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Patent with a purpose

Supreme Court's ruling should begin a debate on a more optimal patents regime

Written by Shamnad Basheer |
April 3, 2013 3:01:20 am

Even as the rest of the world drives in one direction on the patent highway,India appears to be going the other way. That might not be a bad thing,if the others are driving the wrong way. The latest in a series of decisions that marks out India as an apparent outlier in the global innovation and trade narrative is a landmark decision from the Supreme Court restricting the scope for pharmaceutical patents. In Novartis vs Union of India,the apex court rejected Novartis’s demand for a patent on the cancer drug,Glivec.

The court ruled that a minor modification to an existing pharmaceutical substance does not merit a 20-year patent monopoly. After all,patents were premised on the notion that an invention had to demonstrate some cognitive leap over and above what existed before and not comprise mere trial and error methods. If not,the monopoly costs through patents were ill deserved — particularly in an area like pharmaceuticals,where access to the patented product often stood between good and bad health,and sometimes,between life and death itself.

The ruling might seem somewhat commonsensical to someone without specialised knowledge of intellectual property (IP). But even for a specialist,a close look at the judgment would reveal that it is in conformity with traditional patent concepts and unlikely to impact pharmaceutical innovation in a significant way,as many have suggested.

It is important to appreciate that,till date,the assumption that greater levels of intellectual property protection necessarily lead to higher rates of innovation has not been empirically proven. In many industries,economists have demonstrated that factors such as lead-time,branding and cost of duplication are incentive enough to innovate. However,many consider the pharmaceutical industry an exception,given the significantly high R&D costs. It is this sentiment that underlies mainstream patent law, where Western patent offices and courts have gradually eroded patent standards in a bid to protect pharmaceutical investments.

The Supreme Court refused to cave in to this supposedly global paradigm. Its refusal to protect global investments through patent monopolies,though grounded in the text of the law,also appears to stem from a national interest perspective,taking into account concerns of both public interest (where India contains a significant number of poor patients with no health coverage),and private interest (where India is home to some of the leading generic companies that might lose their competitive advantage with a rather liberal patent regime).

However,even outside this national interest perspective,one needs to ask: is the real purpose of patent law the protection of investment? Or is it meant to protect ideas that reflect some creative spark and represent a real cognitive advance? I have argued earlier that if the real goal is to protect pharmaceutical investments in R&D,we must do so more directly without torturing our patent regime and diluting its standards. In any case,the patent regime is thoroughly inefficient in protecting pharmaceutical R&D.

First,it does not protect known molecules (those that have been disclosed in scientific literature),even though such molecules may require considerable investment through clinical trials and the like before they can be converted to marketable drugs. Drug companies are unlikely to invest in such molecules without some form of market-based protection against free riders.

Second,the patent regime protects all allegedly new and inventive drugs uniformly,without regard to the quantum of investment made by the drug originator or the health value of the drug,that is,whether the final drug is a first-in-line molecule for curing a rare cancer or the latest in a range of variants for curing erectile dysfunction. A more optimal regime would offer protection commensurate with the actual quantum of R&D investment made by the drug originator. This is an important point to appreciate,given that many drugs owe their origins to university research and government funding. Further and more egregiously,drug companies often claim “marketing” costs as R&D costs.

Most importantly,the legal protection offered to drug originators must correspond with the health value of the drug in question. Such a regime would incentivise a shift away from mere ever-greened versions of existing drugs to new molecules with significant health impact.

Further,given the myriad problems with exclusive market protection and excessive monopoly pricing,generic companies should be free to enter the market on day one,after paying some compensation to the drug originator. This would encourage more competition and keep the prices low for the consumer,while at the same time compensating the drug originator for their R&D investment.

If not for anything else,the key advantage of such a model is that it forces pharmaceutical firms to disclose their actual investments in making a drug,a closely guarded secret around which there is much debate even today. Once this investment has been revealed,countries such as India need protect only a tiny proportion of such investment,commensurate with the size of India’s market for that particular drug. It could also ensure that the protection granted is proportionate to the health impact of the drug.

In the end,the Supreme Court’s refusal to lower patent standards to protect obvious pharmaceutical variants should force the drug industry to reconsider a highly flawed and expensive patent model that protects R&D investments uniformly without regard to the health value of the drug or its impact on pricing and public health.

The writer is the Ministry of HRD Professor of IP Law at WB NUJS and was an academic intervenor-amicus in the Novartis case,

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