Evergreening of Patents in The Pharmaceutical Sector

In the past few years, the industry has undergone many changes. A large number of pharmaceutical companies have lost their protection for the medicines on which increased money is spent on research and development; it is difficult for companies to innovate new medicines. Due to which they are dependent on the existing medicine patent to earn a profit. This leads to different patent strategies like of the patent which has the aim to extend the privileged position that a patentee holds during exclusivity. Such practices may be questioned from a perspective.

Section 4 of the competition law states about the abuse of a dominant position. The intersection between intellectual property law and competition law has been debated. Competition law imposes obligations where the holder of an intellectual property right () has a position of dominance on the relevant market, the IPR probably being the reason why the company is dominant. So accordingly it can be applied to the context of pharmaceutical patents.

In the case of AstraZeneca[1] in December 2012 the EU court stated that the company had abused its dominant position by misusing both the patent system and regulatory procedures with the intent to delay or prevent market entry by generics. The judgment has attracted attention for several reasons. It was the first time that a pharmaceutical company was fined for abuse of a dominant position concerning Evergreening. This case is taken into consideration when discussing the legality of different Evergreening strategies in the pharmaceutical market. Due to this case, the dominant companies are under obligation that they should not abuse their dominant position. Thus, it has become increasingly difficult for pharmaceutical companies, holding a patent right, to know how far they can go.

This paper deals with how companies use and abuse their dominant positions. Is Evergreening just a legitimate way of using a legally obtained right, or is it an abuse of dominance within the meaning of section 4 of competition law? The purpose of this paper is checking the legality of Evergreening of the patent.

Evergreening of Patents in The Pharmaceutical Sector

There are different types of strategies for the Evergreening of products. One of them is second-generation products but will also examine other strategies with the purpose to extend the privileged position that the patentee holds during exclusivity. Due to high expenditures on R&D and clinical tests, combined with the fact that new products are easily imitated, patent protection is crucial.

The pharmaceutical sector is one of the world’s most research-intensive industries. When patent protection is given it leads to a monopoly on the relevant market, giving the patent owner the power over price and supply. Therefore, the market is highly regulated to guarantee the safety and efficiency of the medicine that is available for consumers on the market. Also, price levels are negotiated on a national level before the medicine is approved for marketing[2].the scope of patent changes according to time and place. According to Levine and Boldrin, the pharmaceutical patent was developed in countries where there were weak laws for a patent. An example in the EU of processing of medicine was given patent and not the product[3].

The paper deals with:

What concerns does Evergreening give rise to under section 4 of competition law?

How far can a patent holder go when it comes to Evergreening?

Evergreening of Patents in The Pharmaceutical Sector

PATENT EVERGREENING

A patent is both abused and misused by the Evergreening of the patent. It is a perpetual renewal of patent. It indicates lifecycle management of a pharmaceutical company seeking an extra patent on the minor variation of original drug- a new form of release, new dosages, new combinations, etc. In this a new invention is made only by making trivial changes in the present product this is mostly done by drug companies. The protection afforded by the alleged new invention is then used to extend the patentee’s exclusive rights over the product, preventing competition. These changes are made shortly before the patent is going to expire. In USA and Australia, Evergreening of the patent is done because their legal standard required to get a patent is very low.

These changes are typically made to bestseller drugs shortly before their patents expire. Different methods of delivering drugs (such as extended-release, for example) have been known for decades. But when one of these known delivery methods is combined with a known drug, the patent office considers this sufficiently inventive to grant a new 20-year patent[4]. In the report of National Institution of Health Care Management on Pharmaceutical Innovation stated that 75% of the patent drugs are a new form of the existing product, which eliminates competition, expanding monopolies and adversely affecting the right to health[5]. The negative impacts of Evergreening of the patent are:

  • Evergreening extends the period of market exclusivity.
    • It forces the generic manufacturer to wait indefinitely for all the patents to expire and delays the introduction of generic competition.
    • It has adversely affected public health.

