Innovation is at the heart of trade and commerce. And protecting innovations is Trade-Related Aspects of Intellectual Property Rights (TRIPS).While there are contentious issues that need to be sorted out, there is no denying that protecting intellectual property is the only way to encourage innovations.

Sisir Kumar Pradhan | @TheDollarBiz 

Ten years ago, Dinesh Gupta, was running from pillar to post to meet the mounting medical bills of his mother who was suffering from chronic myeloid leukemia (CML), a cancer of the blood that leads to unregulated production of white blood cells (WBC) in the bone marrow. As days passed, paying for existing drugs was turning out to be an almost impossible task. One morning, his mother’s oncologist broke the good news that a better drug – Imatinib Mesylate that had the potential to completely cure her – was available in the market. The bad news: its price was way beyond Gupta’s reach. Gupta felt the kind of empty helplessness that a typical breadwinner in a middle-class family in the developing world. with a cancer patient experiences. He surrendered everything to fate.

Days later, a miracle occurred. Gupta recalls that day still. A family member informed him that a substitute drug from Natco Pharmaceuticals (a generic drug maker) had become available in the market. And that it was ‘the’ solution.

The year was 2003. Then, Novartis, the Swiss pharma giant, had just won the exclusive marketing right (EMR) for Imatinib in India under the brand name Gleevec and had priced it at about Rs.1,20,000/month (for a standard dose of 400 mg) – way beyond Gupta’s budget. But then, overnight, Natco started selling a generic version of Imatinib, under the brand name Veenat, at 1/10th the price and Gupta’s mother got a new lease of life. “Thanks to Natco, my mother is alive today,” Gupta tells The Dollar Business.

It’s money, honey

Gupta’s mother is one of the few thousands who have managed to live longer because companies like Natco manufacture generic versions of anti-cancer drugs and sell them at a fraction of the original drugs’ price. But such emotions do not persuade companies to wash their hands off a potential treasure formula. 

Novartis is a case in point. After all, the millions of dollars invested in the research of Imatinib cannot be written off with a smile, no matter how humanitarian it might sound. Generic versions are a pureplay nightmare for companies like it. [It’s worth noting that in Novartis’ product portfolio Gleevec is one of the biggest revenue earners, with a contribution of $4.69 billion to its total global sales of $57.90 billion in CY2013.] Losing patent rights in a country with over 1.2 billion people  is in any case bad news for a patent-lover.  [The Supreme Court of India ruled in favour of Natco in its war against Novartis through a 2013 ruling.]

Assembly line production has significantly improved the speed and cost of making medicines

 

In international trade, a patent holder has the sole right to manufacture a product and export it to regions where its patents are effective. It also has the power to prevent the import of cheaper versions of its products from outside. It’s worth noting that the Indian pharma industry exported around $11 billion worth of medicines in FY2013. More significantly, emerging markets like Africa, home to the most number of HIV/AIDS affected people, imported $2.7 billion worth of medicines from India in FY2013 – about 17% of the region’s imports of $15.4 billion. [Novartis, in its 2013 Annual Report, has forecasted that in 2014, it will lose $3 billion to generic erosions as compared to $2.2 billion in 2013.]

According to Toronto-based intellectual property (IP) experts Anthony F. Baldanza and Charles Todd, “IP laws guarantee an absolute right to the creator and owner of a work. They also prevent the commercial exploitation of someone’s innovation and research. However, this legal monopoly sometime leads to absolute market dominance and monopoly as defined under competition laws.” And when this advantage or dominant position is abused by someone, it creates a conflict between IPR and competition law.

The Indian version

The Indian Parliament passed the Patents Act in 1970, which restricted product patents and also reduced the time involved in getting process patents approved. Before the Patents Act, medicines in India were among the costliest in the world. But even though India had a proper patent law, Indian companies were not very proactive in protecting their business interest before it signed the WTO agreement in 1995. While joining WTO, India asked for time to amend its patent law in order to comply with the TRIPS (Trade Related Aspects of Intellectual Property Rights) agreement in a phased manner.

In 1999, India allowed transitional filing of product patent applications, with retrospective effect from 1995. Full product and process patent protection was re-introduced beginning 2005, when all transitional regulations ended. Big pharma has often criticised Indian patent laws, which it claims don’t protect its IPRs. It is a fact that many domestic pharma companies did brazenly produce generic equivalents of expensive drugs until 2005, when India amended its patent law. The new law (that exists today), amending India’s Patent Act, ratifies innovations in all spheres – from machinery to software and medicines. However, it allows making and selling of all generic drugs, which had been approved in India before 2005, provided the seller pays licensing fees to the patent holder.

