Biopharmaceuticals: can India have its cake and eat it?

In late 2011, India adopted a National Manufacturing Policy to boost gross domestic product from 16 percent to 25 percent by 2022. The policy aims to aggressively increase domestic manufacturing capacity, especially in high technology areas.

One mechanism to achieve this goal is by adopting measures that “ensure access for Indian companies to foreign technologies” by “leveraging the strength of India’s large market”. The official policy further elaborates that one way to ensure access to foreign technologies requires India to overhaul its IP regime “to enable more collaborative innovation.”

During the 2012 general assemblies of the World Intellectual Property Organization (WIPO), India proclaimed that “while fully recognising the importance of IP rights for innovation—diffusion of technology also merits serious consideration.”

This tone appears to overlook the spirit of India’s 2011 policy. In fact, many foreign inventors have experienced increased difficulty in obtaining and enforcing IP rights, particularly patents, in India. It seems that India’s IP regime reform includes “supporting” its national industry at the expense of foreign inventors.

Notwithstanding the international legality of its policies, it is highly questionable whether India’s treatment of foreign patent applications and grants is sustainable. There are four main areas that have caused many innovative stakeholders to rethink India’s commitment to innovation:

1. Requiring foreign inventors to prove certain aspects of their inventions not available at the time of patent application;
2. Creating barriers to patent enforcement, namely the inability to obtain preliminary injunctions during the course of judiciary proceedings;
3. Issuing compulsory licences or invalidating granted patents based on dubious rationales; and
4. Requiring foreign inventors to meet unnecessary and overly burdensome procedural rules in order for a patent application to be considered by India’s Patent Office.

Biopharmaceutical innovation

The situation is even more worrying for research-based biopharmaceutical companies in India. Due to the complexity, uncertainty, and capital required to research early-phase molecules, biopharmaceutical research and development is largely dependent on robust IP rights.

For instance, it is estimated that for every 5,000 to 10,000 investigated pharmaceutical compounds, only one will become a marketed medicine. In addition, that process is estimated to cost more than $1.2 billion. In order to recoup the large amount of investment required to bring a medicine to market, companies need a certain level of certainty to reap the fruit of their labours.

Legal certainty is a key ingredient for sustaining biopharmaceutical innovation. Due to the global nature of biopharmaceutical innovation, inventors need a level playing field in order to take full advantage of diffusing technologies and know-how around the world. In this manner, it is important for governments to strike the correct balance of short-, mid-, and long-term policies affecting innovative biopharmaceutical companies.

India is attempting to strike this balance in a formal national debate on innovation and IP rights. In a policy brief resulting from that debate, Indian stakeholders recognised the importance of robust IP rights in a knowledge economy, and called for the “improvement of the institutions that grant IP rights and … those that are responsible for its enforcement.” However, since 2011, innovative biopharmaceutical firms have witnessed an unfortunate deterioration of IP rights in India.

Meeting India’s patentability criteria

In order to receive a patent, an invention needs to be patent-eligible subject matter and must be “new, involve an inventive step, and capable of industrial application.” Section 3 of India’s Patent Act generally outlines types of inventions that are not patent-eligible subject matter. Subsection (d) of that section further requires:

“For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of a known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy …”

In order for any of the enumerated inventions in Section 3(d) to receive a patent, an applicant must show an ‘enhanced efficacy’ of that invention during formal patent review. Enhanced efficacy, as India’s Supreme Court described in Novartis v Union of India, must be “specifically claimed and established by research data” in the affected patent application.

Notwithstanding the legal concerns relating to India’s obligations under Article 27.1 of WTO’s TRIPS Agreement, biopharmaceutical patent applicants are now faced with a practical problem: enhanced efficacy data is not normally available until up to eight years after applying for a patent.

Disclosing information to prove enhanced efficacy in a biopharmaceutical patent application may be impossible because it is unknown at the time of applying for a patent. Moreover, delaying the date of patent application until such data are available carries a substantial risk that the invention will not be patentable because it likely to become publicly disclosed (eg, primarily through patent applications in other countries). In many circumstances a medicine’s efficacy is determined once clinical trials are conducted.

Patent enforcement and preliminary injunctions

Article 28 of TRIPS outlines the rights conferred by patent grants. It provides:

“A patent shall confer to its owner the … exclusive right … to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or importing [the affected patented product].”

“Legal certainty is a key ingredient for sustaining biopharmaceutical innovation. Due to the global nature of biopharmaceutical innovation, inventors need a level playing field in order to take full advantage of diffusing technologies and know-how around the world.”

In the event a patent is allegedly infringed, the typical recourse for a patent owner is to seek judicial intervention to permanently enjoin the infringer from “making, using, or offering for sale” the patented product. However, only a judiciary body can determine whether infringement occurred. That process, usually a conventional court trial, may take years.

In order to ensure the alleged infringer ceases the possible infringement, courts provide patent owners with an opportunity preliminarily to ‘prove’ that the patent is in fact being infringed and that that act is causing the patent owner irreparable harm. This opportunity is called a preliminary injunction.

When a bona fide request for a preliminary injunction is rejected, infringers are essentially allowed to infringe for the entire duration of the trial. In other words, the main tactic for a defendant infringer in that circumstance is to delay the case for as long as possible. Unfortunately, biopharmaceutical patent owners in India are regularly witnessing such tactics. The Indian judiciary has become more and more reluctant to issue preliminary injunctions.

