August 15, 2007
A Win for Generic Drugs: Indian Court Rules Against Drug Maker Novartis
by Anne Moore Odell
In a test case for drug patents in developing nations, Novartis loses an attempt to challenge an
Indian patent provision.
An Indian court earlier this month ruled against Swiss pharmaceutical company Novartis' challenge to India's right to refuse patents on
existing medicines. While international aid agency Oxfam and the Interfaith Center on Corporate Responsibility
(ICCR), an institutional investor organization,
see the verdict as "an important victory for global public health," Novartis is worried that the
"Indian court ruling will discourage investments in innovation needed to bring better medicines to
patients." Novartis is a widely held stock in socially screened portfolios.
ramifications of this ruling by the High Court in Chennai reach well beyond India to other
developing nations, largely because of India's important role as a manufacturer of generic drugs.
Oxfam reports that over two-thirds of the generic drugs made in India are then exported to other
developing countries for considerably less cost than the patented brand medicines. Unicef, Doctors
Without Boarders, and other aid programs also depend on the low cost generic medicines manufactured
The lawsuit hinged, in large part, on how drug innovation occurs and if slight
differences in medicines, i.e. "incremental innovation," require new patents for the drugs.
Novartis brought India to court challenging the constitutionality of the Section 3(d) of the
provision of Indian Law that states patent monopolies will be awarded for only "truly innovative
medicines" rather than minor changes of existing medicines. The US Supreme Court also recently
ruled in favor of stricter criteria for medicine patents.
"This case has always been
about gaining clarity on how innovation is valued and protected in India," said Carrie Scott,
spokesperson for Novartis. "Medical progress occurs through incremental innovation, and Section
3(d) excludes these important developments, ultimately denying patients in India new and better
medicines. Effective patent systems help patients because incentives are in place that stimulate
long-term research and development efforts needed to develop better medicines and ground-breaking
therapies like Glivec."
However, some drug companies practice "evergreening" with their
products, the act of seeking to extend the market exclusivity of a product by introducing small
changes that do not offer therapeutic value just before a patent expires. "Evergreening" and
"incremental innovation" can be confused. The idea that medicines are developed through incremental
innovation is also heavily debated.
The World Trade Organization (WTO) in 1994 confirmed
the Agreement on Trade Related Intellectual Property (TRIPS) to balance the rights of developing
countries to protect public health and the rights of intellectual property. In 2001, developing and
developed nations met again over TRIPS to clarify the agreement. India's provision is safeguarded
by TRIPS, Oxfam reports.
"We are satisfied with the ruling," said Rohit Malpani, Policy
Advisor for Oxfam America. "It seems some pharmaceutical companies think they are beyond TRIPS. As
they enter developing nations, they need to create a middle ground to offer medicines. Their
approaches need to be voluntary, company-by-company, and medicine-by-medicine. In developing
countries, drug companies could have tiered pricing within the country and between countries."
Oxfam and ICCR saw the Novartis court challenge as a threat to millions of people in developing
countries too poor to buy patented medicines. Besides risking public health, Oxfam and ICCR believe
the lawsuit threatens to damage Novartis' reputation in developed and developing countries.
Almost half a million people signed petitions that asked Novartis to pull the case. Oxfam also
noted that between 80-90,000 emails and telephone calls were placed to Novartis. Some are worried
that there might be a backlash against the company or even a regulatory backlash, lowering its
stock price. Emerging markets like India could also see a backlash against the drug maker.
"We felt that if Novartis won the case in India, it would have serious impact in developing
nations," said Lauren Compere, Co-chair of the Access to Health Working Group of the ICCR and
Director of Shareholder Advocacy at Boston Common Asset Management. "We are looking at the
patents that support the manufacturing of generic pandemic medicines in India. This is a test case
for TB, HIV/AIDS and anti-viral drugs that have a big impact in that part of the world. The crux of
the issue is patent on non-innovative drugs."
However, the irony is that currently
Novartis doesn't sell Glivec in India and 99% of the patients prescribed Glivec in India receive it
free from Novartis through its Glivec International Patient Assistance Program ( GIPAP.)
Novartis reported that its access-to-medicine programs reached over 33 million patients
worldwide in 2006, with contributions totaling nearly a billion Swiss francs. This represented some
2% of its total net sales donated to patients and research into neglected diseases.
told SocialFunds.com, "This case did not threaten the supply of medicines from India to poor
countries given the safeguards already in place. Medicines are made available through
tiered-pricing solutions, public-private partnerships, shared contribution models and donation
However, giving away free drugs is not the issue, as much as the 7,500 patients
who have received free Glivec might appreciate it. "Medical philanthropy is not sustainable for
developing nations," said Oxfams's Malpani, "Countries need to have functioning public health care
"In India, Novartis is faced with a globalization dilemma that characterizes
many emerging economic powers today: two markets within one country. India has a booming middle
class on one hand, and a vast number of extremely poor people on the other," said Novartis'
spokesperson Scott. "As a result, in India, we are pursuing a dual, patient-focused strategy. We
are aware of the many obstacles poor patients face regarding access to medical care there. At the
same time, we take affluent India seriously as a formidable world power with all the rights and
obligations that such status brings with it. "
The Indian court has deferred to the WTO to
resolve the question on TRIPS compliance. The Glivec patent appeal is still not decided and the
Intellectual Property Appellate Board (IPAB) review continues as a separate proceeding. Although
the drug maker could appeal to the Indian Supreme court or ask the Swiss government to present it
before the World Court, Novartis told SocialFunds.com the company will likely not appeal the
decision. What happens next will be probably be behind the scene, with harder lobbying by Novartis
and other drug companies of the Indian government to rewrite laws.