A deconstruction of Novartis’s defense of its challenge to the India patent regime.

Brook K. Baker
Northeastern U. School of Law
Program on Human Rights and the Global Economy
Health GAP
February 7, 2007

Given the barrage of negative publicity that Novartis has received as a result of campaigns contesting its effort to overturn India’s strict new patent regime, Novartis has issued a three-page defense of its lawsuit.

This defense contains one truth, numerous half truths, and several flat out lies:

Truth: Novartis seeks secure access to middle-income consumers via patent-based monopoly rights.

“In India, Novartis is faced with a globalization dilemma that characterizes many emerging economic powers today: two markets within one country. India has a booming middle class on one hand, and a vast number of extremely poor people on the other.

[W]e take affluent India seriously as a formidable power with all the rights and obligations that such status brings with it. As a consequence, we seek to establish effective protection for pharmaceutical innovation in India.”

Half-truths: Novartis does seek monopoly rights in the India market and it does compete with Indian companies, but it faces no realistic threat that patent-free Indian generics would be shipped to its patent-protected markets in North America, Europe and Japan.

“[I]t is clear that we seek business opportunities in India’s growing economy. We also compete with Indian companies globally in attractive markets, and the export of copies of our products into richer countries is a major concern to us.”

Rich countries have stringent border controls, drug registration procedures, and prescription practices that preclude import and sale of generic versions of patented medicines. If Novartis’s complaint were true, the U.S. would be flooded with cheaper generic versions of AIDS medicines (or even of Glivec, which has been produced and sold at 1/10 the cost in India), but, of course, it is not.

Half-truth: For Novartis, patents are truly non-negotiable, but it is not true that the patent system is the best or only way of promoting research and development.

“Protecting innovation is the foundation for massive R&D investments made by the pharmaceuticals industry that are vital to medical progress. Companies can continue to bring improvements and innovations to patients and societies only with effective patent laws. For a research-based company such as Novartis, patents are not negotiable.”

The public sector, especially in the United States, contributes significant resources to the basic research that is the foundation of many pharmaceutical innovations. Moreover, under the patent regime, incentives for innovation are diverted from true social need towards block-buster drugs (sales over $1 billion a year) and me-too drugs (minor variations developed primarily to extent an existing patent monopoly or to gain market share from a competing block-buster drug). Similarly, patent-based monopoly rights divert pharmaceutical research away from preventative innovations, like vaccines, and towards every-day medicines for chronic diseases that primarily impact rich consumers in rich markets. As a consequence of this perverse set of patent-based incentives, there is very little research into the diseases that primarily affect poor people in the global south.

In addition, there are many viable alternatives to the existing patent-regime with respect to global public goods like medicines. Prize funds, research and development treaties, and more robust and targeted public investment in research are but a few of the proposals under discussion that could reduce or eliminate the bloated sales forces and supra-competitive profits that make drugs so expensive.

Half truth: Novartis now, belatedly supports one narrow set of TRIPS-compliant flexibilities for accessing cheaper medicines, but it is concurrently challenging another perfectly lawful flexibility, namely defining scope of patentability so as to prioritize public health and to increase access to medicines.

“Our case does not challenge provisions that provide for access under international trade agreements, specifically the TRIPS and the Doha Declaration. These flexibilities allow production for export under compulsory licenses that have been issued for public health reasons. They have been put in place to allow poor countries to safeguard access to medicines that do not have sufficient local production capacity. In fact, political agreement on the Doha flexibilities has been reached in order to mitigate impact of TRIPS implementation in India.

Novartis supports the TRIPS conditions that promote access for developing countries.”

Novartis confirms its new-found loyalty to one-narrowly defined TRIPS flexibility – compulsory licenses issued under the August 30, 2003, Paragraph 6 Implementation Decision. In this regard it is important to note that Novartis previously joined 38 other drug companies and trade associations in challenging South Africa’s completely lawful Medicines and Controlled Substance Act that would have permitted parallel importation. Maybe it now concedes the error of that 1998-2001 challenge to a lawful TRIPS flexibility, but even now it erroneously implies that compulsory licenses can only granted pursuant to the August 30 Decision.

