DAMODARAM SANJIVAYYA NATIONAL LAW

UNIVERSITY

VISAKHAPATNAM, A.P., INDIA

INTELLECTUAL PROPERTY RIGHTS

PHARMACEUTICAL PATENTING IN INDIA- PROBLEM OF PUBLIC

ACCESS TO HEALTH

NAME OF THE FACULTY

DR. P. SREE SUDHA

G. ARTHI

19LLB102 & Semester V

 TABLE OF CONTENTS

Acknowledgement………………………………………………………………….2

Abstract…………………………………………………….……………………….3

Introduction………………………………………………………………………...4

Patents in Pharmaceutical Industry in

India………………………………………...6

Transfer Of Patent
Rights…………………………………………………………...9

Conclusion………………………………………………………………………...15

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 ACKNOWLEDGEMENT

The project consumed huge amount of work, research and dedication. Still, implementation
would not have been possible without support of my lecturer. I take this opportunity to express
my profound gratitude and deep regards to my lecturer for his exemplary support, monitoring
and constant encouragement throughout the course of thesis.

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 ABSTRACT

This “paper highlights and overview of and analysis of the patent laws in relation with the
pharmaceuticals, the problems of public access to health in India. Moreover, patents have played
a keen role in changing national and global innovation landscape. Patents are a kind of
intellectual asset to whoever owns it, say, any individual or a company or it can be the
government of a nation as well.

IPR Laws are getting more and more popular these days. It provides a relief to the innovative
creators that their invention, idea, discovery will remain theirs. And among them, patent law is
the most important. However, when it comes to medicine, which is an essential item for every
individual, the same patent laws act as a blockage to the access of these essential commodities.
This article deals with the meaning of pharmaceutical drugs, and it’s patenting in India, along
with problems that occurred because of it to the public access to health. However, IPR culture in
India is anything but satisfactory. It demands interest, in depth knowledge and effective
strategies for encouraging and building IPR activities and explore scientific and industrial
research and innovation in India.”

3
 INTRODUCTION

The “Indian pharmaceutical industry is a successful, high-technology-based industry that has

witnessed consistent growth over the past three decades. The current industry players comprise
several privately owned Indian companies that have captured a substantial share in the domestic
pharmaceutical market due to factors such as favourable government policies and limited
competition from overseas1. However, the liberalisation of the Indian economy is revolutionising
Indian industries as they begin to emerge from domestic markets and gear up for international
competition.

The Indian pharmaceutical industry is a prime example of an industry that is being forced to
revisit its long-term strategies and business models as India opens its markets to global trade.
Factors such as protection of intellectual property are increasing in significance due to the
growing recognition of the need to ensure protection of valuable investments in research and
development (R&D). Efforts are being made in India to curb problems of weak enforceability of
existing intellectual property legislations, and the Indian government is moving towards
establishing a patent regime that is conducive to technological advances and is in keeping with
its global commitments.”

PATENT LAW IN INDIA

Patent rights “were introduced in India for the first time in 1856 and, in 1970, the Patent Act
1970 (The Patents Act) was passed, repealing all previous legislations. India is also a signatory
to the Paris Convention for the protection of industrial property, 1883, and the Patent
Cooperation Treaty, 1970. The Patents Act provides that any invention that satisfies the criteria
of newness, non-obviousness and usefulness can be the subject matter of a patent. Some of the
non-patentable inventions under the Patents Act include methods of agriculture or horticulture,
processes for the medicinal, surgical, curative, prophylactic or other treatment of human beings,
animals or plants or substances obtained by a mere admixture, resulting only in the aggregation
of the properties of the components, etc.
1
Over 20,000 registered pharmaceutical manufacturers exist in the country. The market share of multinational
companies has fallen from 75% in 1971 to around 35% in the Indian pharmaceuticals market, while the share of
Indian companies has increased from 20% in 1971 to nearly 65%. Http://www.indiapharmachem.com

4
With regard to pharmaceuticals, in the case of substances intended for use or capable of being
used as food, drugs or medicines or substances produced by chemical processes, patents are
granted only for the processes of manufacture of such substances and not for the substances
themselves. Hence, pharmaceutical products are currently not granted patent protection under
Indian law.

