The Novartis Strategy- A Lesson To The Pharma Industry
Posted in Marketing & Strategy Articles, Total Reads: 2016
, Published on 26 May 2014
April 1st 2013, the supreme court’s judgment day for the Novartis’s patent application for a leukemia treatment drug named Glivec (beta crystalline form of imatinib Mesylate) brought out major inferences about the Patent Act in India , with respect to other countries . Some of the important questions that arose out of this particular judgment will be discussed in this article
This case pertains to the pharmaceutical industry for which the Patent Act in India was amended in the year 2005. The judgment throws an insight in to the socio-economic factors that have to be considered by a pharmaceutical drug manufacturer, applying for the patent of his drug in the times to come i.e. the generic nature of the lifesaving drugs that have to be taken in to account for easy affordability.
QUESTION 1: What is the implicit strategy of the companies applying for patents for drugs like “Glivec”?
Pharmaceutical companies like Novartis invest huge amounts in to their research and development field. Getting patents for a developed drug is the main motto behind this investment in a profit making model similar to the ones in MNCs like Novartis.
According to TRIPS agreement all the patents applied under any country’s patent law is valid only for a period of 20 years. The idea behind this is to emphasize on the fact that most of the products tend to lose their commercial viability and hence the knowledge must be freely shared with the public. But, companies try to preserve the commercial value of their patented drug and the sole rights to produce it, in order to gain market monopoly of that drug. In order to preserve their patent on the drug and prevent generic versions, the companies come up with minor modifications or create newer versions of the same drug without actually changing the efficacy* of the drug. This method is referred to as evergreening. The beta version of imatinib mesylate is one such example. This clearly explains the case of Novartis trying out minor modifications and applying for patents.
QUESTION 2: Justify the judgment on the grounds of preventing innovation and development.
Under section 3(d) of the Indian patents act amended according to the WTO norms in 2005, any improvement on the existing patent would be provided only if the efficacy of the modified product is different or improved substantially compared to the existing form. Beta crystalline form of imatinib mesylate is a modified form but doesn’t vary in its efficacy compared to the original drug. This was a clear case of evergreening and thus was one of the reasons for the rejection of its patent. In the case of developed countries such small improvements are still being given patent. The Indian law has always been known for its delay in judgments but this case though long provided a decisive statement for other companies which try to do the same practice.
The major outcome of this case from the point of view of Novartis might seem to hinder development though on a minor scale. But the judgment paved way for real and solid innovation instead of such trivial ineffective innovations. This actually promotes the companies to invest on research channelized towards inventing a new product rather than trying to protect its product that is meant to be lifesaving. To add another point against the case of Novartis, it was investing a mere 0.02 percent of its total turnover for their research in India. This clearly shows us that Novartis was more bent on establishing themselves the sole producer of the drug for years to come rather than to serve a noble reason behind this innovation. Innovation as such is eligible for patent only if it has a positive impact on mankind. This forms the basis of the answer to my next question.
QUESTION 3: What is the impact of the judgment on the Indian public?
Section 2(1)j of the Indian patent act gives out three criterion under which the invention can be granted a patent; Novelty, Utility and Inventiveness. This question deals with the utility aspect of the law. Utility in the context of this law is defined as the ability or the effect the invention has or could have on the public. Ultimately the public should benefit from a patented product.
In India the public have to spend their own money for their medical expenses unlike countries like the USA and UK where there is a social security system to provide medical facility for its people. Novartis manufactured drug glivec is priced at around 1.2 lakh INR a month compared to the similar generic drugs which are available at a cost as low as 10000 INR a month. If the patent of this drug had been granted to Novartis, it would have prevented domestic manufacturers from manufacturing it and thus directly affected the availability of the drug at a cheaper rate to the public. Novartis would have controlled the supply of the drug and the price of the drug could have also been increased. This is contradicting the patent law which is aimed at benefiting the people and importantly in a country like India where the major population that is in need of this drug is formed by the middle class section.
QUESTION 4: How does this decision affect the local pharmaceutical industry?
There is a huge demand for life saving drugs in India. This has in turn provided an opportunity for the domestic manufacturers to manufacture equivalent alternate drugs and make it available to the public at a cheaper cost. Another point that is to be noted here is that a majority of these smaller domestic manufacturers started out when the patent law did not have a provision for the pharmaceutical patents. So Novartis was special case which was considered for patent from the mailbox* provision of the patent act. During this period they were given EMR (exclusive marketing rights) for the drug for a period of five years. This in itself prevented the local manufacturers from manufacturing the drug.
So this judgment came as boon to the local players. This gives them more freedom to manufacture lifesaving drugs creating a win-win situation for the domestic player and the general public. And since the demand for the drug will be met, the cost of the drug will remain constant. Companies like Cipla Ranbaxy and a few other major manufacturers were elated with the outcome.
QUESTION 5: What is the expected response to this judgment by foreign drug manufacturers in the future?
Cases like these might lead to a situation wherein the MNCs that are operating in India would refrain themselves from investing on research activities in the India. They would still be in the market as India offers them a huge market to sell their drugs but that position in the market would come at the cost of contributing to the social model rather than their profit making model. They have to come up with prices that could match the prize of the generic drugs that are manufactured.
From the point of view of the Indian Patent body a clear message was delivered to these companies - an application for patent based on such trivial changes would not be encouraged. The overall impact on the foreign manufacturers is actually minimal considering the fact that they generate revenue from various countries, but for them to sell their drug in India which is a market with a lot of opportunities would become more challenging.
Many other countries which include Argentina, Peru and a few other Latin American countries along with Australia have either implemented or planning to implement the Indian model of Patent Law.
CONCLUSION OF THE CASE IN A SWOT MATRIX
The Indian patent law showed that it is stringent about ‘evergreening’ patents. This proves to be the law’s internal strength.
The judgment will also promote innovation and research in its true sense rather than trivial improvements in the name of innovation.
The judgment though strong in many aspects set a bad precedent for foreign pharmaceutical companies applying for patent in India.
This meant that they would be giving a serious thought about investing in research and development in India.
This judgment provides an opportunity for the domestic players to manufacture generic versions of the lifesaving drugs.
There are also opportunities for the people to get themselves treated with the drug at lower and affordable costs.
Foreign manufacturers would be skeptical about launching new drugs that have been patented as genuine inventions in other countries in to the Indian market. This might lead to a situation of India becoming outdated with the usage of lifesaving drugs.
This article has been authored by Ankit Tibra and Madhusudan TV from IMT Ghaziabad