Compulsory licences and patent invalidations

While TRIPS permits the use of compulsory licences under certain circumstances, routine use, or the threat of use, of compulsory licences discourages the introduction of new medicines. Even though allowed under TRIPS, compulsory licences are an option originally intended for use in extraordinary circumstances. Frequent use of compulsory licences weakens IP regimes because they undermine the incentive for inventors to invest in risky research.

Yet, a number of commentators applaud the frequent use of compulsory licences. This line of thought often focuses on short-term objectives rather than on solutions that can be sustained long term. In addition, recurrent use or threat of compulsory licences has a negative effect on attracting foreign investment. In the biopharmaceutical sector, the absence of foreign investors from a market may lead to reduced investment in public health.

History has demonstrated that compulsory licences are less effective than other access initiatives. For instance, voluntary agreements between patent right owners and potential licensees not only disseminate the underlying technology, but also the related expertise and know-how. In the last decade, India has issued and regularly threatened to issue compulsory licences on a wide range of biopharmaceutical medicines.

In 2012 India’s Controller General issued a compulsory licence relating to a cancer treatment, thereby enabling an Indian generic manufacturer to produce and sell the medicine without risk of patent infringement. Similarly, India has threatened to consider compulsory licences for at least three other medicines since 2007.

The Indian government has indicated that compulsory licences are needed because the affected medicines are not accessible to all Indian patients. Yet voluntary negotiations to strike agreements with the patent owners are frequently one-sided, leaving little room for real discussion. In the Nexavar case, Natco argued that the simple sending of a letter constituted negotiation with the rights holder.

Similarly, biopharmaceutical firms require a level of certainty to ensure that reviewed and granted patents will withstand threats of infringement.

Naturally, patent-granting authorities are tasked with striking a balance of efficiency and accuracy when substantively reviewing patentability, but the quality of patent review should be maintained at a high level. In 2013 alone, at least five biopharmaceutical products in India have had their respective patents invalidated, while those patents are still in force in the vast majority of other countries.

Nearly all of these invalidations were based on the invention not satisfying the patentability criteria or definition of invention found in India’s Patent Act. Moreover, the reasoning in many of these cases adopted drastically broad interpretations of the Patent Act, therefore creating a disparity between the standards applied by India’s Patent Office and the judiciary.

“India is building a significant amount of expertise and has the potential to be a global leader of biopharmaceutical innovation.”

Yet another area of growing concern for a number of innovative industries is the premise that in order to ‘work’ a patent (failure to supply to market with a product covered by patents can be grounds for a compulsory licence) it must be manufactured locally. This is part of a growing trend where preferential market access (PMA) or ‘forced localisation’ policies require extensive local content requirements on procurement of electronic products by the government and private sector entities in the information and communications technology sector. Another example is India’s national solar policy, which promotes the use of solar energy in India but inhibits investment from foreign firms.

Patent application requirements

Regulatory and administrative agencies often require certain levels of formal procedures to maximise efficiency and quality. For instance, many countries require inventors to follow certain procedures to submit a patent application to a relevant patent granting authority.

These procedures are usually designed to maximise an authority’s efficiency in reviewing patent applications while minimising the burden on a patent applicant. After all, a patent is a trade-off between an inventor and a government: for a fixed period of time an inventor can exclusively own what is covered by the patent, but is required to publicly disclose the invention. After that exclusivity period expires, the invention is made public.

The High Court of New Delhi in Hoffmann-La Roche v Cipla found that an Indian patent may be invalidated if an applicant fails to provide translated copies of all relevant foreign patent applications and correspondence to India’s Patent Office.One common procedural requirement for obtaining a patent in nearly all countries includes the disclosure of patent applications relating to the same or similar inventions in foreign countries. In India, this requirement is outlined in Section 8 of the Patents Act.

However, unlike nearly all other countries, India’s Patent Office requires that an inventor not only disclose any foreign patent applications (and related material), but also provide translated versions of those documents.

This requirement creates an enormous financial burden for innovative biopharmaceutical companies, and provides no benefit to India’s Patent Office because the material disclosed relates to the same invention. This is one example of measures that cause an undue procedural burden for foreign applicants.

While it is important for countries to develop robust national manufacturing policies to encourage domestic industry, foreign investment should been seen as complementing this objective rather than as something to be undermined. It is unclear from the biopharmaceutical industry’s experience whether India’s National Manufacturing Policy is complementary to its debated national IP rights strategy.

India is building a significant amount of expertise and has the potential to be a global leader of biopharmaceutical innovation. However, the laws, regulations and guidelines relating to medicinal IP rights must be transparent to provide foreign and local inventors the needed certainty to mitigate the significant costs incurred during R&D and product launch.

If India truly wants to create an environment where health innovation can thrive, there needs to be a collective understanding that such an ecosystem can be built and sustained only through:

There is huge potential in India but a delicate balance needs to be found to create mutual benefit for all parties. Unfortunately, many innovative industries believe India presents a risk too far and are starting to move investments elsewhere. The time for action is now, to ensure the policies of today do not destroy the vast potential for the economic growth of tomorrow.

References are available on request to the authors.

Andrew Jenner is director of innovation & trade policy at the International Federation of Pharmaceutical Manufacturers & Associations. He can be contacted at: a.jenner@ifpma.org

Ernest Kawka is a policy analyst for innovation, IP & trade at the International Federation of Pharmaceutical Manufacturers & Associations. He can be contacted at: e.kawka@ifpma.org