India had a product patent regime for all inventions under the Patents and Designs Act 1911.
However, in 1970, the government introduced the new Patents Act, which excluded
pharmaceuticals and agrochemical products from eligibility for patents. This exclusion was
introduced to break away India's dependence on imports for bulk drugs and formulations and
provide for development of a self-reliant indigenous pharmaceutical industry.

The lack of protection for product patents in pharmaceuticals and agrochemicals had a
significant impact on the Indian pharmaceutical industry and resulted in the development of
considerable expertise in reverse engineering of drugs that are patentable as products throughout
the industrialised world but unprotect able in India.2

As a result of this, the Indian pharmaceutical industry grew rapidly by developing cheaper
versions of a number of drugs patented for the domestic market and eventually moved
aggressively into the international market with generic drugs once the international patents
expired. In addition, the Patents Act provides a number of safeguards to prevent abuse of patent
rights and provide better access to drugs.

The term of patents in the case of processes or methods of manufacture of a substance intended
to be used or capable of being used as food or as a medicine or drug is for a period of seven years
from the date of filing or five years from the date of sealing the patent, whichever is less. Patents
relating to all other inventions are granted for a period of 14 years from the date of filing the
patent, unless shown to be invalid.”

2
"trips and Pharmaceuticals: Implications for India", http://www.cuts-india.org/1997-8.htm#Pharmaceutical
%20Industry%20in

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 PATENTS IN PHARMACEUTICAL INDUSTRY IN INDIA

A patent “is a type of intellectual property right that provides protection over any novel invention
and also, gives the exclusive right to sell, use, create and/or manufacture the patented product.
As new and improved drugs are being introduced every year in the market, drug or
pharmaceutical patents have become particularly important as these drugs helps to generate a
significant amount of revenue for their commercial benefits.

The pharmaceutical sector is an area in which innovation impacts the bottom line of the drug
manufacturers who focus on research and development of a new drug and incur huge costs in
doing so, where there is neither a guarantee nor an assurance that their research product shall
survive various testing stages and will commercially thrive if released in the market3.

Importance of Innovation in The Drug Industry

 Innovation in the Drug Patent is a key element that defines the success of a drug
manufacturer.
 Innovation provides high returns on investment. While developing and launching a new
drug involves huge costs, the rate of return on successful drugs can be much higher than
the costs associated with introducing the drug to the market.
 While it can increase the risk involved when developing drugs, the benefits drastically
outweigh the risk as innovation allows higher profitability and better profit margins.
 Innovation is important for these companies because more and more money is spent on
marketing and research of potential drugs. If these drugs don't make it to market, then
time and money spent are lost. Therefore, innovative approaches must be taken to
determine how such pharma companies can make a return on their investment without
losing too much money.
 While the cost of bringing a new drug to market can be high, drug companies can
actually increase profits by marketing current drugs to enhance the success of those drugs
that they are currently manufacturing, and are on the market.”

3
SUDIP CHAUDHURI, THE WTO AND INDIA’S PHARMACEUTICALS INDUSTRY: PATENT
PROTECTION, TRIPS, AND DEVELOPING COUNTRIES 2 (2005).

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Importance of Drug Patent

Patents “contribute to roughly 80% of the overall revenue of pharmaceutical companies and
obtaining patent protection is important to safeguard the innovative approaches used by pharma
companies. Drug patents help recoup investments that are incurred during the research and
development stage. Also, drug patents can secure against infringement cases, as competitors can
easily duplicate the manufacturing of a drug. Drug patents help raise venture capital, which thus,
improves the overall economic growth of companies operating in this industry.”

Requirements for Patent Protection

However, not “all drugs can be patented, and thus not all inventions can be patented. There are
certain criteria that must be met in order to be able to apply for patent protection and these
include – the invention must be non-obvious, must be new and must be useful 4. An invention is
non-obvious if when comparing the invention to other previously patented inventions, it doesn't
provide the same type of support or disclose the same type of information as in other inventions.
This specific criterion is one of the most important items when considering patentability of an
invention. It also helps to identify what type of competition would be out there for such an
invention5.

