This article is written by Lakshmi Murlidhar, Student, School of Law, Christ University. The author in this article discussed the factors which affect the Patent laws in the Pharmaceutical Industry. The author also discusses various case laws and portrays the Indian perspective on the issue.

Introduction

A legal scholar, James Boyle in a compelling study named The Public Domain (2008) opined that, “We are in the middle of a second enclosure movement. While it sounds grandiloquent to call it ‘the enclosure of the intangible commons of the mind,’ in a very real sense that’s just what it is…Once again things that were formerly thought of as a common property, or as “non-commodifiable” or outside of the market altogether, are being covered with new, or newly extended property rights.”

History

While the first enclosure movement in England involved privatizing much of the common lands, the second enclosure movement brought privatization of creative and intellectual work. This resulted in the formulation of Intellectual Property Laws. When people criticized the movement, Boyle stated in defense that it was better to protect someone’s creative work through the process of law than by secrecy. This is because secrecy is an individualistic approach and no one seems to benefit from it. Laws in place would benefit the inventor as he could pass on the usefulness of his creation. He explained that affixing laws for intellectual property established a contract between the state and the owner of the property. When the owner discloses his creation to the people of the state, he obtains consideration by gaining temporary monopoly over that property. Thus, gaining the right to transfer his property.

In Indian Pharmaceutical industry, the right to have patent over the intellectual property was established in 2005. This right on a global level got more recognition in the year 1995 when India became a party to the TRIPS (Trade related aspects of Intellectual Property Rights) agreement. A pipeline protection was granted by way of the first amendment in 1999. Later in 2002, India amended her patent Laws to comply with the TRIPS guidelines. However, the third amendment in Patent Law in 2005 established a patent regime in India wherein, a mere discovery of a new form, a new property, or such new use of a known substance was considered patentable under certain conditions. This also introduced provisions for the grant of compulsory licenses for export of patented pharmaceutical products in certain conditions.

These conditions included a product or process having an ‘inventive step’, the capacity to be industrially accepted, newness, and being technically advanced. This was done so that the patented product was economically significant and distinct from traditional or existing knowledge. The amendment has been made to preclude obviousness during patent filing.

Three factors impacting the Pharmaceutical Industry

The Political factor

• Background

The International Bill of Rights grants ‘right to health’ which requires access to medicines. This conflicts with the ‘right to grant of patent’ simply because both rights are essential for establishing law and order. Infact, having patent over one’s own inventions is as much a human right as maintenance of health. It is also ‘morally’ upright to protect one’s creative work or scientific production, hence bringing in moral rights. The war essentially emerges when the two rights to living persons deprive one of the other. The key area of concern is that due to patent rights, patients often fall victim to the high costs of life saving drugs having high costs of production.

• Treaties and Obligations
  • In November 2005, the Economic, Social and Cultural Rights issued a comment stating that the only human right to be taken into consideration is the ‘Right to health’.
  • The Universal Declaration of Human Rights (UDHR), the International Covenant on Economic, Social and Cultural Rights (ICESCR), and the International Covenant on Civil and Political Rights (ICCPR) are together called as the International Bill of Rights. These international agreements also provide for the right to access to essential medicines and emphasize on positive rights.
  • The DOHA declaration emphasizes on the legitimacy of public health as an exception to the protection of intellectual property rights. This is due to the powerful interests involved and an effective enforcement structure upheld by the WTO but not the ICESCR. The declaration prohibits the TRIPS agreement from preventing its members for curating measures that maintain and improve public health. It suggests that the interpretation of the agreement should be done in a way that propagates access to medicines and supports the regulations as stipulated in the WTO. As per the agreement, each member has the right of granting compulsory licenses and have the freedom to determine the grounds of granting such licenses. Besides this, each member also has the right to determine what constitutes a public emergency. The declaration has proven beneficial in softening debates of worldwide relevance of access to the medicines. However, it is yet to address issues that are fundamental such as the relevance and requirement of having patentable rights on drugs in both developing and least developed countries.
• The Impact

Existence of various treaty commitments result in misuse of such obligations by political activists by criticizing and influencing government policies. The criticisms are generally centred on violation of negative rights, however, critics of state policy have recently started making extensive use of positive rights as a means to protest which is, the right to health. Even though the state may not have acted as per their obligations under the treatise governing human rights, In actuality, such obligations are valued more than any other legal commitments.

A state cannot be permitted to violate the commitments of human rights. It is a generally accepted fact that any policy impacting the realization of a right, whether social benefits or for the protection of other rights, must meet a minimum of two conditions. These are Firstly, If the policy achieves a specific goal, and secondly, whether the goal is sufficient to justify the restriction of another right.