But more importantly, Novartis’ lawsuit directly challenges another key TRIPS-compliant flexibility, namely the right to strictly define novelty, inventive step, and industrial applicability – the baseline standards of patentability – so as to exclude patents for minor variations of existing chemical entities, for new uses of know chemical entities, and for mere combinations of existing entities. Novartis and other drug companies want to impose the same loose standards of patentability for India and other developing countries that they have gained in the IP-crazed courts and legislature of the U.S. and Europe. There is in fact a great deal of variability of patent standards between countries, and India’s stricter definition is completely permissible under existing TRIPS standards.

Lie: The Mashelkar Committee report did not directly address, let alone hold, that certain provisions of the India Patent Act were non-compliant with TRIPS.

“Many of the points we have raised around India’s patent laws have been corroborated by the recent Mashelkar Committee report on patent issues in India. The Government-established Mashelkar Committee voiced its views in favor of incremental innovation and held that certain provisions of the Indian Patent Act are not compliant with international agreements, specifically WTO’s TRIPS agreement (Trade-related Aspects of Intellectual Property Rights).”

The Mashelkar Committee in India was tasked with determining “whether it would be TRIPS compatible to limit the grant of patent for pharmaceutical substances to new chemical entity or to new medical entity involving one or more inventive steps.” This definition would be even more restriction than the version of section 3(d) of the Act that Novartis is challenging. The only thing that the Mashelkar Committee actually said about the current India’s Patent Act is that “There is a perception that even the current provisions in the Patents Act could be held to be TRIPS non-compliant.” (¶5.11.) A “perception” is not a “holding.”

Lie: Research-based pharmaceutical companies like Novartis do not make their investment decisions based on monopoly marketing rights in developing country markets – which has been produced and sold at 1/10 the cost in India in rich country markets where their medicines enjoy even higher standards of intellectual property protection.

“Knowing we can rely on patents in India benefits government, industry and patients because research-based organizations will know if investing in the development of better medicines there is a viable long-term option.”

Many research-based drug companies are exploring and cementing strategic sub-licensing partnerships with Indian drug companies given their comparative cost advantages in manufacturing for global sales and given prospects for lower-cost clinical trials in India. However, drug companies make 90% of their global sales in the U.S., Canada, Europe, and Japan. India comprises only 1.3% of the global market. Does Novartis really want people to believe that its going to make fundamental investment decisions based on 1.3% of the global market instead of the 90%? It will set up shop in India in order to make even more profits in rich country markets not because of higher patent standards in India.

Donations are not an adequate defense: The best defense that Novartis mounts is that because poor people can’t afford its drug it gives much of it away in poor countries like India.

“In 2006, our access-to-medicines program reached 33.6 million patients. Novartis spent USD 755 million last year alone. ... The Glivec International Patient Assistance Program (GIPAP) is one of the most far-reaching patient assistance programs every implemented on a global scale. In India, 99% of patients who receive Glivec receive it free from Novartis [6,600 people].”

However, corporate donations are not a sustainable solution: (1) they are frequently hard to access, (2) they are revocable, (3) they are not offered across the broad spectrum of patented medicines that poor people need, and (4) they are designed primarily to forestall generic competition by removing market incentives.

Novartis’s efforts to sanitize its efforts to eviscerate the heart of India’s stringent patent regime are, in the end, indefensible. Its defense of its cancer-drug patent today will undermine access to medicines for HIV/AIDS, for heart disease, for diabetes, in fact for every new medicine needed by desperately poor people in developing countries. Charity does not hide avarice. By protecting its “fundamentals” – its non-negotiable, patent-right aspirations – Novartis is revealing the cold and cruel logic of Big Pharma: profits over people; letting poor people die is less important than selling to middle-class Indians.