Gauri Kamath on Drug "Differential Pricing" in India

Gauri Kamath of Business World has an excellent review of the latest "differential pricing" efforts of MNC's in India. Readers may know that SpicyIP is an ardent advocate of "differential pricing" strategies.

See here for one of our posts which reviews Merck's scheme relating to the anti-diabetic, Januvia. In fact, Gauri has referred to our SpicyIP post in her article as well.

She ends by noting that "If Merck is able to win over doctors, regulators and public opinion, in addition to making money, more may follow... For diabetics, this is sweet news indeed." I'm reproducing her article below:

PHARMACEUTICALS Game Changer
Merck’s low-priced diabetes drug might change a few rules

GAURI KAMATH
13 June 2008

India’s pharmaceutical multinationals have watched Naveen Rao flag off his company’s newest offering with interest. Rao, managing director of Gurgaon-based MSD Pharmaceuticals, the Indian subsidiary of the US’s fifth-largest drug maker Merck, is talking price.

Local MNC arms seldom discuss pricing. Until India began awarding drug patents in 2005, cut-price generics were freely available. MNC originals, priced at a premium to recover research costs, looked embarassingly expensive in contrast. More recently, their drugs are being imported; Indian arms have little say in pricing.

Rao is promising to change all that. In April, he launched Januvia, a diabetes drug, on the plank of ‘differential pricing’ — charging different prices to different customers, or countries in this case, for the same product depending on their ability to pay. Januvia retails in India at Rs 43 a pill, roughly a fifth of its price in the US.

It has got everyone’s attention. “This is probably the first case of differential pricing implemented by Big Pharma (top western drug makers) in India,” says Utkarsh Palnitkar, national sector leader for health sciences at Ernst & Young, in Hyderabad. Though no MNC manager would come on record, a senior manager at the Gurgaon-based subsidiary of a US drug maker says, “This is not what MNCs usually do.”

The move is part corporate social responsibility, and part hard-nosed economics. “Merck’s tagline is ‘Patients Come First’,” says Rao, 54, who spent 12 years with Merck in the US before heading home in 2005. “I didn’t want it to seem as though we put rich patients first.” Equally, he says, this is about business strategy. Merck aims to be among the top five drug companies in India by 2015; it is currently ranked 120. “We have to be India-friendly,” he says. But, will it work?

Sweet Spot

Januvia is the first in a new class of drugs called DPP4 inhibitors. Unlike older diabetes drugs, it causes neither weight gain nor a potentially fatal drop in blood sugar levels. It also helps postpone the use of insulin in patients. “It is a breakthrough class of drugs,” says Anoop Misra, head of the department of diabetes at New Delhi’s Fortis Hospitals, but cautiously. Januvia is a new drug and has mild side effects — sore throat, diarrhoea and upper respiratory tract infections. Serious side effects, if any, could come to light once it is used extensively, he says.

But for now, Januvia is in a sweet spot. “It is almost as effective or better than existing drugs,” says Subhash Wangnoo, senior endocrinologist at Delhi’s Indraprastha Apollo Hospital, who conducted the drug’s trials in India. “And there is more patient compliance.” Januvia is tipped to be a blockbuster barely 15 months after it was launched in the US. But it could fail in India — the diabetes capital of the world with 43 million diabetics — if the pricing isn’t right.

The Difference

Merck’s drug is not the cheapest. Older diabetes drugs retail for less — some as low as a few paise per dose, under government control. Also, many MNC drugs are priced lower than in their home markets. So why is Januvia any different?

MNCs mostly decide on a flat percentage off the home market price, or a floor price below which they will not go. But Merck took another approach, and spoke to 350 Indian doctors and patients to decide on an India-specific price. Doctors voted for under Rs 50 a day, but diabetics, hit by the side-effects of older drugs, were willing to pay twice as much, says Rao. Ultimately, Januvia’s tag was lower than both.