The global picture

The scope of protection and enforcement of IPRs vary from country to country. The primary goal of TRIPS is to narrow the gaps in the way these rights are protected around the world and to bring them under common international rules. It establishes minimum levels of protection that each government has to give to the intellectual property of fellow WTO members. The WTO has also made provisions to resolve disputes under the Dispute Settlement Body. When the WTO agreement came into effect on January 1 1995, developed countries were given one year to ensure that their laws and practices conformed to the TRIPS agreement. Developing countries and (under certain conditions) transition economies were given five years until 2000. Least-developed countries, on the other hand, had 11 years until 2006, which was extended to 2013 in general and to 2016 for pharmaceutical patents and undisclosed information.

 Are we there yet?

In a bid to comply with the WTO agreement on TRIPS, the then Congress government managed to pass the amended patent bill in 2005 despite strong opposition from the main opposition NDA and other international bodies. Following the amendment, India faced criticism both at home and abroad. International non-government organisations like Oxfam International and Doctors Without Borders said the new law will put an end to the development of generic drugs, the impact of which will be felt globally. Following mass opposition to the new law, the then Commerce & Industry Minister Kamal Nath, in a clarification, had said, “I have ensured that all flexibilities that are permissible are taken advantage of. If any upsurge in prices come to notice, the government will deal with it.” Besides, India’s traditional knowledge will be protected as plants cannot come under patents, he added.

Following reports of patents being filed for traditional Indian products and plants with medicinal values, India launched a Traditional Knowledge Digital Library (TKDL) to electronically document its exhaustive list of traditional knowledge such as Ayurveda. The database has 34 million pages of information in five international languages in searchable formats and has been shared with patent examiners all over the world.

Generally generic

The Indian pharma industry has earned a name for itself all over the world for its expertise in reverse-engineering new processes for manufacturing drugs at low costs. However, over a period of time, companies like Dr. Reddy’s, Ranbaxy, Aurobindo Pharma, Sun Pharma and Natco have worked towards drug innovations as well.  

The Hyderabad-based Dr. Reddy’s was the first Indian company to file Paragraph IV Drug Product Application with the US Food & Drug Administration (USFDA). Under the Drug Price Competition & Patent Term Restoration Act (the Hatch-Waxman Act), a company can seek USFDA’s approval to market a generic drug before the expiration of a patent relating to a branded drug. The first company to submit an Abbreviated New Drug Application (ANDA) with the USFDA, gets the exclusive rights to market the generic drug for 180 days.

A fully automatic filling and sealing machine at the manufacturing plant of a pharmaceutical company

Dr. Reddy’s also became the first Indian company to receive a 180-day marketing exclusivity in US for Fluoxetine capsules (an antidepressant) on August 2, 2001. “180 days is a good enough time for a generic drug manufacturer to earn a handsome profit in US. As per insurance agreements in US, doctors are bound to prescribe the cheapest available drug in the market, thereby helping the cause of Indian companies,” Dr. V. C. Vivekanandan, Intellectual Property Chair Professor at Hyderabad based NALSAR University of Law, tells The Dollar Business.

 

Others are waking up

Other sectors in India are also, slowly but surely, realising the importance of investing in R&D and protecting their IPRs. MNCs like TCS that gets a major share of its revenue from international markets, understand the importance of securing their IPRs. For instance, TCS, in 2011, received ISO 27001 certification, the highest internationally accepted standard for Information Security Management Systems (ISMS). TCS was one among just 300 companies to have earned this certification then. In its FY2014 annual report, TCS has mentioned that it has filed 1,746 patent applications, of which, 114 have been granted. 

BHEL, which exported goods worth Rs.438.68 crore and gained export incentives of Rs.24.26 crore for foreign exchange earnings of Rs.12,357 crore in FY2013, has also started investing in protecting its IPRs. The public sector unit invested Rs.1,252 crore on R&D in FY2013 and filed for 385 patents and copyrights during the year.

The Tea Board of India and the Darjeeling Planters Association have also been fighting hard to prevent misuse of the word ‘Darjeeling’ for other types of tea. For this, the Tea Board has, since 1998, hired the services of CompuMark, a global trademark research and brand protection solutions provider.

India spends crores of rupees every year to prevent misuse of the ‘Darjeeling’ tea brand

 

Not the final word

“India’s IP laws are still at an evolving stage and we are also learning from experience,” says Dr. Vivekanandan. Similarly, commenting on the post-TRIPs scenario, Pharmexcil Regional Director K. Subbi Reddy tells The Dollar Business, “If a product is an essential commodity then volumes will grow and subsequently if companies don’t cut their prices down, competitors will find ways to make the product available at a lower price. The original inventor should always obtain a patent to safeguard the business interest, however no government will allow the patent holder to gain from creating a monopoly, particularly when people’s lives are at stake.”

IP has facets to it. In the developed world, it is used as a medium to gain competitive advantage, generate revenue from licensing fee and royalty, swap patents like a trade and/or prevent competition. In the developing world, the jury is still out. But, as competition intensifies, TRIPS will have an ever bigger role to protect interests and provide a level-playing field to all stakeholders.