For example, Gleevec cost in India Rs.4115 per tablet. Its generic version is being sold in India by Resonance and Indian generic drug company at Rs. 30/- per tablet. While the annual cost of the Gleevec is Rs.15, 00,000/-[6]in India it was 10000 annually. If the patent is widely used the price falls up to 95%[7].

Public Health vis-a-vis patents

Every human being has a right to life. The right to health is given to all human beings, which includes physical and mental health, which includes access to all medical services, sanitation, housing, food, etc. it is the universal notion of the right to be healthy. “The right to health contains four elements[8].

  • Availability- goods and services, all the programs also should be available adequate in all geographical areas.
  • Accessibility- Access to health facilities, goods and services must be universal, guaranteed for all on an equitable basis. Accessibility has four overlapping dimensions: Non-discrimination, Physical accessibility, Economical accessibility (affordability) and Accessibility of information;
  • Acceptability – All health facilities, goods, and services must respect medical ethics. They must respect the dignity, provide culturally appropriate care, be responsive to needs based on gender, age, culture, language, and different ways of life and abilities; and
  •  Quality: – Health facilities, goods, and services must be scientifically and medically appropriate and of good quality”.
Evergreening of Patents in The Pharmaceutical Sector

According to section 83 of the [9]  as follows:

“(a) that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay;

(b) that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article;

(c) that the protection and enforcement of patent rights contribute to the promotion of technological innovation and the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations;

(d) that patents granted do not impede protection of public health and nutrition and should act as an instrument to promote public interest especially in sectors of vital importance for socio-economic and technological development of India;

(e) that patents granted do not in any way prohibit Central Government in taking measures to protect public health;

(f) that the patent right is not abused by the patentee or person deriving title or interest on patent from the patentee, and the patentee or a person deriving title or interest on patent from the patentee does not resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology; and

(g) that patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public “[10].

This section states that a patent should act as an instrument to promote public interest in the case of vital importance.  But in the developing and least developing countries, the existing patent practices are prejudicial to public health. This section has clearly stated that patents are not granted merely to enable patentees to enjoy a monopoly.

Pharmaceutical Patents and Public Health Issues

The product patent regime in pharmaceutical products, directly or indirectly, creates private monopolies encouraging ever-greening of patents, resulting in patent abuse affecting the human rights of millions of patients in low-income countries, facilitating giant multinational pharmaceutical companies to artificially extend the period of patent to keep competitors out and keep the prices of the patented product high and also abuses dominant position. India was in a need for cheap drugs so it has played a very significant role in the pre-TRIPS regime as the producer and supplier of drugs to different parts of the world. Before TRIPS agreements India has been a great leader to supply antiretroviral drugs and other medicine globally at affordable prices. It was supplying 50 per cent of the cheapest drugs in the world to places like Papua New Guinea, Laos, Kenya, Africa, etc[11].

India gas supplies medicine for HIV also, but as the country’s worst-hit by AIDS do not have sufficient manufacturing capacity in the pharmaceutical sector, they rely upon imports from major generic drugs producing countries such as India for HIV treatment of the millions of their patients. On 01/01/2005, India had to shift again from the process patent regime to product patent regime in medicine, agriculture and chemical substance to comply with TRIPS. However, to prevent the abuse of product patent several changes were introduced in the 2005 amendment including pre-grant oppositions, amendments in section 3 widening the scope of non-patentable inventions and redrafting of section 3(d)[12].

