New Delhi's patent malpractice

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Novartis headquarters on Oct. 19, 2012, in Basel, Switzerland. Novartis is a Swiss multinational company ranking number two in pharmaceutical sales in 2010.

Article Highlights

  • Nothing halts foreign investment faster than uncertain rules over intellectual property

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  • India's current patent law as interpreted by the Indian Supreme Court is protectionist and harms patients

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  • Undermining drug patents puts patients in other countries at risk, too

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On Monday, India's Supreme Court rejected a patent for Glivec, Novartis's blockbuster leukemia drug, putting an end to a seven-year legal battle. This decision, along with the government's efforts to undermine drug patents, threatens the health of patients in both India and the U.S.

Indians will receive lower-quality copies of Glivec and other drugs and are less likely to receive cutting-edge products in the future. Meanwhile, patients in countries that import Indian drugs have lost a key tool in ensuring the quality of the medicine they are prescribed.

India currently exports more pharmaceutical products to the U.S. than any other emerging market, and its drugs have consistently had quality-control problems. The latest is atorvastatin—generic Lipitor made by Ranbaxy—which was found late last year to contain glass particles.

The quality and consistency of India's drugs could be enhanced by foreign investment through infrastructure funding, technology transfers and changes in management culture. Yet nothing halts foreign investment faster than uncertain rules over intellectual property.

Indian pharmacies offer generic drugs at lower cost but also of lower quality.

The issue boils down to a protectionist interpretation of India's patent law. The vast majority of new drugs are products of incremental innovation—small improvements to existing compounds that improve health outcomes. Clause 3(d) of India's patent law is designed to prevent a company from making insignificant changes to an existing drug purely to secure or extend a patent (a strategy called "evergreening").

A reasonable idea in theory, but in practice the evergreening clause has resulted in the denial of justified protections for beneficial new drugs. Glivec is a case in point. The drug is a salt variant of a previously known compound that patients can more easily digest, thus enhancing its effectiveness. The product has been patented in the U.S., U.K., Russia, China and Taiwan, among many other countries—but not India. In the past, New Delhi has also refused to protect widely patented drugs made by Bayer, Gilead, Pfizer PFE +1.21% and Roche.

As a result, Indian pharmaceutical manufacturers are free to copy and sell these drugs. Yet there is no guarantee these local companies can reproduce them as safely or effectively as the original, especially when they have no data-sharing agreement with the company that designed them.

Meanwhile, India's pharmaceuticals regulator is plagued with systemic problems that threaten drug quality. The Indian government's Parliamentary Standing Committee on Health and Family Welfare issued a damning report last year accusing its federal drug regulatory agency of extensive corruption and misrepresentation of pharmaceutical drug data. The health ministry set up a committee to investigate the findings, but nothing has come of it. Prospects for reform are dim.

Undermining drug patents puts patients in other countries at risk, too. More Indian drugs are available in U.S. hospitals and pharmacies than ever before. While the U.S. Food and Drug Administration maintains offices in 15 locations around the world and conducts random foreign-factory inspections, it cannot regulate the world. Substandard products from developing countries routinely slip through Western regulatory systems, including America's.

Furthermore, the FDA does very little surveillance of products already on the U.S. market. It assumes that once a manufacturer has attained the required standard, the standard will be maintained. The main line of defense against subpar medicines is the adverse-effects reporting system administered by drug companies in the end market, which only identifies problems after they have caused harm.

Foreign investment in India is one of the strongest tools patients have to guard against these threats—by working closely with Indian pharmaceutical companies and government agencies to systematically improve oversight, information sharing, management and product quality. Novartis cut off infrastructure investment in 2007 because of the Glivec decision. Other companies considering similar investments are likely to be turned off altogether and look elsewhere.

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