Assignment Title

Impact of the Indian Patent Act on the Indian

pharmaceutical industry

Submitted To: - Submitted By: -

Prof. Vijaylakshmi S. Anurag Mohanty
Deepak Bhakt
Abstract
It has been more than two years since the Indian Patent Act of 1970 (the
Act) was amended to make it compliant with the Trade Related Aspects of
Intellectual property Rights (TRIPS) Agreement. The amendments were made
amidst much expectation, protest and confusion. Despite having had ten years to
put the amendments together, the Indian Government had to resort to a hurried
Presidential Ordinance in December 2004 to amend the Patent Act. In March
2005, after an invigorating public debate involving all stakeholders, legislators
were able to come out with amendments that attempted to strike a balance
between promoting innovation and ensuring that Indians had continued access to
affordable medicines and so that India remained the ‘ pharmacy ’ of the
developing world. The amendments changed the paradigm under which most, if
not all, Indian pharmaceutical companies built their businesses. Now that the first
product patent in the pharmaceutical sector has been granted (Patent No. 198952
granted on 21st February, 2006 to Roche, on pegylated interferon-conjugates) and
challenge to a key amendment has come to an unsuccessful end at the Madras
high Court, this paper takes a look at what the impact of the amendments have
been so far and what they could be in the future.

Introduction
It is generally said, with justification, that the Patent Act of 1970 was the
single most important factor that laid the foundation for the robust and thriving
generic pharmaceutical industry that India has today. The 1970 Act restricted
patentability in the pharmaceutical sector just to processes as products themselves
were made un-patentable. This proved to be such a disincentive to the
multinational pharmaceutical companies, which were dominating the Indian
market, that they practically stopped introducing new medicines into India, thus
denying Indians access to a new generation of medicines. This led to a huge
unmet demand for modern medicines in the pharmaceutical sector. These
provisions meant that Indian companies could introduce any new medicine, made
by using alternative processes if needed, immediately after they were introduced
anywhere else in the world. Even the need for developing alternate processes
arose only in cases where the innovator had bothered to obtain a process patent in
India. The Act of 1970 had also reduced the term of a patent to only five years
from the date of granting or seven years from the date of filing, whichever was
earlier. In many cases, patents ‘expired’ before they were granted so there was no
incentive to file a process patent in India. Additionally, the fact that India was not
a member of the Patent Cooperation Treaty (PCT) system until December 1997
meant that any process patent had to be filed in India directly within 12 months of
the priority date. As such, many companies simply did not bother to do so. This
explains why very few process patents were filed in India while thousands were
being filed in other countries that also did not grant patents on pharmaceutical
products, for example in Spain and Austria as well as many others.
The fact that Indian companies did not have to design around process
patents did not mean that they did not have to innovate. Lack of patent protection
resulted in the development of a highly competitive domestic pharmaceutical
sector that was very fragmented, where the top player often had just about 5 per
cent of market share. Being highly cost-competitive was an imperative for
survival. This necessitated constant innovation and led to the honing of the now
highly regarded chemistry skills of the workforce. Such honing happened without
the need or availability of sophisticated research facilities; many such innovations
happened on the shop-floor.
The 1990s could well be considered the decade that the Indian
pharmaceutical industry moved up the value-chain and established itself globally.
Several seemingly unrelated factors converged to make this happen.

NEED FOR INDIAN COMPANIES TO MARKET THEIR PRODUCTS IN

ADVANCED MARKETS
By the early 1990’s Indian companies dominated the domestic market but
the very factor that provided them the platform to grow also proved to be limiting.
Their own innovations, which provided them with the edge for a short time, could
not be and were not protected and quickly became industry standards. Companies
had to constantly cut prices just to stay in the game. This meant that they could
not grow beyond a certain size (say US $ 250m) if they were operating just in the
Indian market. They needed to market their products outside of India. While
Going to less regulated markets with weak patent regimes was an option; it too
offered limited growth potential. The US and EU markets, accounting for a very
large slice of the global pharmacy market, could no longer be ignored, especially
by companies with global ambitions. These companies immediately recognized
that unless they became Intellectual Property (IP) savvy they could not operate in
these markets. Their experience in developing alternate processes — albeit mostly
For cost reasons — came in very handy in designing around processes patented in
these countries so they could enter those markets once the product patent had
expired.