Amendment in section 3(d) was the most crucial amendment directly preventing ever-greening of pharma patents and checking attempts for repetitive patents. To grant the patent in India there are two tests of “invention” and “patentability”. The invention is satisfied if it fulfils the three pre-requisites of patentability – novelty, inventive step and industrial utility as discussed above. The controversial section among the non-patentable clauses in section 3 (d). The section 3 (d) after 2005 amendment reads thus: “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 or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.” The Explanation to section 3 (d) states thus: For this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance unless they differ significantly in properties concerning efficacy.” It is important to take a note of section 3 (d) of the erstwhile Patent Act before 2005 amendment which read as: “The mere discovery of any new property or mere new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.”[13]

Evergreening of Patents in The Pharmaceutical Sector

CASE: NOVARTIS A.G VS UNION OF INDIA[14]

  • In 1997, Novartis, a Swiss-based pharmaceutical giant applied to grant the patent to an anticancer drug Glivec which is used to treat Chronic Myeloid Leukemia (CML) and Gastrointestinal Stromal Tumours (GIST) on the basis that it invented the beta crystalline salt form (imatinib mesylate) of the free base, imatinib…  It is a critical drug that is patented in about 35 countries in the world.
  • In 2006, the Madras Patent Office refused the patent application of Novartis for its drug Glivec stating that the said drug did not exhibit any major changes in therapeutic effectiveness over its pre-existing form, which was already patented outside India. The said decision was based on Section 3(d) of the Indian Patents (Amendment) Act, 2005 which provides a known substance that can only be patented if its new forms exhibit “enhanced efficacy”. The Patent Office did not find any enhanced efficacy in the drug Glivec and, therefore, considered it incapable of patentable under Section 3(d) of 2005 Act.
  • In May 2006, Novartis filed two writ petitions under Article 226 of the Indian Constitution before the High Court of Madras – one appealing against the order of Madras Patent Office rejecting its patent request and the other contesting that Section 3(d) of the Indian Patents Act is not in compliance with TRIPS and is vague, arbitrary and violative of Article 14 of the Constitution.
  • The Madras High Court refused the Writ Petitions of Novartis holding that it did not have jurisdiction to determine whether a domestic law is contrary to an international treaty, so it cannot decide whether Section 3(d) complies with TRIPS.  As far as Section 3(d) is considered, the objective of the Amending Act was to prevent evergreening and to make easy access to life-saving drugs to the citizens. Therefore, it cannot be considered to be vague and arbitrary.
  • The court observed that the product was one of the new forms of the substance and not the whole substance. It has always existed in the original amorphous form. The product thus has to qualify the test laid down in Section 3(d) of the Patent Act.
  • The Section specifies that a new form of the substance is not patentable under Indian law unless it enhances its “known efficacy”. Novartis contended that the physicochemical properties of the polymorph form of the imatinib molecule, i.e. better flow properties, better thermodynamic stability, and lower hygroscopicity, resulted in improved efficacy and hence is patentable under Indian law.
  • The Apex Court rejected this contention stating that in the case of medicines, efficacy means “therapeutic efficacy” and these properties while they may be beneficial to some patients do not meet this standard. The Supreme Court also held that patent applicants must prove the increase in therapeutic efficacy based on research data in vivo in animals.
  • The Supreme Court held that the true intention to enact section 3(d) was to prevent the concept of Evergreening and thus if the invention does not fulfil the test of Section 3(d), it cannot be granted a patent. The court further specified that this case should not be interpreted to mean that Section 3(d) bars all incremental inventions. It is about the field of medicine especially in cases of life-saving drugs, great care and caution need to be taken to protect the right to life of the masses.

The Novartis case thus gives a clear indication that India would no longer permit evergreening of patents and abuse of dominant position risking public health and at the cost of poor patients in the country. The judgment gives a strong message to the world that India will give pharmaceutical companies extended market monopoly only of medicine is genuinely innovative and involves substantive innovation. The decision anticipates pharma companies to seek ever-greening of patents in India by extending patent on known drugs and the consequent delay on the availability of affordable generic versions. Novartis is a precedent for other countries as well in determining the patentability of ‘minor improvements.’ No legal system should permit the artful drafting of claims by giant pharma companies to decide the scope of patent law. The judgment itself says: “We certainly do not wish the law of patent in this country to develop on lines where there may be a vast gap between the coverage and the disclosure under the patent; where the scope of the patent is determined not on the intrinsic worth of the invention but by the artful drafting of its claims by skilful lawyers, and where patents are traded as a commodity, not for production and marketing of the patented products but to search for someone who may be sued for infringement of the patent.

