Outside View

In 1997, Novartis AG filed a patent application in India for the beta-crystalline of ‘imatinib mesylate’. The brand name for the same, given by Novartis, is Glivec. The patent application for Glivec was done on the basis that the company invented imatinib mesylate. Until 2005 this application of Novartis did not make much headway. However India introduced the Indian Patent Act from 2005 and also introduced an important provision which prevented ever-greening and granting of frivolous patents (section 3(d) of Indian Patents Act). Ever-greening refers to strategies by which, innovator companies try to retain/extend their product patents even after they expire.

Even before the Indian government considered Novartis’ patent application, some generics companies along with the Cancer Patients Aids Association (CPAA) opposed Novartis’ patent application for Glivec. The opposition was based on the reasons that imatinib was already a discovered form of medicine and did not improve any effectiveness. In January 2006, the Patent Controller finally gave a decision against Novartis stating that the application lacked novelty and was not patentable under section 3(d). This meant that the generics companies could produce the same medicine.

Unhappy with the Patent Controller’s decision, the company filed the case in the High court against the Indian government and 4 other Indian generics companies. Here, Novartis challenged two main aspects

1. Novartis challenged the Patent Controller’s decision of not allowing the patent on Glivec. This was ultimately transferred to Intellectual Property Appellate Board (IPAB), a body which deals with special matters of intellectual property.
   
   
2. Novatis also challenged the validity of section 3(d) in the Indian Patents act, which prevents ever-greening and granting of frivolous patents.
   
   

The High court rejected Novartis’ claims and stated that section 3(d) is quite clear and is constitutionally valid. On the other aspect, IPAB overturned Patents Controller’s findings and held that Glivec was new and involved an inventive step. However, IPAB concluded that the invention did not satisfy the tests of section 3(d) of "significantly enhanced therapeutic efficacy" and thus ruled against Novartis.

Again, Novartis challenged the IPAB’s order in the Supreme Court and the hearing began in August 2011. Since then there have been high voltage arguments from both the sides (for and against) and the Supreme Court has scheduled the final arguments to be discussed from 10 July 2012.

What does this mean for both MNC and Indian players?

The outcome of this lengthy battle by Novartis can have far reaching effects on the future stakeholders of Indian Pharma - Generic pharma, Innovator Pharma and the Indian people. A ruling in favor of Novartis will mean strong monetary gains for innovators like itself. It will also mean a strong incentive to invest in R&D. At the same time, it will negatively affect the pharma generic players in a big way and limit their scope of product expansion in the domestic market. However, the biggest jolt will come to the people of India in the form of higher medicine cost.

By Equitymaster - India's leading 'independent' equity research initiative. Trusted by over a million members all over the world, Equitymaster is known for its well-researched, unbiased and honest opinions on the Indian stock markets.

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