Palnitkar says the pricing suggests that Merck means business. “Their strategy is the acknowledgement of a large volume of prospective business.” Industry estimates peg the oral diabetes drugs market in India at $300 million and its growth at 20 per cent-plus, annually. The Indian pharma market is poised to become the 10th-largest by 2015, according to US consultancy McKinsey. India now awards drug patents, a key reason behind Merck’s return to the country two decades after quitting.

Januvia is Merck’s first patent-protected drug in India and its first drug to be marketed to primary care physicians in the country’s chronic care segment. The other drugs from Merck’s stable (apart from an adult vaccine) are used for life-threatening infections, where prices are high and volumes far more limited. But as Rao says, “Diabetes is mainstream.” So, managing costs is a big issue for doctors and patients.

Take, for instance, Byetta, another diabetes drug launched in India by Merck’s US rival Eli Lilly. At Rs 7,600 a month, Byetta has 2,000 patients, and is seeing 10-15 new patients every day. Devashish Ohri, senior vice-president for marketing at Lilly’s Gurgaon office, says that Byetta, which has to be injected twice a day, is meant for those who are overweight and unable to control sugar on multiple oral diabetes drugs. And that the number of new patients on Byetta could double as it pushes the drug to more doctors. “We have just scratched the surface.”

For Januvia, with price on its side and its once-daily tablet form, prospects may be brighter. One caveat, though. The two drugs act completely differently. Byetta’s unique selling proposition is that it helps patients actually lose weight; Januvia’s plank is “no weight gain”. Says Apollo’s Wangnoo, “There is a role for both.”

Yet, Lilly’s optimism illustrates the market potential. As for doctors like Misra, Januvia is still expensive, to be prescribed when other oral drugs fail. “I would not prescribe it as the first line of treatment.” He would also judge its efficacy depending on how his patients respond.

The Halo Effect

There is relationship-building at work here as well. Merck is trying to cut through the tide of criticism sweeping over MNCs for pricing drugs out of the reach of millions. And further soften Indian regulators who are demanding a role in the pricing of patented drugs. “I could have charged whatever I wanted,” says Rao. “But I behaved responsibly.” Merck is awaiting approval to market Gardasil, a vaccine against a form of cervical cancer that kills thousands of Indian women every year. Rao hints at a ‘public-private’ partnership model for it, but offers no details citing its pending approval.

Shamnad Basheer, a New Delhi-based patent expert, believes that Merck’s shift in its pricing policy has to be viewed in the context of a recent patent-infringement battle involving a cancer drug being fought in an Indian court between generic company Cipla and patent-owning Swiss drug maker F Hoffmann-La Roche. An initial judgement has gone in favour of Cipla’s cut-price generic. On his blog, Basheer asks, “Will Roche learn from Merck’s wisdom?”

Great Expectations

Indeed, Merck is being seen as a trendsetter of sorts. “It is to be hoped that other MNCs follow suit when new drugs are introduced in India,” says V. Mohan, chief diabetologist at Dr Mohan’s Diabetes Specialities Centre in Chennai. Will they? GSK, for one, has already begun by practising differential pricing for its vaccines business, and may do so for drugs, too. If Merck is able to win over doctors, regulators and public opinion, in addition to making money, more may follow.

For now, Januvia could shake up the market for new diabetes drugs such as Byetta and Galvus (to be launched soon by Swiss MNC Novartis). A Novartis spokesperson would only say that Galvus would be priced competitively. For diabetics, this is sweet news indeed."

AIDS Patent Rejection: Differential Patentability Standard for Essential Drugs?

In our last post on HIV patent cases in India, we promised to bring you a more comprehensive analysis of the Nevirapine patent rejection. So here it is:

The patent application by BI claimed the ARV (anti retroviral), Nevirapine, as a “hemi-hydrate solution”. More specifically, the patent claimed a composition containing an aqueous solution of nevirapine hemihydrate of particle size between 1-150 micron.

The key advantage claimed by BI related to the particle size which made it more stable and enabled longer storage. The particle size was advantageous to maintain stability of the solution. And the solution was useful for kids who normally find it difficult to take other dosage forms of Nevirapine.

