemed neither incremental nor innovative under Indian law.

This is Novartis’ beef: that any changes they make to drugs must be protected by a patent, regardless of whether they make that drug any better. And this is the cause of their outrage: that our law demands for incremental innovations to be, well, incrementally innovative.

Now for the other red flag: FDI. Statistics reveal that MNCs make up only 23 percent of the Indian drug market. Of top 20 pharmaceutical companies in India, ranked by sales, only five are MNCs. The bulk of Indians buy their drugs from Indian companies, and these companies are the ones investing (that some of them act as licencing agents for MNCs and therefore toe their lobbying line, is not relevant here).

When corporations say “research in India,” they do not mean research for diseases especially prevalent in India and the Third World, like kala azar or malaria. They mean research for diseases in their most valuable markets — Europe, Japan and North America — which together account for over 90 percent of the MNC pharmaceutical industry’s turnover. Sure, we have those diseases too; but whether a drug is developed using Indian intelligence or Swiss skill has no effect on a company’s ability to patent and capitalise on the invention in the markets that matter most to it. To the extent that India is an attractive place for research investment, it has everything to do with our low-cost/high-skill advantage and very little to do with our patent law.

That the MNC lobby plays the “China card” illustrates this point perfectly. To recap: pharmaceutical research FDI in India (a trickle anyway) will now move on account of India’s “bad” patent law (even though the research is aimed at markets elsewhere) and it will move to, er, China, which is only the worst “offender” of Western intellectual property over every other country in the world (as confirmed in the US Trade Representative’s annual Special 301 Report these past 20 years).

They must be joking. Novartis and friends want to make us an offer we can’t refuse, but this is an offer we can’t understand.

Park is with the Lawyers Collective; Prabhala researches intellectual property