The battle for patent protection

April 8, 2013

(Any opinions expressed here are those of the author and not necessarily of Reuters)

The Supreme Court verdict on Glivec brought to an end the battle by Swiss drugmaker Novartis to exclusively market the cancer medicine. In doing so, the bench enunciated a principle to justify a patent only by its intrinsic worth of innovation.

The exclusive marketing right for Glivec was granted in 2003 for a period of five years. Once a drug is off-patent, the product/process can be freely copied. But many companies try to extend the life of the patent further by making marginal changes which are not relevant to the product’s effectiveness. To what extent these devious changes amount to innovation becomes a matter of judgment.

The Supreme Court verdict focuses on this issue. It is certainly not against protection to innovation. But insignificant changes to a product which do not enhance its therapeutic efficacy do not make it a new invention. There is no ‘novelty’ in the change, the court said, and no new substances are used in the drug.

Intellectual property rights are fundamental to innovation. Protection is necessary to recover the cost and make profits. Surely, the cost can be quite high. In the pharmaceutical industry, it is estimated that a genuinely new drug costs over $1 billion for research and clinical tests. But the major unaccounted cost is the cost of failure. That can push up the overall cost of research quite substantially, possibly three to four times.

Research is the key to business leadership. The top 20 pharma companies spend, on average, over $4 billion a year and the very large ones – such as Novartis, Roche and Pfizer – more than $6 billion a year. When they innovate a drug, the money spent on research has to be recovered, for which countries recognise and grant protection under the Patents Act. Initially the drug remains costly; once the tenure of the patent is over, the drug price drops to the cost of production and marketing.

Drugs which are still under patent protection are relatively few, possibly about 10 percent of the pharma market. The bulk market is for generics in which India is progressing rapidly and tops the world market with exports exceeding a fifth of the world’s total. The major markets are the United States, Russia and South Africa. Even developed countries are moving towards unbranded generics to reduce the cost of health care.

The pharma industry in India is growing at more than 15 percent per year. With foreign direct investment now permitted up to 100 percent equity and the spate of mergers and acquisitions, the share of MNCs in the pharma industry has substantially increased.

India is going to be an excellent hub for the pharma industry as a destination for phase III clinical trials. The industry should now invest more in research using protection under the patents law, which is in tune with the TRIPS Agreement since 2005.

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