Pursuant to a pre grant opposition filed by AIDS patients groups, the Assistant Controller, NR Meena rejected the patent on grounds of lack of inventive step, lack of “efficacy” under section 3(d) and lack of “synergy” under section 3(e).

It is interesting to note that counsel for the opposition (Anand Grover of Lawyers Collective) stressed the fact that the since the invention related to an "essential" medicine, a patent issued would have a debilitating impact on “access”. Therefore it was imperative that the patent office subject such patent applications to a "strict" patentability standard/threshold.

To buttress his point, he cited the Madras High Court decision in the Novartis case, TRIPS and the Doha Declaration, all of which made clear that countries had flexibilities in devising patent regimes that adequately catered to “public health” concerns. He also referred extensively to Carol Correa's "Guidelines for the Examination of Pharmaceutical Patents: A Public Health Perspective".

The Asst Controller attempts to dispose of these “policy” style arguments quickly by noting that TRIPS and other arguments relating to “public health” are not specific “specific grounds” that one can cite in an opposition. Interestingly however, he goes on to qualify all the above submissions by Grover as “matters of law”. In other words, he appears to have accepted the proposition that the patents covering essential medicines ought to be construed “strictly” as a matter of law.

His proposition paves the way for differential “patentability” standards at the patent office in respect of "essential" medicines. This is over and above the differential standards built in by Parliament into statute such as section 3.d (which applies mainly to pharma and agro chemical inventions).

However, it bears noting that this standard is likely to be applicable only to "essential" medicines and not all pharma patents. Therefore, a patent application relating to a new variant of the Viagra drug is not likely to attract the same kind of sympathy by the Indian patent office (in fact, the patent office may deploy a liberal standard of patentability to intentionally keep prices high!).

Here are some quick points that I prepared that may qualify as a “summary” of the decision:

On Novelty (and "Mosaicing")

The opposition cited a number of prior art documents which they alleged “anticipated” BI’s patent application. The patent office however disagreed, stating that no single document, by itself, contained all the prior art necessary to anticipate. In pertinent part, the office held that for the purpose of “anticipation” one cannot “mosaic” different documents and claim that they anticipate the patent.

On "Inventive Step" (Non Obviousness)

Although the patent office ruled against the opposition on the "novelty" issue, they held in their favour in so far as "inventive step" was concerned. The Asst Controller appears to suggest that one may “mosaic” different prior art for the purpose of establishing lack of inventive step. And based on all the prior art cited, the patent office held that a skilled person could have put them together to arrive at the claimed “invention” (a composition containing an “aqueous suspension of nevirapine hemihydrate”). The patent office also hinted that the reduction in particle size could be achieved by milling or other conventional methods. And that there was nothing novel or inventive about the method here.

Section 3(d): No Comparative Data

As mentioned earlier, the key advantage claimed by BI was in terms of the particle size which made it more stable and enabled longer storage (i.e. particle size was advantageous to maintain stability of the solution. And the solution was very useful for kids who normally find it difficult to take other dosage forms of Nevirapine). However, the patent office still ruled against BI on section 3(d).

The key reason underlying the patent office rejection on this count was because no evidence had been submitted that would have enabled the patent office to compare the efficacy of the claimed invention against an earlier known substance. In other words, one has to necessarily show “comparative advantage” and explicitly compare the invention against an earlier known substance. This point by the patent office demonstrates the importance of submitting some data (whether clinical trial, in vitro, scientific publications etc) that would help establish that the "efficacy" of the claimed invention was superior to an already known substance/composition. It is not enough to merely allege such increase in efficacy or hope that the patent office will so intuit from the other evidence/submissions.