OPPORTUNITIES PROVIDED BY THE HATCH – WAXMAN ACT IN

THE USA
The most important hurdle — and opportunity — that the Indian
companies faced in the US was the patent certification system that the US Food
and Drug Administration (FDA) had in place for Abbreviated New Drug
Applications (ANDA). This system required ANDA applicants to certify against
the patents listed against any drug listed in Approved Drug Products with
Therapeutic Equivalence Evaluations (Orange Book) maintained by the FDA,
under the provisions of the Hatch – Waxman Act of 1984 (H – W Act). There are
four ways an applicant can certify against each listed patent: that
(i) there is no patent listed,
(ii) the listed patent has expired,
(iii) the product covered by the ANDA will not be launched before the
expiry of the listed patent, or
(iv) The patent is invalid or unenforceable or the product covered by the
ANDA does not infringe the patent.

The last certification — the so-called Paragraph-IV (Para-IV) certification —

is the most important. The H – W Act made the very act filing of an ANDA under
Section 505(j) of the US Federal Food, Drug and Cosmetics Act (FD & C Act) an
act of infringement under US patent law. The ANDA applicant who filed a Para-
IV certification had to notify the patent holder / innovator of such filing and
provide the factual and legal basis for the Para-IV certification. The patent holder/
innovator could then initiate legal action against the ANDA applicant. On the
other hand, the H – W Act provided for an 180-day exclusivity for the first
ANDA applicant with a Para-IV certification who either did not get sued or ended
up winning the case in the case of a lawsuit. This meant that there was a big
incentive for companies that could develop non-infringing products and processes
and could develop strong invalidation cases. All this required that companies that
wanted to avail these opportunities had to be very IP-aware. A few pioneering
Indian companies recognized this around the mid-1990s and set
About putting together IP and regulatory teams who, along with their already well
established research teams, would enable them to accomplish their goals.

INDIA’ S SIGNING THE TRIPS AGREEMENT

At about the same time the Uruguay round of the General Agreement on
Tariffs and Trade (GATT), with Intellectual Property Rights as a key subject, was
underway. It was finally signed in 1994 and the TRIPS Agreement came into
being. India was a party to the Agreement and, being a developing country, had
until 1st January, 2005 to establish certain minimum standards for protecting
intellectual property as set out in the TRIPS Agreement. There were several
changes that India had to make in her patent law. One of the key changes was to
reestablish a product patent regime in the area of pharmaceuticals. While this was
a bitter pill for many companies, several others recognized that it was inevitable
that India had to align her patent laws with certain minimum internationally
accepted norms. They prepared themselves diligently to face the coming
challenge and considered the upcoming product patent regime to be an
opportunity to promote and protect IP being generated by Indian scientists. This
also aligned well with their aim to move up the value chain and invent and
develop drugs of their own.

2005 AMENDMENTS TO THE INDIAN PATENT ACT OF 1970

The 2005 amendments to the Indian Patent Act were one of the most
publicly scrutinized legislations in India. Depending on one ’ s point of view, the
changes had the potential to bring in millions, if not billions, of dollars of trans-
national investment in pharmaceutical research & development (R & D) and
make India an innovation superpower, or could adversely affect millions of poor
Indian patients by denying them the access to essential medicines. The resulting
cacophony drowned out the voice of those who recognized the possibility of a
middle path. The Act of Parliament enacted in March 2005 had quite a few
changes from the amendments included in the Ordinance of December 2004. As
expected, products were made patentable in the pharmaceutical field. Other
changes like providing 20-year patent term and publication of applications had
been introduced prior to 2005.

Impact on public health

The possible impact of the 2005 Amendments on the Indian pharmaceutical
industry has been much debated in the media and many academic and industry
forums, and it is evident that the dichotomy that characterized that pre-2005
debate continues. But an objective evaluation of the amendments shows that it is
indeed a good attempt at striking a compromise between protecting intellectual
Property rights and taking care of public healthcare needs. For a country like
India, maintaining reasonable access to medicines is of paramount importance
and non-negotiable under any circumstances. As such, the amendments to the
Act have to be viewed from this perspective. Among other things, it has
introduced certain criteria for patentability, pre- and post-grant opposition, more
Provisions for compulsory licensing, etc. If the legislative intent of not allowing
Ever-greening is to be realized, imparting appropriate training to the patent office
Personnel and judiciary is very critical. It has to be borne in mind that India has
certain provisions in her patent law that are unique to India and that training
based on US and European patent law could sometimes be counter-productive.
Any such training would need to be supplemented with extensive interaction with
domestic practitioners.

