India: A Changing Regime - India´s Tryst with January 1, 2005

Last Updated: 15 November 2004
Article by Archa Saran

I. Indian Patent System and TRIPS

The patent regime in India is due for a seismic change on January 1, 2005. When India became a member of WTO and a signatory to TRIPS with effect from January 1, 1995 it was given five years as a developing country, to change its laws to comply with TRIPS. This period was later extended by five years and now comes to end on January 1, 2005.

TRIPS inter alia, required grant of process as well as product patent in all fields of technology, for a period of twenty years from the date of filing of the application. The (Indian) Patent Act, 1970 did not permit product patent for food, medicine/drugs and substances produced by chemical processes. For these, only a process patent was granted, for a period of seven years while for the rest, the term of the patent was fourteen years.

In line with TRIPS requirements, the first amendment to the Patent Act in March 1999 put in place a mailbox system, to receive applications for grant of product patent for food, medicines/drugs and chemicals, to be examined after December 31, 2004. Provisions were also made to grant Exclusive Marketing Right1 ('EMR') in these areas to applicants to tide over the transition period. The Patent Act was again amended in May 2003, to increase the term of patents to twenty years but one of the most crucial changes - product patent in all fields of technology, still remained unaddressed.

II. The Patent (Amendment) Bill, 2003

Last year, the Department of Industrial Policy and Promotion drafted the Patent (Amendment) Bill, 2003 which was put on hold due to the parliamentary elections in May, this year.

The Bill inter alia provided for the following:

  1. Introduction of product patent in all fields of technology as per article 272 of the TRIPS agreement;

  2. Deletion of the provisions relating to EMRs and introduction of a transitional provision for safeguarding EMRs already granted3;

  3. Introduction of a provision for enabling grant of compulsory license for export of medicines to countries which have insufficient or no manufacturing capacity to meet emergent public health situations4;

  4. Amendment and strengthening of the provisions relating to national security;

  5. Amendment of the provision relating to opposition procedures.

After certain modifications by the new Government, the Bill was referred to a Group of Ministers5 to study the implications of its more controversial provisions. The Indian pharma industry has made a strong representation to the GoM to change the following provisions of the Patent Act / Bill:

  1. Amendment of section 3 of the Patent Act which deals with inventions not patentable - to exclude from patentibility new forms of previously patented compounds so that marginal changes or improvements which merely promote evergreening of patents are not allowed. The Bill does qualify the words 'new use' in section 3(d) of the Act6 with "mere new use". The GoM is reportedly not in favour of allowing the generics to be sold in the market once the product patent is granted. The domestic companies manufacturing the generic versions of drugs for which product patent applications are pending in the mailbox, have offered to pay a royalty of 25% of their profits to the applicants, once the patent is granted, to be allowed to continue selling their products;

  2. Change in clause 23 of the Bill, which seeks to replace the existing pre-grant opposition system with a post-grant system. Section 25 of the Patent Act gives an interested party five months (four months + one month extension) from the date of advertisement of the acceptance of the complete specification, to initiate opposition proceedings. The Bill provides for grant of patent to all applications, which are found acceptable by the Examiners. The patent can be challenged within one year of the grant on the same grounds, which are available under the existing Act. While this may speed up the process, clear the backlog and put an end to use of opposition procedure as a delaying tactics, the pharma industry has urged the Government to retain the pre grant system to ensure that fraudulent, unlawful and frivolous patents are not granted, even by mistake. There are indications that the GoM is considering retaining the pre grant opposition system and further, to make it mandatory for the Controller of Patents to give a speaking order while disposing off a pre-grant representation.

  3. The Bill introduces a new section in the Act - section 92A which provides for grant of compulsory license to manufacture and export patented pharmaceutical product to a country which has insufficient or no manufacturing capacity in respect of that particular product, if the applicant has obtained a compulsory license in that country. The proposed amendment gives the Controller of Patents, the power to grant compulsory license on such terms and conditions, as he deems fit. The efficacy of this system is doubtful as the conditions for importation of the patented product to a country which has acute need of it and the terms on which the product can be exported by the country which manufactures it, are quite complex and difficult to fulfil7. Besides, there is a likelihood of patent protection not being available if the pharmaceutical product is exported to a least developed country8.

  4. The Government has retained discretion to grant compulsory license9 dealt with in Chapter XVI of the Patent Act. This is considered by the MNCs to be considerably beyond what is permitted under TRIPS while the generic drug industry feels that too many concessions have already been made. Despite the heated debate, the foreign pharmaceutical companies have little cause for concern. There are a number of imported drugs in the market without generic equivalents for which compulsory licenses have not been granted.