Section 3(d): Therapeutic Efficacy

More importantly, the patent office held that the only advantage cited was that a reduction in particle size permitted longer storage. According to them, this did not constitute an increase in “therapeutic” efficacy. In pertinent part, they stated that: “Improved particle size stability means that someone who is able to make aqueous solution of Nevirapine Hemihydrate can store it for longer in the shelf. However the “therapeutic” effect of Nevirapine, whether in hemihydrate or anhydrous form or whether administered in aqueous, tablet, parenteral or any other dosage form would remain the same”.

From the above, it can be seen that the patent office is likely to insist upon “therapeutic efficacy” in future cases. And not just any kind of advantage claimed for the drug sought to be patented, such as an increase in heat stability, manufacturing efficiencies etc.

Needless to say, in construing efficacy to mean "therapeutic efficacy", the Indian patent office was merely following the Madras High Court decision in this regard. And as per our constitutional structure, it is bound to follow the rulings of the High Courts. I have elaborated on this aspect in a recent article and I extract the relevant portion below:

“First, it is important to appreciate that while certain acts of the patent office qualify as “purely administrative,” others could be said to be of a “quasi judicial” nature. Whilst determining whether an application meets the criteria of patentability, the patent office could be said to be performing a quasi-judicial role.

Since the patent controller is a “tribunal” (at least when deciding on whether or not something is patentable), it will be bound by the supervisory jurisdiction of the High Court under Article 227. And in much the same way as the IPAB, it is bound by decisions of the High Court.”

The article then goes on to question the assumption that the term "efficacy" in section 3(d) necessarily means "therapeutic efficacy". Not least because the section applies to agro-chemicals as well—and it seems downright stupid to ask if a variant of an existing pesticide demonstrates greater therapeutic efficacy than its known predecessor! We had also blogged on this aspect here.

The article notes:

"While some of the suggestions in this paper are immediately implementable, other issues will necessarily involve a more detailed empirical/policy investigation. One such issue is the definition of efficacy: ought “efficacy” to be restricted to only therapeutic efficacy, or should it be widely defined to encompass non therapeutic advantages as well, such as heat stability, manufacturing efficiencies etc? This issue will, in many ways, determine the scope of protection of incremental pharmaceutical inventions in India. Illustratively, if efficacy is restricted to only “therapeutic” efficacy, new drug delivery mechanisms, a category of inventions in which Indian companies are particularly proficient, will fall out of the scope of protection."

Notwithstanding any of the above, unless the ruling of the Mad HC is challenged, it is here to stay. And future patent office decisions will continue to insist upon "therapeutic" efficacy. Interestingly, a recent update of the patent office manual quotes the Madras High Court definition of “efficacy,” as well. I will comment more elaborately on the patent office manual and its implications for the Novartis case in a later post.

Section 3(e): No Synergy

The patent office also held against BI on section 3(e), which prohibits patents to any "substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof". In other words, unless a combination of individual elements produces some "synergy", the said combination is not patentable. The patent office rules that the claimed composition by BI did not demonstrate additional synergy, when combined. However, the reasoning was not very detailed in this regard.

Patent Eligbility vs Patentability

I had mentioned in the earlier post that of all the commentaries pertaining to this case, I would recommend the post by IMAK, where Tahir succinctly explains the decision. In particular, Tahir takes issue with the patent office reasoning, whereby patentability criteria such as "novelty and "inventive step" are looked at first, prior to assessing the section 3(d) issue. He notes that:

"If any criticism can be levelled at the decision, it is from a practice point of view. As with the Novartis/Gleevec decision, the patent offices seem intent to go through the novelty, inventive step tests first before considering what are not inventions under the Patents Act i.e s3(d) and s3(e). Logically, and as evidenced in case law from other jurisdictions, the patent office should deal whether a patent application even meets the threshold of an invention, as set out in s3 of the Indian Patents Act, before moving on. Therefore, s3d should be applied first."