The invention must be new, and not already in existence. This includes any inventions that were
previously patented, whether the invention is identical or very similar in nature. It is also
important to keep in mind that if the invention is being used, you may run into a problem. If that
invention is being used but has no patent protection, it still has common law protection.

But, if you submit your patent application for the same invention, you may be successful in
obtaining patent protection, as the other inventor should have patented his or her invention to
obtain full protection rights over the invention6. Lastly, the invention must be useful, meaning
that it must have a purpose. This is probably the most easily understandable factor, as the
invention must have a use, whether it be to assist in some sort of problem or benefit the user in
some way.”
4
Shamnad Basheer, India’s Tryst with TRIPS: The Patents (Amendment) Act, 2005
5
Shamnad Basheer, The “Glivec” Patent Saga: A 3-D Perspective on Indian Patent Policy and Trips Compliance,
6
Gardiner Harris & Katie Thomas, Low-Cost Drugs in Poor Nations Get a Lift in Indian Court, N.Y. TIMES

7
Criteria of Patentability

In the “pharmaceutical industry, a patent is an IPR granted by the government to the inventor for
the protection of his invention, which can be a drug or process to produce it. Note that the patent
provides solutions even for several technical problems, but for getting patented, the ideas need to
satisfy the criteria of patentability. As per the Indian patent law, an invention is patentable if it
covers a new product or process that meets the following requirements;

 Newness/ uniqueness: The subject-matter must be unique, i.e., before the date of filing,
it should neither be published in any document nor be used anywhere in the world.
 Inventive: The invention should involve features that make it non-obvious even to
skilled persons. For instance – it should have technical advancements over the existing
knowledge or economic significance or both.
 Industrial Applicability: The Invention should be capable of getting fit into the relevant
industry. For example – a new method of excluding tumour cells from the patient’s body
is not applicable industrially and thus, not patented.7”

Benefits Of Patents in Pharmaceutical Industry

In the “pharmaceutical industry, patents contribute to roughly 80% of the total revenue generated
and is a key element defining the success of a drug manufacturer. Obtaining patent protection is
vital to safeguard the innovative approaches used in the pharmaceutical industry. Patents prevent
the issues of infringement by not letting the competitors easily duplicate the manufacturing of
any medication or treatment. As developing and launching a new drug involve incredibly high
costs, patents in the pharma industry help in regaining the investments that are incurred during
the stage of research and development. The Indian patent law is an example of the significant
patent legislation aiming at balancing the interests of both – the consumers and the inventors. In
the present times, the owners can file the Patent Application for a wide range of pharmaceutical
products and processes. However, before filing, the researchers should cautiously consider the
criteria of patentability and types of patents that best suit their pharmaceutical products or
processes.”

7
Section 2(1) (ja) of the Patents (Amendment) Act, 2005, No. 15 of 2005

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 TRANSFER OF PATENT RIGHTS

Since “patent is a form of property, the rights vested with it can be transferred from the patentee
to any other person through assignment or grant of license. The Indian Patent Act requires that
an assignment or license of a patent must be in writing, clearly specifying all the terms and
conditions governing the rights and obligations of the parties8.

Patent assignment

Assignment in general, is the act of transferring to another the ownership of one's property,
means the interest and rights to the property. Assignment of patent rights is defined as a transfer
by the patentee of all or part of its right, title and interest in a patent or patent application to any
other person. The person to whom the right in patent is assigned is called the assignee and the
person who assigns the right is called the assignor.

PATENT LICENSES

A patentee may, by a license, permit others to make, use, or exercise, the invention which
otherwise would not be allowed. Licensing of a patent transfers a bundle of rights which are
limited as to time, geographical area, or field of use. A patent license may be a voluntary license
or compulsory license.

(i) Voluntary license: When the patentee at his/ her own wish, empowers another person to
make, use or exercise the patented invention by a written agreement, it is called a voluntary
license. The Indian patent office and the central government do not have any role in such license.