The Economic factor

• Background

From the economic perspective, grant of patents result in a temporary monopoly on the production, sale and use of the product or the process for which patent is obtained. The holders of pharmaceutical patents, or their licensees can hence charge much more than the actual cost of production without being undercut by competition. This leads to drugs that are priced in a way that are out of reach of many people who are in need of them. Example: Though the generic versions of first-line drugs for HIV/AIDS are increasingly accessible, the ‘second-line antiretroviral’ required by patients having developed resistance to the original treatments are patented and consequently unfairly expensive.

• Advancements
  • Despite having only meagre proportion of the drugs subjected to patent on the World Health Organization (WHO)’s current list of essential medicines, this number is likely to grow. This especially applies to the economic conditions of India, as TRIPS regulations are being implemented and new drugs are being developed.
  • Access problems are going to further exacerbated in cases of so-called TRIPS-plus agreements, bilateral agreements between the US and the individual developing countries leading to stronger IP protection and restriction on the permitted exceptions to IP rights. The present IP regime results in higher prices for the most essential medicines. Higher prices for essential medicines reduce the ability of people and governments to access them.
  • Consequently, the international IP regime appears to be in direct conflict with state obligations under the right to health.
• Impact on India  
  • The cost of R&D which has escalated results in MNCs looking for different ways to cut down on costs due to which India has become a welcoming destination. Many MNCs are collaborating with Indian Companies that are offering a cost-effective drug discovery regime.
  • In the year 2005, the value of contract research in India was estimated to be $US100-120m growing at a rate of 20%-25% a year as per the report of Chemical Pharmaceutical Generic Association.
  • In a survey by 179 Global Pharmaceutical Executives, 62% foresee India as an integral part of their business in the upcoming five years.
  • Besides various outsourcing arrangements, MNCs are also involving the Indian companies in drug development and the covenant to share profits.
  • Example: Contract research lab – Advinus Therapeutics in partnership with Merck collaborated for drug discovery and development in order to jointly develop drugs for metabolic disorders. If the drug is commercialized, Advinus could obtain a yield of $US150m in milestone payments including royalties under such agreement.
• Improvements
  • Besides the significant changes in Thailand based on the compulsory Licensing Campaign on heart disease medicines on AIDS, there are fifteen pre-grant oppositions concerning medicines for AIDS in India. This allows consumer group generic companies and IP specialists to interfere and challenge weak patent applications.
  • These numbers are likely to grow as public interest groups start appreciating the relevance of stopping 90% to 95% of weak patent applications that can get rejected as per the Indian Standards even though they manage to sail through the U.S Patent office.

The Legal factor

• Article 15(1)(c) of the International Covenant on Economic, Social and Cultural Rights [ICESCR]
  • The International Bill of Rights provides right of protection for people involved in creative work. Article 15(1)(c) of the ICESCR takes into cognizance the rights of everyone; to have absolute ownership over their scientific, literary or artistic production. Thus, protecting the moral and material interests of the author.
  • ‘Authors’ as per the covenant includes all persons involved in creative work, which applies to a range of intellectual laborers, along with writers, inventors and medical researchers.  
• The challenge
  • Article 15(1)(c) appears to promote protection of intellectual property. The latest legal challenge is between two human rights claims, considering how one law provides for the medical patent regime while the other represents right to health. The Committee on Economic, Social and Cultural Rights in the year, 2005 published a General Comment on Article 15(1)(c). The Comment attempts to strictly distinguish human rights of authors from IP rights, stating the immense necessity of differentiating intellectual property rights with human rights as per Article 15 (1)(c). It propagates the interdependence of the two human rights.
  • With regard to such conflicts, it concludes that, “The state is by law obliged to strike a balance between their obligations under Article 15 (1) (c) on the one side, while promoting and protecting the full range of rights guaranteed by the statute.” State parties should ensure that their legal regime for the protection of moral and material interests resulting in a scientific, literary or artistic production must not become an impediment to comply to their actual obligations towards the people in terms of right to food, health and education.
• Section 3(d) of the Indian Patent Act 1970
  • This section has been controversial ever since 2005 when India had to merge its regulations with that of the WTO and the TRIPS agreement. The intention behind this section was to prevent evergreening of patents. The section does not involve grant of patents for those products or inventions that lack efficacy, considered as a reasonable criteria for such a grant. Hence, any new form or use of an already known substance, unless it adds to the commercial value of the known product, shall not be granted patent rights. It also lays down the test for increasing efficiency.
  • Section 3(d) states that any new form of a known substance are allowed to be patented as long as they differ significantly in properties with regard to efficacy. So the criterion per-se is not an increment in efficacy but a substantial improvement in the efficacy of the new over the substance already known. The section’s main objective is to prevent a phenomenon called ‘ever-greening’ by proving that only those variables that show enhanced efficacy are patentable.
• Case Studies
  • The Novartis AG v. Union of India case is famous in this aspect as it took the government to court claiming that the Patent Act 2005 did not meet rules set by the World Trade Organization and violated the Indian Constitution. It wanted a greater and more extensive grant of patent protection than what was offered by the Act. Such a claim being opposed on grounds of Lack of Novelty, lack of significantly enhanced efficacy, Obviousness and wrongful priority, was rejected by the High Court of Madras. The significant question raised however, was whether India complied with the WTO rules and was the patent protection granted to protect the Pharmaceutical Companies? It was observed that India did comply with the WTO Rules but also safeguarded itself from grant of patent for real innovations only. This means that minor modifications made to the drugs with patent rights in order to maintain monopoly and enjoy extended time of such patents could no longer be done in India.
  • In F. Hoffmann-La Roche Ltd. And Anr. vs Cipla Limited adjudged by the Delhi High Court was where Ciplaintended to sell its generic version of Erlotinib under another name, Erlocip. Another company Roche, sued Cipla for patent infringement and sought an interlocutory injunction. Cipla’s counterclaim was that the patent held by Roche was invalid and should be revoked. It also argued that the balance of convenience was in its favour on grounds of price difference between the two drugs and public interest involved in making such drugs available at an affordable price. The court held that:
    • (i) Erlotinib (the original name) was not a derivative of Gefitinib(the plaintiff company’s product)
    • (ii) Even if such derivative is assumed to be true, it does not violate Section 3(d) as it demonstrates increased efficacy.
    • Hence, the court granted patent.
• Application of the Law
  • It has also been observed that there has been significant growth in the use of this section by the Indian patent office by rejecting almost every application not fitting in the bracket. It is being used against primary patents as well.
  • The United States, however, opposes this provision. The US government brought out a special 301 report for 2014 which supposedly classified India as a “priority watch list country.” This is based on its analysis on the level of protection provided by India to the intellectual property. Wherein, it objectified India by such a phrase due to its analysis of the issue of Compulsory License by the Controller General of Patent, Designs and Trademarks in accordance with section 84 of the Patent Act.
  • It also stated the relevant use of Compulsory Licensing for green technologies as per India’s National Manufacturing Policy and the challenges faced during strict enforcement of rights of ownership of Intellectual Property.
  • It is, however, important to note that as per the general trend, if section 3(d) reduces primary patents this will make drug production and distribution of new drugs easier. On the contrary, if the section is interpreted in the sense of grant of secondary patents, generic production and distribution will not be possible until the expiry of the primary patents or the life of the product itself.