Although I see some merit in Tahir’s point, I wonder whether what he suggests is pragmatic. Would it be possible for the patent office to completely rule on section 3.d, without looking into issues of "novelty" and "non obviousness" at all? In a recent article, already referred to earlier, we’ve recommended as below:

“Section 3(d) may be construed as a refinement of patentability criteria to cater for “ever-greening” – a specific problem inherent in pharmaceutical innovations. More specifically, the “enhanced efficacy” criterion can be seen as refinement of “non- obviousness” principles, i.e. most forms of existing pharmaceutical substances are deemed obvious, unless they demonstrate increased “efficacy.” At some level, section 3(d) could also be said to embody a utility test, i.e. unless the new form has significantly enhanced utility over and above what existed before in the art, it is not patentable.

Under the present scheme of the Indian Patents Act, section 3(d) is part of a section that begins with the phrase “the following are not inventions within the meaning of this Act…” In other words, any pharmaceutical invention that does not comply with section 3(d) represents excluded patentable subject matter, i.e. section 3(d) is structured as a patent eligibility test and not as a patentability test. At a conceptual level and drawing from the patenting practices of most member states, one can draw a distinction between “patent eligibility” and “patentability.”

“Patent eligibility” broadly refers to the requirement that a subject matter for which a patent is sought be inherently suitable for patent protection, in the sense of falling within the scope of subject matter that patent law prima facie exists to protect. In most jurisdictions, patent eligibility manifests itself in the term “invention,” i.e. a poem, though new, non-obvious and useful is still not patentable, as it is not an “invention.” The term “patentability,” on the other hand, refers to those set of principles that inform the requirements that must be satisfied for a patent eligible subject matter (i.e. an invention) to be granted a valid patent. Principally they are the requirements of novelty, inventive step (non-obviousness), utility (industrial applicability) and sufficient description.

By mandating that a new form without increased efficacy would not amount to an “invention,” section 3(d), in effect, constitutes a patent eligibility standard. Although this is more a matter of form than substance and is not likely to make an impact on the outcome of the case, it will influence the stage at which the examination is conducted. Being a patent eligibility standard, an examination is conducted right at the start. Compare this with a non-obviousness or inventive step examination, which is done at a later stage. Since an examination under section 3(d) is likely to call into question some of the very same issues used in a non-obviousness determination, it may help to explicitly state section 3(d) as a “patentability” criterion rather than a patent eligibility criterion.”

Apart from a non-obvious determination referred to above, section 3(d) calls into question issues of “novelty”. The section states in pertinent part that only those "new forms" that demonstrate significantly enhanced efficacy over and above a "known substance" will be patentable. This issue comes up quite starkly in the Novartis case, with the question being: What is the "known" substance against which the Novarits beta crystalline application has to be compared for assessing efficacy?

As noted in a previous post, the various steps involved in the allegedly inventive process are:

) Synthesizing imatinib as its free base, a compound that was patented in the US, EU and several other countries. However, this could not be patented in India, owing to the fact that in 1993, India did not provide product patents for pharmaceutical substances.

ii) Converting the free base to a particular salt form, imatinib mesylate, by adding methanesulfonic acid.

iii) Crystallising the imatinib mesylate to obtain the beta crystalline form, which is allegedly the most stable polymorphic form of the salt. A patent application was filed for this and it is this application that is the subject matter of dispute.

iv) Formulating the beta crystalline form of imatinib mesylate into a pharmaceutically useful drug, Glivec.

While rejecting the patent application on grounds of section 3(d), the patent office does not make clear as to what the "known" substance in this case is. Would the “known” substance be the imatinib free base (in relation to which it is far easier to show increased efficacy) or the later salt, imatinib mesylate? Or the alpha crystalline form of imatinib mesylate?

Notwithstanding this defect, is is important to appreciate that for the purpose of section 3(d), one has to necessarily make a determination of what amounts to a "known" substance: a determination that will inevitably call into question issues of "novelty".

Conclusion

As mentioned in the last post, the most significant portion of the patent office decision appears to be the implicit finding that when an application claims an "essential medicine", patentability criteria have to be interpreted "strictly". Perhaps this could mean that if the meaning of the term "efficacy" is uncertain, the patent office would give it a stricter/narrower construction, limiting it to "therapeutic" efficacy, rather than opening it up to a more liberal interpretation. In short, this decision paves the way for patent offices to treat “essential medicine” cases differently.

