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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.

The 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 in India.

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.

Scott 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 programs."

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 systems."

"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.

 

 
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