Evergreening of Patents in The Pharmaceutical Sector

What concerns does Evergreening give rise to under section 4 (abuse of dominant position) of competition law?

There is a relation between IPR and competition law which is always in debate. IPR gives a right to the owner whereas the purpose of competition law is to have fair and free competition in the market. By giving patent protection, the owner gets the right to exploit his or her patent for a limited period which creates a donation position and this leads to abuse of dominant position. Depending on the circumstances, e.g. availability of substitutes in the market, the patentee may hold a monopoly, or at least dominance, on the market since he or she is the only one who can manufacture, sell and market the product. This leads to the perspective of a competition law whose goal is to keep competition-free[15].

One of these concerns is the unilateral conduct of a company in a dominant position, a position possibly attained through the possession of an exclusive right. To ensure that these companies do not misuse their exclusive right, section 4 of completion law put certain restrictions on their freedom of action. One could conclude that competition law and intellectual property law contradict one another. But this seems to be a simplistic and false conclusion. Instead, it seems to be generally accepted that intellectual property law and competition law are just two means to the same end[16]. The disciplines share the same objective of promoting consumer welfare and efficient allocation of resources with the ultimate aim to bring new and better products to consumers at the lowest possible price[17]. There is balance over and under the protection of innovation which is maintain by IPR and competition law works as safety to unfold the balance is called into question. But even though it can be concluded that intellectual property law and competition law are not inherently in conflict.

So now we should decide to what extent IPR is harmful and when competition law should intervene[18]. Evergreening of pharmaceutical patents may be a scenario in which the balance between over- and under-protection is threatened. The main question of this paper is the legality of Evergreening about section 4 of competition law. By case laws, it can be said that due to Evergreening of patent it is an abuse of dominant position (section 4), and thus an unlawful practice, even though Evergreening practices most definitely Balance at the border between lawful conduct and unlawful abuse. There is no specific situation in which it can be said that it is unlawful it differs from case to case. While giving the judgment is granted some factors need to be taken into account such as the intention of the strategy and if the conduct has a potential or an actual effect on the market. 

CONCLUSION

In conclusion to this paper, pharmaceutical companies are involved in Evergreening of patents. A reward is giving to the people who innovate by granting a patent. Patents give an exclusive right to the owner to exploit it and earn a profit. In the case study of AstraZeneca, it has been shown that the pharmaceutical industry has declined, with several successful medicines going off-patent without being replaced by new bestsellers. There are many reasons for this problem; one is that medicine for a lot of diseases already has been invented. The second reason is ruled that exists for generic companies, making it unprofitable to be a research-based Originator company. This is the reason that the originators have made the most out of the patents they already possess by using different patent strategies i.e. Evergreening.

In the second generation product there is a small improvement in the present product and get patent protection for 20 years. In the paper, we have already discussed how it is unlawful under section 4 of the competition law. In some cases, it is lawful according to competition law but then it is unlawful according to the public interest.in Evergreening of patent means some improvement is made in the present product which is beneficial but it is illegal. The countries must penalize ever-greening practices by making necessary amendments in their patent laws. For instance, Australian patent law provides safeguards against ever-greening by imposing penalties under sections 26C and 26D of the Australian Patent Act, 1990[19].

The Act also has a mechanism for damages to be paid to the government if Evergreening practices are proved. Similarly, Article 18.9.4 of the Republic of Korea-United States Free Trade Agreement (KORUS FTA)[20] has been specifically drafted to permit the establishment of a pharmaceutical patent “anti-ever-greening” oversight agency[21]. Ever-greening of patents is against the scheme and spirit of patents and it is highly unethical. Patents should not result in the non-availability and non-affordability of medicines. Developing and least developing the world must take Novartis as a case study to understand how the TRIPS flexibilities can be used against unethical evergreening of patents.

