The Novartis Decision: Is the Big Win for Indian Pharma Bad News for Investment?

The rejection of Novartis' patent application for a drug it developed more than a decade ago has been hailed by health care advocates. But it may spell bad news for New Delhi's attempts to lure foreign investment to the country

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Rafiq Maqbool / AP

Ranjit Shahani, vice chairman and managing director of Novartis India, speaks during a news conference in Mumbai on April 1, 2013

In a decisive victory for India’s pharmaceutical industry, India’s Supreme Court rejected Novartis’ patent application for the cancer drug Glivec on Monday, ending a seven-year battle by the Swiss drugmaker to get a patent in India on its powerful leukemia drug. The medication, which was approved for use in the U.S. back in 2001, has been produced generically by Indian pharmaceuticals for years at a fraction of the Swiss drug’s cost. The Indian drug industry’s victory, however, is being described as a stunning defeat for intellectual-property rights and may have repercussions on India’s attempts to attract foreign investment.

Nevertheless, health activists have called the top court’s decision a win for patients seeking cheaper treatment and against “evergreening,” the alleged practice of making minor tweaks to an existing drug to prolong a company’s hold on a patent and protect it from being produced by other firms as a cheaper generic version once the patent has expired. The ruling was met with enthusiasm by Indian drug manufacturers, which produce a generic version of Glivec, or Gleevec, as it is called in the U.S. market. Patients’-rights groups, who advocate for cheaper drugs to be available in countries like India where few can afford costly medication, also applauded the move. Advocates were concerned that a ruling in favor of Novartis could set a precedent that would ultimately cut off India’s vast supply of cheap generic drugs for diseases like HIV. Such medicines are exported to other developing markets. Millions of poor patients rely on them.

(MORE: How an Indian Patent Case Could Reshape the Future of Generic Drugs)

India’s generic-drug industry took off in 1970 after the government allowed for multiple patents to be granted on products with small adjustments to the process in which they were made. Today the industry is one of the nation’s biggest moneymakers, but India itself is a hugely attractive market for pharmaceutical companies. Novartis filed for an Indian patent on Glivec in 2006 and appealed after its application was rejected on the grounds that the drug had simply been amended but was not new. Novartis has argued that the drug had significant differences from earlier versions that made it eligible for a patent.

The drawn-out case has been closely watched by a global industry that, despite India’s reinstating stricter patent laws as a condition of being granted access to the World Trade Organization in 2005, is growing increasingly frustrated with the nation’s seeming reticence to recognize intellectual-property rights. Last month, the Financial Times reported that Roy Waldron, the chief intellectual-property counsel for Pfizer, said at a congressional hearing in Washington that India “routinely flouted trade rules to bolster the Indian generic industry at the expense of innovators.”

Indeed, the fact that India is creating a tough environment for global companies to continue to invest in new drug discoveries has been one of the chief criticisms of Monday’s ruling. In a statement, Novartis said the Supreme Court’s decision “discourages innovative drug discovery essential to advancing medical science for patients.” It went on to say that the company’s “primary concern of this case was with India’s growing non-recognition of intellectual property rights that sustain research and development for innovative medicines.” According to Novartis, 95% of the more than 16,000 patients who are prescribed Glivec in India today are receiving it free of charge through the company’s donation program.

The move also comes at an awkward moment for parts of the government that have been lobbying hard to convince global companies that India is friendly to foreign investors. On Monday, the same day the decision came down, Finance Minister Palaniappan Chidambaram was actively courting investors in Tokyo, telling reporters that India could handily absorb an annual $50 billion in foreign direct investment and reiterating the government’s commitment to simplify the process. Big Pharma, for now, does not seem likely to push to the front of the line.