Preventing ever-greening
‘Ever-greening’ was one of the most important concerns that had to be
taken into account when the amendments were being debated. In the Indian
context, ‘ inventions ’ that do not result in a distinct product but only cover an
aspect of an existing product have been termed ‘ frivolous inventions ’ .
Inventions that do not claim new chemical entities but do result in a distinct
product have been termed ‘incremental inventions’. In the last 10 – 15 years a
significant proportion of patents on pharmaceutical products have claimed various
attributes of existing products. In most cases, they do not even cover a marketed
product.
 Their aim is not to protect a product but prevent anyone else from coming
up with an alternative. In other words, the monopoly is extended through a series
of patents. It is not unusual to see a single patent claiming five or more different
polymorphs (see, eg, US patents US 7,001,919, US 6,500,987, and US
7,148,376). When they made the amendments, Indian lawmakers strengthened
Section 3(d) of the Act by making certain inventions — particularly on salts,
polymorphs, esters, physical characteristics such as particle size, chemical
characteristics such as purity, isomeric purity, derivatives such as metabolites,
complexes, etc, and combinations of known substances — in the pharmaceutical
field patentable ‘ only ’ when they met certain conditions. It must be noted that
the law does not rule out patentability of any such invention; it merely requires
the applicant to show that the invention they are claiming has certain superior
characteristics when compared to what is already known. This could be
considered as bringing in certain aspects of substantive examination, say no
obviousness determination, into Section 3(d). They also retained Sections 3(e)
and 3(I), which say that mere admixtures resulting only in the aggregation of
properties of the components (eg., some formulations) and methods of treating
humans or animals, respectively, are not patentable.

Oppositions
Instead of the post-allowance but pre-grant opposition system that India
had earlier, the amendments brought in a two-level pre- and post-grant opposition
system that could be filed by any interested party under almost similar grounds.
Although this appears to provide an extra layer of protection, the pre-grant
opposition, in reality, is an opposition to the application itself, when it has
possibly not been examined yet. The claims could be amended upon opposition.
At best, pre-grant opposition is a process through which a third party can bring
certain references / information to the attention of the examiner, much like filing
an observation with the European Patent Office, although the involvement of the
third party is to a greater extent in India. It should be borne in mind that pre-grant
opposition does not supplant the regular examination process. Rejection of a pre-
grant opposition does not mean that the claims have been found allowable; it
merely means that the grounds put forth by that opponent have not been found
appropriate enough to reject the claims.
 Another opposition model that could be considered is the earlier pre-grant
opposition system where opposition could be filed after the claims were allowed
but before the patent was granted. This meant that the claims could not be
asserted against any potential infringer till the opposition was disposed off. This
system lets the examiners do their job first and then lets any potential opponent
focus on allowed claims instead of unexamined claims in an application. The
problem with the earlier system was that it was interminable. If reasonable but
rigid timelines are prescribed for the various activities associated with the
opposition system, then this could be an alternative well worth looking at. Post-
grant oppositions could more appropriately be filed before the Appellate Board.
The oft-heard argument against the two tier opposition system: it delays the
granting of a patent unduly is not really convincing. Section 11A of the amended
Act provides that, once the patent is granted, the patentee shall have the patent
rights starting from the date of publication. If an accused product infringes the
granted claims, the patentee is entitled to damages from the publication date.
Therefore, any delay in granting the patent due to opposition proceedings will not
be of much consequence as far as the ability of the patentee to get damages goes.
One thing though is clear: considering that India’s patent system is at the
early stages of an evolutionary process, it is better to err on the side of caution
when examining and granting patents than on the side of an ‘ anything goes ’
approach to patent examination which would inevitably result in ‘ frivolous ’
inventions being granted patents and subsequent, prolonged litigation. The pre-
grant opposition system plays an important role in ensuring this. Given that the
patent office in India has just begun to acquire the infrastructure and expertise so
vital for ensuring a thorough examination, interested parties could play a crucial
role in ensuring that the patent examiners have all vital information that could
help them do just that.