  5. Data exclusivity10 has not been addressed in the Bill. The Government has taken the stance that there is no obligation under TRIPS to include provisions for data protection since Article 39.3 of the TRIPS11 only requires protection of test data against unfair commercial use. However a 14-member inter-ministerial committee has been set up to study the existing legal framework including the Drugs and Cosmetic Act, 1940 to provide for data protection and is expected to present its report soon.

Other salient features of the Bill are:

  1. Permitting patenting of embedded software and software combined with hardware although software by itself remains unpatentable. This has been welcomed by the Indian software industry, which is planning a foray in the embedded software and mobile computing market.

  2. Mandatory disclosure of origin of materials likes plants, animals, and microorganisms for patenting of inventions, which use such material or associated knowledge12. Absence of such disclosure has been made a ground for rejection, opposition and revocation of the patent / application13.

The GoM is expected to finalize its report by the end of this month. The Bill will then be tabled before the Parliament when it meets for its winter session in December.

  1. The Indian Pharma Industry

The Indian pharmaceutical industry14 is presently undergoing a paradigm shift. Where previously the focus was reverse engineering and generics, the industry must now concentrate on development of new chemical entities, which means a huge investment in R & D, both in terms of time and money. The industry experts have also identified certain other areas for development like herbal drugs, contract research and clinical research. With a rich bio diversity that includes 45,000 species of plants, out of which 20,000 plants have proven medicinal value, India has a good chance of capturing a portion of the $ 65 billion global herbal industry.

Some of the Indian companies are already exploring new markets:

  • France has emerged as one of the most attractive countries for acquisition of companies. Earlier this year, Ranbaxy one of the foremost Indian companies, acquired RPG (Aventis) SA, France. Zydus Cadila already has a French subsidiary Zydus France SA, which is launching 43 generics in the French market this year and will launch 45 more by 2006. Other Indian companies like Wockhardt, Unichem and Sun Pharma are in talks for acquisition / alliance with several French companies.

  • Most Indian companies have a presence in US. Zydus Cadila has recently set up its second company in USA - Zydus Pharmaceuticals USA Inc. In 2002, it had set up Zydus Healthcare LLC, which sells Active Pharmaceutical Ingredients (API). Wockhardt Ltd. has also recently set up its subsidiary in US- Wockhardt USA Inc for sales and marketing. The generic market in US is likely to see some action as more than 500 drug patents are expiring in the next two years. Several Indian companies are taking advantage of this opportunity by filing or planning to file Abbreviated New Drug Applications.

  • Dr. Reddy's the biggest Indian company in terms of R & D investment has a presence in 50 countries including Russia, CIS Countries, Latin America, Africa and China.

  • Ranbaxy has recently launched its first branded prescription tablet - Visclair in UK.

  • Recently, Mumbai based Gelnmark Pharmaceuticals entered into a USD 190 million deal with New York based Forest Labs Inc. for development of a drug molecule identified by Glenmark researchers for treating breathing disorders. Earlier this year, Glenmark's wholly owned subsidiary in USA entered into a license agreement with KV Pharmaceutical Company for marketing of eight generic products in USA.

Once the product patent regime is in place, several multinational pharmaceuticals are also expected to enter the Indian market including US based Ivax Corporation, Merck & Co, Israel based Taro Pharmaceuticals. Those already in India are planning expansions:

  • Germany's Hexal AG has a liaison office in India and is building a formulation plant in Bangalore from where products will be exported to Hexal's subsidiaries all over the world;

  • Bayer A.G. has identified India as its global outsourcing hub for basic as well as specialty chemicals. It is also looking for Indian partners to develop joint research and explore other initiatives.

  • Pfizer has doubled its R & D expenditure in India;

  • Roche, Aventis and Chiron have decided to make India their regional hub for active pharmaceutical ingredients and supplies of drugs apart from outsourcing clinical research;

  • Novartis, Astra Zeneca, Eli Lily and GlaxoSmithKline have also decided to make India their regional hub for clinical research.

  • Merck & Co is planning to set up its Indian subsidiary by early 2005. Initially products will be imported from its parent company but it is expected that the company may later outsource the manufacturing services to India.

Almost 15% of the medicines marketed in India, which represent approximately USD 650 million, will come within the ambit of the product patent regime. The prices of the drugs are likely to soar and a sharp increase in patent litigation is expected but with new opportunities knocking at the door, the Indian drug industry continues to be optimistic.

