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Generic Pharma Industry in India

Intellectual Property Rights and Global Markets

                                                                                                                             Prof. T.C. James*

Indian generic pharma industry had in the past been lauded for its yeoman service in providing access to affordable zmedicines throughout the world. This had become possible consequent on the development of the generic pharma industry in India through sustained policy and legislative support by the government over a long period. One of the most significant factors in that has been the innovative patent regime that India had introduced in the 1970s. As in the case of many other developing countries which were under colonial rule for long, India also inherited on its independence in 1947, the Patents and Designs Act, 1911, which was patterned after the Patents and Designs Act 1907 of the United Kingdom.

Commissions & Committees for Pharma Industry

After Independence, the country appointed various commissions and committees to explore ways to develop domestic pharmaceutical industry and also make modern medicines available to people of the country. The most prominent of the committees was the Ayyangar Committee (under the chairmanship of Justice N. Rajagopala Ayyangar) This committee explored the situation in the background of status of pharma industries in other countries. It also went in detail through the draft Patents Bill which had earlier been introduced in the Parliament. On the basis of the committee's recommendations, the Parliament enacted the new Patents Act, 1970. The most significant aspect of this act was that it had extended only process patents to pharmaceuticals and food products and that too for a period of seven years only. The new act was brought into force in 1972. The next three decades saw the phenomenal rise of the generic pharma industry in India.

Patent Protection

Manufacture and sale of generic drugs become possible when the original product is not protected by a patent. Since, as per the Patents Act, 1970 (till its amendment in 2005), pharmaceutical products could not obtain a product patent in India, the Indian companies which were at a nascent stage, could manufacture new generic drugs by finding out their chemical composition through reverse engineering. They could also export their products to those countries, particularly in Asia and Africa, where also most of these products did not have any patent protection. Further, since in those days, period of patent protection even in developed countries was for 14 years only, the medicines came out of the patent regime faster and the Indian generic industry found good market in the developed countries also.

Share of Generics in Global Market

Today, about 50 per cent of all the drugs in the global market are generics. About 88 per cent of the prescriptions dispensed in the United States in 2014 were generics.1 In India, the 'branded generics' account for 90 per cent of the rupees one lakh crore pharmaceutical market.2 India accounts for 20 per cent of global exports in generics.3 Countries have separate legislations for regulating them, like the Hatch-Waxman Act, 1984 of US. Governments have been attempting to popularise more generics because of the high cost of the 'branded' medicines. The difference is clear when one realises that although generics 

account for 50 per cent of all medicines, the value in financial terms of these is only about 17 per cent. As per the Generic Pharmaceutical Association, generic drugs were responsible for $254 billion savings in health system in 2014, reflecting the price advantage.4 The transnational pharmaceutical industry, however, was and still is not happy with the growth of the generic industry. There have been sustained efforts by the industry to push for delays in the entry of generics. The most potent of the tools for this is the patent, since patent rights exclude all competitors, even independent researches resulting in an identical or similar product. Many of them developed in regimes which had provided favourable conditions either through non-grant of patents to foreign inventions or, in certain cases, to pharmaceutical products. Now the approach of big pharmaceutical firms has been towards extension of the monopoly rights, both spatially and temporally.

                                                                                                                                                     [ 33 ]


Intellectual Property Rights (IPRs)

Intellectual Property Rights (IPRs), which include, among others, patents, trademarks, industrial designs, copyrights, geographical indications and so on, were within the remit of the World Intellectual Property Organisation (WIPO) based in Geneva. The agreements and conventions of WIPO were not directly impacting trade and commerce and had limited enforcement provisions and also provided very wide flexibilities in their implementation to the countries. The General Agreement on Tariffs and Trade (GATT) was the one which was regulating trade and commerce. The only provision under this agreement that affected Intellectual Property (IP) was the one relating to protection of geographical indications. While this protected many denominations of wines and spirits and also some food items, it did not affect pharmaceutical products. Towards the end of the Tokyo Round of GATT negotiations (1973-79), the US proposed a plurilateral agreement on trade in counterfeit goods, a trade mark issue but limited to border measures. However, the proposal did not receive general support and was not adopted. The Uruguay Round of negotiations commenced in the year 1986. The pressures of the pharmaceutical industry for inclusion of IPRs within the negotiating mandate were intensified.