Compulsory licensing
Patents in India could be compulsorily licensed to any person interested in
obtaining one under several sections of the amended Act (eg., Sections 84, 90(1)
and 92A), for a variety of reasons, including
a) reasonable requirements of the public with respect to the
patented invention not being been satisfied,
 b) patented invention not being available to the public at a
reasonably affordable price,
c) patented invention not being worked in the territory of India,
d) a market for export of the patented article manufactured in
India not being supplied or developed, and
e) Addressing public health problems in any country having
insufficient or no manufacturing capacity in the pharmaceutical sector for
the concerned product. These provisions, not all of which are new to the
amended Act, attempt to safeguard not only the availability of medicines at
affordable prices to the Indian public, but also the ability of Indian
companies to export patented medicines to countries with unmet healthcare
needs. Section 92A specifically implements the provisions of the Decision
of 30th August, 2003 adopted pursuant to the Doha Declaration on 14th
November, 2001. Domestic compulsory licensing provisions require an
applicant to make an earnest, but failed, attempt at obtaining a voluntary
license from the patent holder before applying for a compulsory license.
They also require a three year cooling-off period from the date the patent is
granted before an application for compulsory license could be made. While
these have been incorporated in order to provide the patent holder
reasonable time to comply with the ‘working of a patent’ requirements
under Section 84(7) (d) and / or consider and negotiate voluntary licenses,
it could be a cause for concern in case of national healthcare emergencies
— for example, an epidemic where such cooling-off period or the
requirement of a failed attempt at getting a voluntary license may be
impractical. In such a scenario, the government can use the provision under
Section 47 (4) which provides the government with rights to import
patented medicines and drugs ‘ for the purpose of merely of its own use or
for distribution in any dispensary, hospital or other medical institution
maintained by or on behalf of the government or any other dispensary,
hospital or other medical institution which the Central Government may,
having regard to the public service that such dispensary, hospital or
medical institution renders, specify in this behalf by notification in the
Official Gazette.’
 One important area where Indian companies have been able to do very well
is in the supply of anti-retroviral (ARV) drugs for the treatment of human
immune deficiency virus (HIV). Indian firms produce and market generic
versions of first-line triple combination drugs at very affordable prices. These
fixed dose combinations (FDC) of ARV drugs reduced the number of pills to be
taken per day. Indian firms also introduced the pediatric formulation of ARV
drugs. Many countries, especially in the developing world, depend to a large
extent on the ability of Indian companies to meet their need for ARV drugs.
Introduction of the product patent regime in India has created serious doubts on
the continuing ability of Indian companies to develop and supply generic ARV
drugs, especially the newer generation drugs. But Indian companies have
managed to stay in the game through a combination of many of the avenues
available to them under the amended Act. To their credit, innovator companies
have been willing to issue voluntary licenses to Indian companies on newer ARV
drugs. This shows that with a good understanding of the patent landscape in
various countries and a pragmatic approach, Indian companies can continue to
fulfill l demand for affordable medicines in the developing countries.

Experimental exception
Section 107A (a) of the amended Act provides for experimental exception
(similar to the Bolar Provisions of the US patent law). This provides that ‘any act
of making, constructing, using, selling or importing a patented invention solely
for uses reasonably relating to the development and submission of information
required under law for the time being in force, in India, or in a country other than
India, that regulates the manufacture, construction, use, sale or import of any
product shall not be considered as an infringement of patent rights’. This makes it
possible for scientists in India to work on patented articles in order to generate
data for regulatory submissions across the world without the fear of being sued
for infringement.

Technology transfer
Another important aspect of the amended Act is the retention of the
provision (Section 84(7)(e)), which makes importation of a patented article into
India by the patentee, importers directly or indirectly authorized by the patentee,
or other persons against whom the patentee is not taking infringement action not
being considered working of a patent. Section 84(7) (d) says that ‘[C]compulsory
license could be applied for if the patented invention is not being worked in the
territory of India on a commercial scale to an adequate extent or is not being so
worked to the fullest extent that is reasonably practicable ’ . Put together, these
two clauses make transferring the technology covered by patents in India
imperative if the patentee does not want to risk the possibility of a compulsory
license.

This means either the patentee himself manufactures in India or transfers

technology through a license to a local partner. In either case, it results in the
transfer of technology to India and creation of jobs in India. But working of a
patent in India alone is merely a necessary condition to avoid a patent from being
compulsorily licensed. It is not a sufficient condition: the affordable cost and
reasonable availability criteria have to be independently met.

IMPACT ON INDIAN PHARMACEUTICAL COMPANIES

While there is an element of truth in the assertion that the Indian
pharmaceutical industry will have a very limited number of products to work on
as the product patent regime takes root, it cannot be concluded that Indian
companies have nothing to gain from a reasonably strong patent regime. Neither
is the fear that many Indian pharmacy companies will have to close down as a
result well-founded.