Secondly, the patent office is likely to continue with construing efficacy as "therapeutic efficacy". Unless such a construction is challenged in court. Lastly, the Nevirapine decision teaches us that unless data is submitted to compare an earlier known substance against the claimed form, an applicant is likely to fail the section 3(d) test.

Would love to hear from our readers on what they think might be the implications of this decision for future pharma cases. Also, if I have missed out on or overlooked some aspect of this decision that you think deserves mention, please do let me know.

SpicyIP:Trademark through the Taxmans Lens

IP acquisitions are becoming commonplace where companies are going a shopping for IP assets ;assets that could add synergy and diversity to existing product lines. Recent M&A forays by companies such as Biocon and Suven were largely driven by the IP acquisition rationale.

Heightened awareness that IP can constitute a discrete asset class capable of creating value and opportunities for arbitrage is fast gaining ground.IP value and IP related cross border transactions has seen a dramatic recognition in recent years.

WIth a surge in cross border transactions of intangibles, valuation and tax considerations of IP continue to be vexatious issues. The tax man is scrutinizing these deals with fine tooth comb( is he bored with celebrity tax bust ups??!!??) , perhaps also an attempt to establish judicial precedents in areas of IP tax law that hold much grey(read that as the provisions in 'The Income Tax Act'pertaining to IP)

Determination of 'situs' of such intangibles continues to be a tricky issue,the key determinant in deciding the jurisdiction for tax purposes.Transfer Pricing concerns follow.

'The Income-tax Act, 1961, contains a deeming provision whereby certain income streams arising to non-residents (including foreign companies), directly or indirectly from a business connection, from any property in India, or transfer of a capital asset situated in India, would be subject to tax in India.
The Act does not explain the circumstances under which capital assets such as trademarks, brands, etc., can be said to be situated in India. Hence, in what circumstances a property or an asset could be considered to be situated in India remained a vexed issue, especially in the case of trademarks and the like.'

The recent ruling by the AAR(Authority for Advance Rulings) on the SAB Miller case throws light in this direction and lays down some guiding principles that could help resolve this issue.SAB Miller is part of the Australian based brew biggie Fosters.

Interestingly,the AAR is a quasi judicial body that pronounces rulings only when parties initiate the process.

The decision of AAR to conclude the trademarks were situated in India was also, inter alia, aided by the fact that (a) the business of Foster’s India was being carried on in conjunction with Foster’s Australia and, since 1997, the said intellectual property was being put to use in India; (b) the Foster’s logo, etc., was registered in India in 1993 and, as such, were being used by Foster’s India by virtue of the exclusive licence agreements; and (c) Foster’s Australia retained its proprietary rights in the goodwill associated with the assets and simultaneously ensured that the assets acquired value in the form of reputation and goodwill (by sale of beer under the brand names).

AAR concluded that the capital assets in terms of the trademarks and the brand transferred by and through the S&P agreement were situated in India. Accordingly, the consideration received for the same was subject to tax in India.

Live mint as always carried an incisive analysis on this ruling.

HIV Patents in India: Will it Rain "Rejections"?

On the issue of HIV patents and oppositions at the Indian patent office, it's literally "raining" news. So far, we have 3 significant developments in the last 2 weeks or so, and I've tried to summarise them below:

1. Pre Grant Oppostion to Gilead's AIDS Drug, "Viread"

Bhuma Srivastava of the Mint reports that:

"Signalling mounting global resistance to patenting of drugs in India, a Brazilian public health group has filed an opposition in India against US drug maker Gilead Sciences Inc.’s patent filing for their anti-AIDS drug, Viread. This is the first pre-grant opposition filed by an overseas body against a patent grant in India and reflects a growing concern about ensuring that the supply of cheaper, non-patented drugs from India is not blocked."