Meanwhile, the US was losing international competitiveness in manufacturing and service industries. At the same time, it was leading in research outcomes and, therefore, enhanced IP protection throughout the world was in its interest. Countries like Switzerland and Japan who also had large research-based industries also joined the US in pushing for inclusion of IPRs in the GATT negotiations. The concerted efforts of these countries and international lobbying of big corporations finally led to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) in 1994, at the time of the conclusion of the Uruguay Round.5 This comprehensive treaty covering almost all IPRs was included as one of the basic treaties of World Trade Organisation (WTO) with mandatory dispute settlement mechanisms and detailed enforcement provisions. The pressures from the industry that 14-year patent period was not sufficient for them to recoup their research expenditure, particularly for pharmaceuticals where the drug approval process was time-consuming leading to introduction of the new drugs in the market much later than the commencement year of the patent, led to the extension uniformly across all countries and technologies to a 20 year patent protection regime. The TRIPS Agreement also provided for patents for all inventions across technology and for both products and processes. Developed countries had a one-year window to make their IPR regimes TRIPS compliant and developing countries a 10-year window. From January1, 2005, all WTO member-countries, with the exception of the least developed countries, had to have IPR laws and enforcements which were as per their obligations under the TRIPS Agreement. The new regime has resulted in many constraints on the generic industry in India which had thrived under the special regime that was in existence since 1972.

                                                                                                                                                   [ 34 ]


Huge Challenge for Developing Countries to Access Affordable Medicines

A major concern of developing countries like India during the TRIPS negotiations was access to medicines. The newly patented medicines were always highly priced and were beyond the reach of common people in almost all these countries. With inadequate public healthcare systems and virtual lack of any social security or insurance, the ordinary people in these countries would find it difficult to access medicines was the fear of the negotiators from these countries. These concerns were addressed in the TRIPS Agreement through various provisions. The articles on objectives and basic principles specifically stated that the protection and enforcement of intellectual property rights should be “in a manner conducive to social and economic welfare, and to a balance of rights and obligations” (Article 7), and that members may “adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development” (Article 8). It also recognised that “appropriate measures may be needed to prevent the abuse of intellectual property rights by right holders” (Article 8). It also included provisions which have come to be generally known as TRIPS flexibilities.

Doha Declaration

Although the TRIPS Agreement incorporated flexibilities, which included compulsory licences, specifically to address public health crises, when countries initiated steps for exercising those flexibilities, doubts were raised by pharmaceutical companies over the same. This led to restatement of the public health provisions in the Doha Declaration on the TRIPS Agreement and Public Health (2001), which stated in unambiguous terms that “the TRIPS Agreement does not and should not prevent members from taking measures to protect public health”, and that the “Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.”6 It also made special provisions for countries that do not have manufacturing capacity in pharmaceuticals to avail of those facilities in other countries under the Compulsory Licence provisions. This declaration has made it possible for the generics to enter the access to medicine area in certain circumstances. However, the provisions have been used in a very limited number of cases by developing countries.