(ii) Compulsory license u/s 84: A compulsory license is a statutory license which can be
granted to a third party by the Controller of Patents under certain conditions. Compulsory license
under the Patent system is an involuntary contract between a willing buyer and an unwilling
seller imposed and enforced by the government. Under compulsory license the government
allows someone else to produce the patented product or process without the consent of the patent
owner. Compulsory license may be granted on the following grounds mentioned under section
84 of the Patents Act, 1970 viz.”

8
Harrington PJ, Hodges LM, Puentener K, Scalone M. Synthesis of 3,6-Dialkyl-5,6-Dihydro-4- Hydroxy-2hPyran-
2-One. Indian Patent IN 206678, 2007

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  The reasonable requirements of the public with respect to the patented invention have not
been satisfied, or
 The patented invention is not available to the public at a reasonably affordable price, or
 The patented invention is not worked in the territory of India 9. However, compulsory
license can be granted only after the expiration of three years from the date of the grant of
a patent.

(iii) Compulsory license for export of patented pharmaceutical products u/s 92A:

Section 92A of the Patents Act, 1970 states that compulsory license may be issued for
manufacture and export of patented pharmaceutical products to any country having insufficient
or no manufacturing capacity in the pharmaceutical sector for the concerned product to address
public health problems, provided that such country has granted compulsory license or allowed
the importation of patented pharmaceutical products from India34. The Controller shall, on
receipt of an application in the prescribed manner may grant a compulsory license solely for
manufacture and export of the concerned pharmaceutical product to such country under the
specified terms and conditions.

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3 Section 68 of the Patents (Amendment) Act, 2005

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Natco Pharma Ltd., India vs Bayer Corporation, USA10

Facts of the case

Bayer “Corporation (to be referred as patentee) is the American subsidiary of Bayer AG, a
German multinational chemical and pharmaceutical company. It manufactured a drug called
‘Sorafenib’ (Carboxy Substituted Diphenyl Ureas) used in treating advanced stage cancer in
kidney and liver. Patentee obtained a patent for the same in United State and India, also in many
other countries including countries of European Union. It was granted patent in India in the year
2008 after examining the various provisions of the Indian Patent Act, 1970. Meanwhile in 2005
patentee developed a drug named Naxavar (to be referred as ‘drug’) for the treatment of Renal
Cell Carcinoma RCC (kidney cancer) and subsequently got approval for the hepatocellular
carcinoma HCC (liver cancer). Patentee got approval for importing and marketing the drug in
India until 2008, when it was finally launched in India.

Indian generic pharmaceutical company, Natco Pharma Ltd. (Hereafter to be referred as

applicant) was incorporated on 19th September, 1981 in Andhra Pradesh as a Pvt. Ltd. Company
as Natco Fine Pharmaceuticals Pvt. Ltd. and became a deemed Public Company with effect from
1st July, 1992 under Section 43A of the Act. Subsequently, it changed its name to Natco Pharma.
Ltd.

The application for the compulsory licensing of Naxavar11 by applicant was filed before the
Controller of Patents in 2011 under section 84 of Patent (Amendment) Act 2005. Applicant
claimed that Bayer’s patented drug not been made available to the public at a reasonably
affordable price and that the reasonable requirements of the public had not been met. It further
argued that Bayer had failed to work the patent in India within the specified three years period.

Issues Framed in the Case

a. Bayor had failed to fulfil reasonable requirements of the public with regard to the
patented invention.
b. Nexavar was not available to the general public at a reasonably affordable price.
c. Bayor had not worked to the patented invention in the territory of India.”
10
Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013 (Intellectual Property Appellate Board, Chennai)
11
Targeted therapies for kidney cancer, American cancer society, Sorafenib (Nexavar)

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 Arguments on the Respective Issues Framed

Bayor “had failed to fulfil reasonable requirements of the public with regard to the
patented invention.