Globally competitive Indian companies

As seen earlier, becoming an international player, especially having a
presence in the advanced markets, is imperative for any Indian company that
wants to grow beyond a certain size. The size of the domestic market necessitates
this. Every country in the world is becoming acutely concerned with the ever
increasing healthcare costs and timely generalization has been found to be an
effective way to keep healthcare costs under control. A recent report in the New
York Times says that generics already account for 60 per cent of prescriptions in
the $ 275bn a year US prescription medicine market. 2 Several globally
successful Indian companies have shown that it is possible to be IP-compliant and
cost-effective at the same time. For the last three years, Indian companies have
accounted for about a third of all Drug Master Files filed with the US FDA. The
very attractiveness of these markets makes them extremely competitive. Indian
companies, which have thrived in the very competitive Indian market, have the
skill and ability to play a significant role in these markets. A stronger domestic
patent regime will certainly prepare them to face the challenges of these
international markets and several recent articles discuss this.
Indian companies have moved up the pharmaceutical value chain (Figure
1) in the last decade. They have gone from manufacturing active pharmaceutical
ingredients using off-patent processes to discovering New Chemical Entities of
their own. At each stage, IP generated has been protected by patenting them. This
has provided Indian companies with opportunities for out-licensing products and
technologies and / or garnering a greater market share in advanced markets
through supply agreements.

Promoting research and Innovation

While preventing ever-greening is an understandable and desired goal, that
a strong patent system is needed to ensure that there is equitable return on the
considerable investment that goes in to bringing new drugs to the market is
indubitable. Having a lax patent system is not one of the options being considered
by any government for making medicines more affordable. More and more
innovative products and processes are coming out of smaller but nimble
companies whose only asset is their IP. It must be noted, however, that the
decision to invest in R & D or clinical work in a country like India is ultimately
driven largely by economics and not by the strength or extent of IP protection.

A stronger patent regime abroad has actually helped Indian companies

develop and hone their reverse-engineering skills and it is to be expected that a
stronger system at home will only promote greater innovations in India. Several
Indian companies have recognized this and have invested considerably in R & D.
The focus is on Novel Drug Delivery Systems and Drug Discovery and
Development. In advanced countries, pharmaceutical innovation, its protection
through patents and exploitation is a self-sustaining cycle since the market is
large enough to provide sufficient returns on R & D. In developing economies,
this is not yet so. Resources that could be sunk into research are limited.
Therefore, after a particular stage, Indian companies will need to look for partners
to co-development or out-licensing opportunities. In either case IP due diligence
will be the first activity that the potential partner / licensee will engage in.
Without appropriate protection, the attractiveness and value of any invention goes
down considerably. Thus, a relatively stronger patent system, as has been
introduced through the amended Act, could promote innovation. In recent years,
several collaborations between Indian companies and multi-national companies
have been announced.
Contract research and manufacturing services
A stronger patent regime does not necessarily mean that every company
must work on cutting-edge areas and invest huge sums for doing so. Depending
on a company’s strengths, a stronger patent regime will bring in various
opportunities. The contract research and manufacturing services (CRAMS) area is
taking off in a big way in India post-2005. Many companies have set up separate
divisions to do the CRAMS work. These companies offer a variety of services,
either selectively or as one-stop shops. Custom research in drug discovery and
development, custom synthesis and process development, and contract and toll
manufacturing of drugs under patent are some of the services that are being
provided.
It is perhaps not a coincidence that the tremendous growth in Collaborative
R & D and CRAMS work has happened after 2005 amendments to the Act.
Being ‘IP-enabled’ is an imperative for Indian companies, not a choice.
Indian companies must place a premium on understanding patent issues. IP
knowledge must not reside in select pools; it must pervade the organization. All
key functions must be aware so that their activities are ‘IP enabled’. Setting up a
separate IP department, however small, for handling patent issues and providing
them appropriate training is normally a good beginning. Relying only on external
support for key patent issues limits the ability of a company to react quickly to
emerging situations. IP departments, much like quality assurance and regulatory
departments, perform the role of internal policemen, which is critical when
performing IP due diligence. IP skills, combined with India’s inherent scientific
strength and capabilities, will enable Indian companies to convert what appears to
be a threat into a great opportunity.
CONCLUSION
The amendments to the Indian Patent Act made in 2005 are a major way
forward in protecting and promoting innovations while at the same time
maintaining access to affordable medicines for the Indian public and retaining
India ’ s ability to be a low-cost producer / supplier of pharmaceuticals to the
developing world. While it is true that the playing field and some rules of the
game have changed, the game remains the same. There are several opportunities
that Indian pharmaceutical companies, big or small, can avail of and not survive
but actually thrive. The key is for them to prepare themselves by making
themselves IP-aware. Improved patent office infrastructure and adequate training
of all personnel involved is vital for ensuring the legislative intent of eliminating
ever-greening of patents is fully met.
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