Interestingly, Gilead has a number of voluntary licensing arrangements with Indian generic manufacturers in relation to this very same drug. However, these licenses have been attacked by civil society activists as causing significant price hikes in jurisdictions where there are no patents, and causing artificial decrease in supplies of API's, thereby increasing their costs. KEI sent a letter to the FTC in early 2007 asking them to investigate potential antitrust implications of these licenses. Kruttika will blog in detail on this soon.

Bhuma Srivastava mentions these licensing arrangements and the concerns they spur in her report:

"In 2006, Gilead had signed a spate of voluntary licensing agreements with 11 Indian non-patented, or generic drug makers, allowing them to make copies of the anti-HIV drug and selling it in 95 low-income countries including India, in a bid to take the sting out of the patent oppositions.

The public health activists refuse to believe such licence—called “patent settlements and not pure licensing agreements” by one of them— would solve the problem.

“The voluntary licences come with several restrictions on geographies, exports and back-end supplies for the generic companies. There is a lack of transparency on these deals,” said Menghaney, adding that all voluntary licensing agreements should be put out in the public domain and scrutinized for anti-competitive clauses.

The statement explains that the deals forged with Indian companies “are restrictive and do not permit export of the drug or raw material (active pharmaceutical ingredient) to certain middle-income countries, including Brazil”, allowing the innovator Gilead to charge exorbitantly for the drug."

2. Post Grant Opposition to Roche's Valcyte

The Economic Times reports that:

"Delhi Network of Positive People (DNP+)—has filed a post-grant opposition against Swiss major Roche’s patent for its HIV drug Valganciclovir at the Chennai Patent office.

The Chennai patent office granted the patent to Roche last year without hearing the arguments of the two NGOs which had filed pre-grant opposition against the drug, a DNP+ release said.

The NGO has opposed the patent on the grounds that Valganciclovir is a known compound, and at most, a ‘new form’ of an already known substance with no improvement in efficacy. DNP+ has also alleged that many patents granted by the Chennai patent office were rejected in the US, which is considered to be far more liberal than Indian patent laws. "

We had blogged on certain "non transparent" aspects of the patent office's dealing with this case during the pre-grant stage here.

3. Indian Patent Office Rejects BI Patent over Nevirapine

By far, the most interesting and widely reported news was the rejection of the patent office of a patent application by Boehringer Ingelheim (BI) covering the anti retroviral (ARV), Nevirapine. This was in response to a pre grant opposition filed by AIDS patients groups in India. The main grounds of rejection were lack of inventive step, section 3(d) and section 3(e).

Reports on this decision can be found at here and here.

The decision itself can be found at the website of Lawyer's Collective here. As for commentaries on this judgment, I would recommend Tahir's post here.

The interesting part about this decision is that the patent office appears to suggest that in the context of life saving drugs (HIV and anti cancer), they will insist on a very "strict" patentability standard. I will carry a detailed blog post on this decision soon.

Concluding Thoughts

Almost all patents covering critical ARV (anti retroviral) and anti cancer drugs are being challenged now in India. Not just by generic manufacturers, but also by patient groups and civil society activists. And lately, even by NGO's from abroad. From the Nevirapine patent rejection, it appears that the patent office will demand a fairly high threshold for patentability in future life saving drug cases. My own guess is that a number of these patents will be follow on inventions based on pre '95 basic molecules and may therefore fail the strict patentability threshold.

On a related note, if this strict/conservative approach to patentability in BI's case involving Nevirapine is followed in other cases as well, perhaps our fears of an access crunch in relation to life saving drugs may be slightly exaggerated? In an article published in the Intellectual Property Quarterly (IPQ) in 2005, I had noted:

"Although the (2005) Act makes wide ranging changes to India’s patent regime, the most controversial provision is the one introducing product patents in the area of pharmaceuticals. Quite naturally, it is feared that this would spur a steep rise in drug prices and an adverse impact on ‘‘access’’ to important drugs. Civil society proponents argue that the TRIPS flexibilities available were not exploited appropriately and that adequate safeguards were not built in to ensure an affordable supply of medicines.