 According to GLOBOCAN, 2008 (WHO, 2008): India has some 20,000 liver cancer
patients and 8,900 kidney cancer patients. Bayor estimated: only about 8900 people
were eligible for the stage IV drug such as Nexavar. Bayor sold only 593 boxes in
2011.
 The Controller estimated that: If, on average, each cancer patient required 3 packets
(3 months’ dosage) of medicines, Bayor’s 593 boxes would have supplied the needs
of less than 200 patients. With Bayer’s modest estimation of 89000 patients was able
to cater to only 2percent of the patient’s needs.
 Possibility that Bayor did not have sufficient time to manufacture the drug available,
was also rejected.
 Bayor, a well-known brand name in India, had been marketing the drug globally since
2006, but Bayor, made little effort to sell the drug in India since its introduction in the
country at 2008.
 It is evident from Bayor’s figures for sales of the drug in India, India’s sales of the
drug accounted for not more than 1.6 percent of the drugs total sales worldwide in the
previous years (prior 2011), as estimated by Natco. Company.

Nexavar was not available to the general public at a reasonably affordable price

 Drug price of US $5608 per month is not a reasonably affordable price. Large Chunk of
the population have accessed to only private health care systems. Annual per capita
income was only about US$ 1489 in 2012 (World Bank 2013).
 Bayor’s Justification: Charging US $ 5608 for the drug on the basis of the huge R&D
costs involved in development of the drug. It requires approximately US$ 2billion to
bring any new molecule to the market. It was submitted that the evidence of comparable
drugs were priced similarly to the Nexavar. Failed versions prepared before the actual
drug invented, accounted 75 percent of total R&D costs.

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  Natco countered stating that Bayor’s claim that R&D costs should be used for the
criterian for fixing the price of the drug. Natco also argued that price of the product shall
not be fixed on the ground that the entire R&D costs for the drug, had to be collected
from the Indian Market
 Patent Controller was also of the view that reasonably affordable price should be seen
from the public’s perspective rather than the patentees.”

Verdict of the Case

In the “judgment of the same, licence was granted to applicant against which patentee appealed
to Intellectual Property Appellate Board (IPAB) which was rejected 12. The IPAB approached the
dispute from a public health perspective in the context of the right to life under Article 21 of the
Constitution of India41, and flagged the major issues based on the three-pronged test laid out in
section 84(1) of the Act42. In granting the compulsory License to Natco, the controller took
account of the fact that Bayer had priced Naxavar at 2.85 lakhs for a month’s course, whereas
Natco planned to sell its generic version, for just 8,900.

Conclusion of the Case

Patent Act, 1970 which is consistent with the TRIPS Agreement provides that the compulsory
licensing should be granted only after taking the fact in account that the considerable efforts
have been made by the applicant in obtaining the Licence, as in the instant case the Licence was
granted soon after the single attempt made by Natco. This proves the fact that the controller have
adopted the most favourable applicant approach, which is non-acceptable in other countries
granting compulsory licensing.

Patent occupy a very important place in pharmaceutical companies. This decision has certainly
disappointed the R&D industries. Given the time and cost in R&D and filing a cross suit for the
compulsory licensing is something which companies resent to. Foreign R&D drugs companies
have shown their disappointment in the decision and indicated that it could both jeopardize
India’s position as a potential market for the launch of new drugs and discourage innovation43.
It would be appreciating, if there could be any other mechanism that can be found for providing
the medicines with lower or at some different prices to those who cannot genuinely afford it. It is
12
Bayer Corporation v. Natco Pharma Ltd., Order No. 19/2013

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advisable if there can be genuine negotiated agreements and voluntary licensing instead of
coerced ones.

A more pragmatic approach to compulsory licensing is the one taken up by Brazil. Instead of
private generic companies obtaining compulsory licensing, the government studies which
diseases needs intervention from the state and use the compulsory licensing as a bargain tool to
get the innovator companies to come to the negotiating table. Brazil has been successful in
getting various inventor companies to reduce drug prices by up to 40%. This approach has
provided a three-dimensional benefit firstly, the government is able to make out as to which
disease requires the urgent need of availability of medicines. Secondly, it helps the patentee to
retain exclusive rights to the patents and lastly, it provides the public in general, medicines at a
lower and affordable price.”