Envisioning Access-Oriented IP Strategies

Some of the challenges in the IPR area that the generic industries are facing are increased pressure by big pharmaceutical companies who generally thrive on new innovative drugs, on governments to introduce certain provisions which are beyond the mandate of the TRIPS Agreement, usually referred to as the TRIPS plus provisions in the IPR, and drug regulations and use of litigation as a pressure strategy on generic pharmaceutical manufacturers. Some of the major pressure areas for India in this case are: (a) easing of patentability norms to provide for patents for minor improvements, (b) introduction of data-exclusivity regime for clinical trial data, (c) non-use of the Compulsory Licence and similar pro-public health provisions in the Patents Act, and (d) patent linkage. We may explore how these provisions affect the pharmaceutical industry in India and access to medicines. The TRIPS Agreement does not get into any elaborate definition of the patentability of an invention. It incorporates the general norms of the Paris Convention on Industrial Property (1883) that an invention should satisfy the criteria of novelty, inventiveness and industrial application. That means the exact contours of inventiveness are left to national legislations. The Indian Patents Act provides that inventiveness is a “feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art.” [Section 2(1)(ja)]. When, in 2005, India amended the Patents Act 

to provide for product patents for pharmaceuticals, in order to prevent patenting of minor innovations, a provision, essentially a clarification on patentability, was added to the then existing Section 3(d) to the effect that “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance” will not be eligible for a patent. This coupled with the already existing provision to the effect that the mere discovery of any new property or new use for a known substance was meant to prevent 'evergreening' of a pharmaceutical patent.

                                                                                                                                                  [ 35 ]


Evergreening and Its Impact

The practice of evergreening is that of obtaining a patent for a minor enhancement or a new use of the patented product, when the patent period is about to expire. Since mostly it is a product patent, this prevents manufacture of generic versions, although the patent on the original invention has expired. This phenomenon is mainly in the area of pharmaceuticals because of the particular nature of the market. Unlike in the case of ordinary consumer goods like a refrigerator or a television set or a mobile phone handset, the decision on which a particular medicine should be purchased by the customer (patient) is made by a third party, that is, the prescribing physician. Ordinarily, a physician is not bound by the affordability of the patient; he is concerned about prescribing the latest or what is perceived as the most effective medicine in the market. Secondly, if it is a new use or a new property, the product remains the same and a competitor cannot manufacture the same, being within the rights of the patent owner. This shuts off generic versions till the last of the patent on the product expires. Sometimes, the generic company would have done basic research and development for the generic version, such as the bioequivalence studies, but that investment also will become infructuous when on minor improvement, a patent is granted. The branded pharmaceutical producers have been demanding the scrapping of Section 3(d) of the Patents Act on one pretext or the other. The provision was challenged on the ground that the word 'efficacy' is not defined and, hence, may lead to arbitrariness, but the Supreme Court clarified that efficacy in the context means therapeutic efficacy and rejected the argument.7

Clinical Trial Data and Market Approval

Another demand of non-generic pharmaceutical companies is that the clinical trial data submitted for obtaining marketing approval for a new drug should not be relied upon for grant of marketing approval for a generic version of the drug. They argue that Article 39 of the TRIPS Agreement makes it obligatory for member countries to protect undisclosed test, or other data submitted for obtaining marketing approval, against disclosure. In India, such data is submitted to the Drug Controller under the Drugs and Cosmetics Act. The data remains confidential and is not revealed. But the Drug Controller relies on this data for grant of marketing approval for a subsequent drug which is a bioequivalent and does not demand fresh data. Insistence of submission of fresh data by each applicant will tantamount to unnecessary clinical trials subjecting human beings for trial again and again, not to say about making the generic versions costlier, by defeating the very purpose of bringing inventions into the public domain on expiry of the patent period.

Compulsory Licence for Patented Anti-Cancer Drug Nexavar

As far as Compulsory Licences (CLs) are concerned, India has so far used the provision only once in 2012. This was the case of an application by Natco Pharma for a CL for the drug Nexavar patented by Bayer Corporation. The relevant provisions of the Patents Act stipulate that on an application by a party a CL can be granted by the Controller of Patents, three years after the grant of the patent on any of the following grounds: that the reasonable requirements of the public have not been satisfied, or that the patented invention is not available to the public at affordable prices, or that the patented invention is not worked in the territory of India. Natco Pharma was granted the CL to make a generic version of the drug Nexavar used in 

the treatment of liver and kidney cancer on the grounds that the drug was not available in adequate quantity in the country even through imports, that the price of the drug was unaffordable to most Indians, being 2.8 lakh for one month's requirement of 120 tablets, and that the invention was not worked in the territory of India since the grant of the patent. Natco was to manufacture and sell the product at a price of 8,800 for one month's supply and to pay a royalty of 6 per cent to Bayer Corporation.