The Indian scenario

Earlier, there existed the system of “process patent” in the pharmaceutical industry. This meant that the process used to manufacture the particular drug was the only one to get patented as per the basic idea of granting patent. Hence, in such scenarios, other producers had to apply different methods to produce the same drugs. But with the emergence of “product patent” regime, the drug itself could be patented. Hence, now, other companies could not manufacture the same drug that had already been created and patented.

Section 5(1) was removed from the Indian Patents Act, which talked about process patent in the Pharmaceutical Industry. There was however a flipside that such patentability can cost people a lot of money to afford medicines. Before the third amendment was made, many companies used different procedures to manufacture the same product. After such amendment, however, the opportunity that was available with respect to patents in India was the allowance of the non-patented or patent-expired drug to continue supplying to the domestic markets including its exports. For the patented drugs, compulsory licensing was introduced for manufacturing of drugs, R&D was promoted for creating new drugs, and collaborations of companies were promoted to grant patent by creating the product together. It is observed that this amendment in India did not let the price of drugs hike up as Indian companies dominated the market despite the existence of TRIPS. It was also observed that foreign companies started opening its subsidiaries in India and sold their drugs through them. This also resulted in a boon as the R&D cost saw a substantial dip in the country in comparison to other states.

The international conventions ensure that India’s Patent law is in conformity with the TRIPS agreement. Developing countries and International agencies like UNICEF and the Clinton Foundation depend heavily on imports of affordable drugs from India. 84% of the drugs prescribed by the MSF worldwide, come from Indian generic companies. Such generic antiretroviral medicines manufactured in India help cure 80% of the 80,000 people that receive treatments in HIV/AIDS projects of MSF in more than 30 countries.

Conclusion

The Pharmaceutical Industry has paved the way to being profitable and inclined to their social responsibilities. It has been able to improve its operations and relations with their stakeholders in the domestic market. But it comes without a doubt that despite the establishment of such regimes, the patent laws suffer some setback in the international front due to its conflicting nature with other treaties that speak otherwise.

It is much of a dilemma to have to choose between two forms of human rights and interpreting one as more superior than the other. One protects the moral rights of an individual while the other protects his life. On the face of it, the latter needs to be given greater superiority. However, on the contrary, it is necessary to avoid the tragedy of the commons and establish patent rights. This is necessary besides the development of the country and hence can also be termed as a necessary evil. In conclusion, what is necessary is a more balanced approach that can bring about a positive change considering the aspects impacting the Patent regime in Pharmaceutical industries.