In India “the similar approach can be adopted as there already exist regulations in the same
regard in the form of Drugs (Price Control) Order 201345. This can help the government in
effective price control of the drug without taking away the monopolistic rights of the patentee.
Also this will help in increasing the access to the medicines. Now, this is only up to the supreme
court of India to draw up the lines for an effective mechanism to be followed in this sphere
whereby following the standards laid down globally.”

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 CONCLUSION

Patents are a “way to prevent market failure and allow for greater investment in research.
However, patent-protected drugs face no price caps nor competitors for about twenty years,
giving patent holders market exclusivity. In an ideal world, medicine would be accessible to all.
To continually create new and better medications, however, somebody has to invest in research
for them, and unfortunately, the amount of financial capital required is no small figure. In 2014,
the Tufts Center for the Study of Drug Development estimated that it takes around $2.6 billion
and a ten-year long-time commitment to develop and license a new prescription drug. Without
patents, certain pharmaceutical companies wouldn’t invest in research themselves but would
instead wait around for another group to discover and license the drug. Then, those companies
could price the drug lower than their competition. This would result in a market failure, in terms
of a positive externality, as other companies would benefit from the research of one group
without having to pay for it.”

PATENTS AND MARKET EXCLUSIVITY

Corporations “wouldn’t want to invest their time and money in something they wouldn’t be able
to profit from due to competition. Thus, the number of pharmaceutical innovations in society
would be less than the socially optimal quantity. Patents are a way to combat this market failure.
By giving pharmaceutical companies a twenty-year patent where prices can’t be regulated by the
government or altered by competition, companies are incentivized to make these huge financial
and temporal investments.

Similarly, corporations wouldn’t want to invest in research for drugs that treat only a small group
of people such as people with orphan diseases like Lou Gehrig’s or Tourette’s. In the United
States, an orphan disease afflicts only around 200,000 people, which in the eyes of companies,
constitutes a small market when considering the amount of research required for developing
prescription drugs.

To stimulate production of these drugs, the U.S. government passed the Orphan Drug Act, giving
companies seven years of market exclusivity for treating certain rare conditions. Much like a
patent protected drug, an orphan drug could be set at any price during these seven years, as it
doesn’t face competition nor government restrictions.”

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NECESSARY CHANGES TO BE BROUGHT

The “goal of a business, at the end of the day, is to profit. There’s a need for patents so
companies are incentivized to make hefty investments for products that save lives. However, it’s
possible to regulate and incentivize at the same time. And, that’s something Americans might
prefer. According to a Kaiser Health News poll, seventy-eight percent of respondents supported
a price ceiling on certain prescription drugs. During the 2016 presidential race, the controversy
of drug prices came up frequently, as the topic was even related to a California ballot initiative.
Hillary Clinton had proposed creating an agency to regulate drug prices and punish unjustified
price hikes. Of course, the term unjustified is subjective and its definition would vary between
administrations, but such an agency could determine which drugs are vital to a patient’s health
and calculate an equitable cap that allows companies to profit and most patients to have access.
As for orphan drugs, the agency could determine what the marketed and primary use of a drug is
in order to determine whether it warrants orphan status.

In general, businesses will try to maximize their profits, and these attempts typically result in an
overall benefit to society in terms of cheaper prices and greater innovations. In the case of
pharmaceutical companies with unregulated market exclusivity, however, these attempts to profit
can end up hurting society, as unreasonable prices can restrict access to health care—an arguable
human right.

The India patent law is an exemplary piece of patent legislation that is aimed to balance the
interests of both the common man and the inventors. After the introduction of product patent
regime, a wide range of pharmaceutical products can be patented in India. Before applying for
the patent, the researchers shall carefully take into consideration the criteria of patentability and
advice of a patent expert is highly desirable in this respect. Once acquired patent rights can be
transferred through assignment or licensing to other persons or companies. Organizations such as
academic institutions and universities not having sufficient manufacturing or marketing
capacities can use patents as an effective tool for the technology transfer. These organizations
can outsource their patented products/ processes to third parties and in return they can earn
revenues to recoup the investments made in the development of such products/ processes.
Compulsory license provides an opportunity to market the patented products under certain
conditions.”

16