Footnotes

1. EMRs - Out of the seventeen applications filed for grant of EMR so far only four have been granted to: Novartis' Glivec, Wockhardt's topical antibiotic Nadoxin, United Phosphorous' pesticide product Saaf and Eli Lili''s Tadalafil. Four of the applications have been rejected while nine are still pending. Both the grant and rejection of EMRs / Applications have been challenged by a number of Indian and foreign companies, most of which are still sub judice. A prime example is the first EMR given in November 2003 to Novartis' Glivec used for treatment of Chronic Myeloid Leukaemia ('CML'). Novartis moved to Chennai High Court for injuncting six Indian companies from selling generic versions of the drug. Natco Pharma, an Indian company appealed to the Delhi High Court challenging the grant of the EMR on the ground that the application by Novartis was filed prior to 1995 when the Patent Act did not contain any provisions for EMRs. In August this year, the Indian Supreme Court issued notice to the Drug Controller General of India, National Pharmaceutical Pricing Authority, Controller of Patents and Novartis on a petition filed by Cancer Patients Aids Association. The allegation in the Petition is the increase in price of the drug from $ 90 to $ 2610 after the grant of EMR which will effectively put the drug out of reach of 24,000 patients in India who suffer from CML. None of these cases have concluded yet.

2. Article 27(1) of TRIPS - Patentable Subject Matter: "Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application…."

3. Pending applications for grant of EMR will be treated as request for examination of the application for grant of product patent

4. This provision is in accordance with para 6 of the Doha Declaration on TRIPS and public health approved in August 2003.

5. The Group of Ministers is headed by the Defence Minister Pranab Mukherjee and comprises of Finance Minister P Chidambaram, Health Minister Anbumani Ramdoss, Commerce and Industry Minister Kamal Nath, Food and Agriculture Minister Sharad Pawar, Chemical and Fertilisers Minister Ramvilas Paswan, Science and Technology Minister Kapil Sibal, Minister of State for Food Processing Subodh Kant Sahay and special invitee Deputy Chairman of Planning Commission Montek Singh Ahluwalia

6. Section 3 of the Act. What are not inventions:

(d)……..the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant;

7. Decision of General Council of 30.8.03 - Implementation of Paragraph 6 of the Doha Declaration on TRIPS Agreement and Public Health available at http://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm

8. The obligations of these countries with respect to pharmaceutical products, under TRIPS, have been waived till January 1, 2016 - Decision of General council dated 8 July 2002 - Least-Developed Country Members - Obligations Under Article 70.9 of the TRIPS Agreement with Respect to Pharmaceutical Products

9. Section 84 of the Act gives the Controller of Patents, the power to grant compulsory license (usually non-exclusive and non-assignable) to work a patent in India after three years from the date of sealing of the patent, on the following grounds:

  1. the reasonable requirements of the public in respect of the patented invention have not been satisfied;

  2. the patented invention is not available to the public at a reasonable affordable price;

  3. the patented invention is not worked in the territory of India.

In granting the license, the Controller shall take into account the following except in cases of national emergency, , circumstances of extreme urgency, public non commercial use and establishment of a ground of anti-competitive practices adopted by the patentee:

  1. the nature of the invention,

  2. the time which has elapsed since the sealing of the patent;

  3. the measures already taken by the patentee/licensee to make full use of the invention;

  4. the ability of the applicant to work the invention to public advantage;

  5. the capacity of the applicant to undertake the risk in providing capital and working the invention, if application was granted;

  6. whether the applicant has made an effort to obtain a license from the patentee on reasonable terms.

10. Protection of test data submitted for regulatory approval of a drug, for a certain period of time.

11. Article 39.3 of TRIPS - "Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use".

12. In order to protect the Indian traditional medicine system of ayurveda and unani medicines, a digital knowledge library is being compiled by the National Institute of Science, Communication and Information Resources. So far 36,000 ayurvedic formulas have been transcribed in patent compatible format while another 22,000 for ayurveda and 72,000 for unani medicine system are in the pipeline. The information that includes names of plants, description of diseases under ayurveda and their modern equivalent, therapeutic formulations etc, will be available in five languages - English, French, German, Spanish and Japanese. The Traditional Digital Knowledge Library is expected to be launched by early next year. The countries that wish to access the system will have to sign a non-disclosure agreement with India. The Government is currently in the process of finalizing these agreements with several countries.

13. If the Bill is passed by the Indian parliament, India would be the first country to make such disclosure mandatory. This reflects the position India has taken in the WTO that the anti-biopiracy provisions in the Convention on Biological Diversity should reflect in the national patent laws.

14. According to a recent survey conducted by Consultancy major Mckinsey, the Indian pharmaceutical industry, with the current turnover of $6.5 billion, is expected to touch $ 23 -26 billion by 2010. India is among the five emerging biotech leaders in the Asia Pacific Region and was ranked third by an Ernst & Young Global Report on the sector. Some of the leading companies in the industry include Ranbaxy, Dr. Reddy's, Aurobindo Pharma, Nicholas Piramal, Lupin, Cadila and Wockhardt.

Copyright: Archa Saran, October 2004.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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