The decision was initially challenged in the Intellectual Property Appellate Board (IPAB) and later in the higher courts with no avail, although the IPAB raised the royalty percentage to seven from six. So far this remains the only CL granted by India, but a scare was created in the media and business circles that India has been contemplating issuing of large number of patents, although there has been no further instance. Now that a full-fledged TRIPS compliant patent regime is there in India and Indian economy has opened to global competition, and Indian market is considered as of high value, almost all new drugs are patented here unlike in the past and the generic industry will have to wait for the expiry of the patent before launching their generic versions. It is also interesting to note that Indian companies are not coming forward with fresh applications for CL. India has also not used other provisions, such as for government use.

                                                                                                                                                  [ 36 ]


Patent Linkage

A fourth demand by the large pharmaceutical companies is for what has come to be known as patent linkage. This means that when application for approval of a generic version of an already marketed drug is submitted to the Drug Controller, he should check with the Patent Office as to the existence of any patent in the medicine and, if so, inform the patentee. This often serves as delaying or harassment tactic and not anything to do with the drug quality or safety, the two issues with which the Drug Controller is concerned. Patents, like other intellectual property rights, are private rights, and it is for the patent owner to take action against infringements. The law provides for civil remedies such as damages, accounts, etc. The Drug Controller should not be made a tool to enforce private rights. Countries which are recipients of the benefits of royalties on patented pharmaceuticals push for such measures through bilateral and regional or other treaties. The progress in the TRIPS Council or in the WIPO for the demand for such provisions is very tardy. Countries like India while negotiating need to assess the balance of benefits before entering such treaties.

Conclusion

While generic companies by encouraging competition helps in keeping the prices in check, the country also needs innovative pharmaceutical companies. Without R&D newer drugs will not become possible and India, with widespread vector-borne diseases and new challenges of lifestyle diseases badly needs new medicines, particularly in areas like TB and Malaria. Even when basic research is done in public-funded institutions, much investment is needed in the clinical trial sector for bringing the drugs to the market. The private companies need reasonable assurance that they will have conditions that enable them to make profits to recoup their investment. They also need enough incentives to introduce new drugs in the Indian market. It is essentially about industry perception. R&D and competition are two essentials to make healthcare affordable, accessible and universal, and without which India cannot achieve the goal of health and well-being of all. The IPR regime will have to balance both the requirements for new drugs and the public interest of easy availability and affordability. It will also have to make periodic changes in the regulations to address new economic and social challenges. Policies and legislations will have to be made keeping in mind the ultimate well-being of the citizens from a long term perspective.


  1. http://www.gphaonline.org/media/wysiwyg/PDF/GPhA_Savings_Report_2015.pdf

  2. http://www.business-standard.com/article/economy-policy/govt-s-generic-push-will-dent-rs-90-000-cr-branded-pharma-market-

  3. https://www.ibef.org/download/Pharmaceutical-January-2017-D.PDF

  4. 4Ibid

  5. See World Trade Organization publication, The Making of the TRIPS Agreement: Personal Insights from the Uruguay Round Negotiations' ed. by Jayashree Watal and Antony Taubman (2015).

  6. WT/MIN(01)/DEC/W/2 14 November 2001

  7. Novartis AG v. Union of India (UOI) and Ors. 2013


*Prof. TC James is President, National Intellectual Property Organisation (NIPO); Visiting Fellow, RIS; Member, SRI; Guest Faculty at ILI & IAIL and Member, Academic Council, Shekhawati University.

Volume: XXXVI No. 2
April June 2017