India has made great strides in encouraging pharmaceutical research and development over the past decade, but a few key decisions over the summer may undermine those hard-won gains. The Swiss drug company Novartis will appeal June's decision of the Indian Intellectual Property Appellate Board (IPAB) to deny it a patent on its anti-leukaemia drug Glivec. IPAB's ruling is hugely flawed and it raises questions as to whether the Indian government is serious about the intellectual property (IP) laws it enacted in 2005, which made it compliant with TRIPS--the intellectual property rules of the World Trade Organization (WTO).
The Manmohan Singh government is fortunate that Novartis is appealing because a higher court will now be able to demonstrate, probably in December, that the rule of law still applies in India by overturning most of the rulings of IPAB.
At issue will be the findings of IPAB, which claims that Glivec is not patentable under section 3(d) of the Indian Patents Act; that is, it is not sufficiently different from an earlier patented version of the drug to be treated as a new one.
But this conclusion seems to contradict its own findings: IPAB found Glivec to be both novel and inventive and an improvement over older formulations of the drug. What is even more unjust is that IPAB will not allow new information about any enhanced benefits to be submitted by Novartis. IPAB argues it should have been included in the original patent application. But since this application was made in 1999 and the extra demand of proof of 'enhanced' efficacy only became law in 2005, this is clearly unreasonable. This retrospective application of the law is probably in violation of TRIPS and Novartis could urge the Swiss government to bring a complaint under WTO law against the Indian government.
These issues are at least debatable in law. But IPAB has also argued egregiously that granting Glivec a patent would lead to 'public disorder' because the drug is expensive. As Shamnad Basheer, Professor of Intellectual Property Law at the National University of Juridical Sciences at Kolkata, says on his Spicy IP blog, IPAB's decision 'is plain ridiculous! There is nothing in the patents act to support such a reading'. Professor Basheer continues: 'One ought to draw a distinction between the grant of a patent and the subsequent use/abuse of a patent'. In other words, if the Indian government believes Glivec is too expensive it could cap its price directly, or drive competition by allowing generics firms to produce the drug. All of these methods have costs, but at least they are legal. But the government has no legal authority to deny a patent on pricing grounds.
In the end, the government of India must decide whether it actually wants to fulfil its obligations under TRIPS. In the mid-1990s the Indian government, of which the current prime minister, Manmohan Singh, was then finance minister, decided, in concert with the WTO, that by 2005 India would enact laws to protect IP. Like all countries, India has to deal with domestic lobbies arguing for rules which benefit them against the common good; the fact that product patents did not exist until 2005 was directly due to lobbying by domestic companies that wanted to copy foreign products, notably drug firm Cipla. Mr Singh stood up to these lobbies then and he must do it again now.
Over the past decade pharmaceutical investment has flourished in India because of the defence of IP. India has enormous potential for drug development, not least because it is well suited to conduct clinical trials--a large, diverse population, many of whom speak English. It has many excellent companies, such as Piramal and Ranbaxy, and these companies and others are working with many large, equally excellent, international firms--Novartis included. Significant technology transfers are being made with drugs being developed to benefit India's middle classes, as well as valuable export markets. The IPAB decision puts this kind of investment at risk.
The Court may yet find in favour of the overall decision taken by IPAB to deny a patent for Glivec, but it should strike down IPAB's retrospective application and incorrect reading of the law.
Roger Bate is the Legatum Fellow in Global Prosperity at AEI.