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Indian Patent Decision on Drug Manufacturing May Have Unintended Consequences Says Professor Lim of The John Marshall Law School

Tuesday, April 02, 2013

The Indian Supreme Court decision that denied Novartis AG its patent appeal could have unintended consequences for major international drug manufacturers as well as India’s own drug companies, says Professor Daryl Lim of The John Marshall Law School in Chicago.

“This decision will allow cheaper versions of patented drugs to be produced, potentially saving more lives,” says Professor Daryl Lim of The John Marshall Law School in Chicago. At the same time, he warns that the court’s ruling makes India a riskier market prospect for local and foreign innovative pharmaceutical companies.

Lim, a patent law expert, says there are two conflicting interests in this case.

“The challenge is for the Indian government to get the right mix of incentives, so that innovators, whether local or foreign, can use its patent laws as an asset and contribute to the country’s long term economic growth, rather than see those laws as a liability to be managed,” Lim explained.

In a landmark judgment on April 1, 2013, that could change the direction of India's pharmaceutical business, the court dismissed an appeal from Novartis. The Swiss drug maker sought patent protection for its cancer drug, Glivec.

Since 2006, Novartis has tried to obtain patent protection in India for minor improvements to Glivec that make it more easily absorbed by the body. Unlike other countries, Indian patent law requires patent applicants to show a heightened level of inventivess, rather than minor step improvements.

India is the chief supplier of inexpensive generic drugs to millions of poor patients worldwide. A month's course of name brand Glivec costs about $2,600, while generic versions cost less than a tenth of that price.

At stake is India's $28 billion drug industry, one of the fastest growing markets in the world.

The professor recognizes two opposing interests in this case. On one side are the global pharmaceutical giants, mostly from the United States and Western Europe.

“They want the high level of patent protection they are used to getting in developed countries,” Lim said. “They argue that it is critical to ensure sufficient revenue to bring more life-saving drugs to those who need them.”

The other part of the equation is India’s drug makers and government players who see the patent strategy pursued by those like Novartis as a form of capitalistic colonialism.

“For them, the calculus is different,” Lim explains. “Easy access to foreign technology means lower priced drugs, a vibrant local generic industry and lives saved. They know that even with occasional legal hiccups, there are enough affluent Indians to keep foreign drug companies coming back.

“On nearly every front – social, economic, public health and politics, it makes sense for them,” the professor added.

After the ruling, the vice chairman and managing director of Novartis India Ltd stated that the company would continue to file for patents and invest there.

“Indian lawmakers are concerned about companies ‘evergreening’ their patents,” Lim noted. Patents generally give their owners 20 years of exclusive rights, after which competitors enter the market and drive prices close to production costs.

Evergreening allows companies to extend the life of their patents by obtaining new patents on old drugs through minor variations in their chemical formulations. Studies have shown that eliminating these secondary patents could free up as much as 36 percent of patented drugs for generic production.

However, an unintended effect of the court’s ruling, Lim observes, may be that drug makers proficient at tweaking foreign drugs to better suit the physiology of the local population could find themselves denied patent protection in India, and consequently choose to pursue their commercial interests abroad.

“This may chill the kind of incremental innovation some companies are good at without delivering the kind of blockbuster innovations the government hopes for,” Lim warns.

About IP at The John Marshall Law School

The Intellectual Property Law Program offered by the Center for Intellectual Property Law at The John Marshall Law School in Chicago is ranked 12th in the nation by U.S. News & World Report’s Best Graduate Schools specialty rankings. For more than 70 years, the Center has been offering one of the largest course selections in IP law in the country. Taught by some of the nation's leading academics, judges, and practitioners, the nationally ranked Intellectual Property Law programs attract attorney and non-attorney professionals from around the world.

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