·   Pharma Report, para 337.
·   Boldrin & Levine (2008) p. 215.
· https://theconversation.com/explainer-evergreening-and-how-big-pharma-keeps-drug-prices-high-33623
· 2002 Report
· Novartis ranked in a total turnover of US $ 1.69 billion from the US alone in 2012 from the drug, Gleevec
· UN General Comment on the Right to Health in 2000
· https://indiankanoon.org/doc/471445/ Section 83 in The Patents Act, 1970
· “Understanding Section 3(D) Of The Patents Act, 1970 Is Essential To Appreciate The Patent Law – Intellectual Property – India.” Understanding The Section 3(D) Of The Patents Act, 1970 Is Essential To Appreciate The Patent Law – Intellectual Property – India, www.mondaq.com/india/x/486342/Patent/Understanding The Section 3D Of The Patents Act 1970 Is Essential To Appreciate The Patent Law
· CIVIL APPEAL Nos. 2706-2716 OF 2013
· Whish & Bailey (2012) p. 769 ff.
· Jones & Sufrin (2011) p. 711, see also Pepperkorn (2003) pg. 527-528
· Commission Guidelines on Technology Transfer, para 7
· PATENTS ACT 1990 – SECT 26 Validity Not Affected in Certain Cases Involving Amendments, classic.austlii.edu.au/au/legis/cth/consol_act/pa1990109/s26.html
· “U.S. – Korea Free Trade Agreement.” United States Trade Representative, ustr.gov/trade-agreements/free-trade-agreements/korus-fta
· Kudrat. “EverGreening: An Abuse of the Patent System.” Academic, 16 Jan. 2015, www.lawctopus.com/academike/evergreening-an-abuse-of-the-patent-system/
· Case C-457/10 P, AstraZeneca v Commission, Judgment of 6 December 2012

[1] Case C-457/10 P, AstraZeneca v Commission, Judgment of 6 December 2012
[2] pharma Report, para 337
[3] Boldrin & Levine (2008) p. 215
[4] https://theconversation.com/explainer-evergreening-and-how-big-pharma-keeps-drug-prices-high-33623
[5] 2002 Report
[6] Novartis ranked in a total turnover of US $ 1.69 billion from the US alone in 2012 from the drug, Gleevec
[7] Supra8
[8] UN General Comment on the Right to Health in 2000
[9] Section 83 in The Patents Act, 1970, indiankanoon.org/doc/471445/
[10] https://indiankanoon.org/doc/471445/ Section 83 in The Patents Act, 1970
[11] Supara4
[12] “Understanding The Section 3(D) Of The Patents Act, 1970 Is Essential To Appreciate The Patent Law – Intellectual Property – India.” Understanding The Section 3(D) Of The Patents Act, 1970 Is Essential To Appreciate The Patent Law – Intellectual Property – India, www.mondaq.com/india/x/486342/Patent/Understanding The Section 3D Of The Patents Act 1970 Is Essential To Appreciate The Patent Law
[13] Ibid
[14] CIVIL APPEAL Nos. 2706-2716 OF 2013
[15] Whish & Bailey (2012) p. 769 ff
[16] Jones & Sufrin (2011) p. 711, see also Pepperkorn (2003) pg. 527-528
[17] Commission Guidelines on Technology Transfer, para 7
[18] ibid
[19] PATENTS ACT 1990 – SECT 26 Validity Not Affected in Certain Cases Involving Amendments, classic.austlii.edu.au/au/legis/cth/consol_act/pa1990109/s26.html
[20] “U.S. – Korea Free Trade Agreement.” United States Trade Representative, ustr.gov/trade-agreements/free-trade-agreements/korus-fta
[21] Kudrat. “EverGreening: An Abuse of the Patent System.” Academic, 16 Jan. 2015, www.lawctopus.com/academike/evergreening-an-abuse-of-the-patent-system/

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