While this concern by civil society has some merit, what it misses is the flexibility that already inheres in the Patent Office to tailor patent protection to suit policy needs. The Indian Patent Office has had an interesting history of taking itself to be a policy guardian of sorts and demonstrating a rather conservative approach to the issue of patentability. Indeed this trend was discernible as late as 2001, when the Office refused an application by Dimminaco AG (a Swiss biotechnology company), claiming a method of producing a live vaccine, on the ground that the term ‘‘manufacture’’ did not include a process that had as its end product a ‘‘living substance’’.

This policy-style reasoning can be traced back to the Ayyangar Committee report, a document that formed the very basis for the current Indian patent regime. Underlying this report was the clear message that fewer patents resulted in a stronger indigenous industry, particularly in the area of pharmaceuticals and chemicals. It will be the endeavour of this article to demonstrate the influence of this policy document on the decisions of the Patent Office even today. Consequently, this article will posit that rooted in a system that stressed the virtues of a weak patent system, it is likely that the Patent Office would continue with a conservative approach to the issue of patentability, even with regard to pharmaceutical inventions (that are patentable under the 2005 Act).

Needless to say, such interpretation would assuage some of the concerns of civil society, in terms of curbing the scope of pharmaceutical patent monopolies and consequently improving access to medicines."

What do our readers think? In particular, have you seen any critical ARV or anti cancer patents that you think are definitely "meritorious" and are likely to make it past the patentability threshold in India? (of course, ignore the ones that have already been in the news, such as Tarceva etc, which though granted, could not be enforced)

Kerala's IPR Policy

Readers will recall Aysha's earlier post on this issue here. Spicy IP would like to thank Dr. Gopakumar G. Nair for passing on the following information to us.

The lush green State of Kerala plans to officially released its IPR Policy in the presence of the Minister for law & Parliamentary Affairs, Shri. M. Vijayakumar, Chief Minister Shri. V.S. Achuthanandan and other distinguished guests tomorrow. For those of you interested, the function will be held at the Mascot Hotel, Thiruvananthapuram, starting 2:30pm.

We reproduce here the official text of the IPR Policy Objectives for the benefit of our readers:

IPR POLICY – OBJECTIVES


1) To Institute a Legal arrangement for the protection of traditional knowledge and biodiversity associated with such knowledge, given the fact that traditional knowledge forms the basis of livelihoods of many TK practitioners and the absence of any legal property rights on such knowledge may render an opportunity for the private appropriation of the Traditional Knowledge by multi national corporates.

State proposes to commit all traditional knowledge, including traditional medicines, the practice of which sustains livelihoods of many, to the realm of “Knowledge Commons” and not to the “Public Domain”. While the Policy envisages creating property rights on traditional knowledge, all the right holders will be deemed to be holding their rights under an obligation that they shall permit others the use of the knowledge in their possession for non-commercial purposes.


2) Setting up of a Supervisory Council on Intellectual Property (SCIP) to provide overall supervision in matters relating to intellectual property rights with Chief Minister as its Chairman and Law Minister as its Vice-Chairman.

SCIP will help any potential patent applicant who asks for its assistance to prepare proper patent applications. It will disseminate knowledge in the state about intellectual property rights.


3) To declare the stand of the Government with regard to the ownership of Intellectual property rights over the outcome of research in state government-funded and state government-aided institutions, especially given the current trend of outsourcing from the west.

While such outsourcing, giving rise to collaborative research can be academically productive for the states’ research institutions, it is important to ensure that our public research institutions do not simply become providers of cheap labour to multinational corporations."


SPICY IP supports all government endeavors to protect traditional knowledge and also congratulates the Government of Kerala on its apparent interest in collaborative research with academia (is it just me or does it really sound like a State Bayh-Dole?). However, I am personally a little confused about dedication of all TK to what has been termed as "the realm of 'Knowledge Commons.'" Does this mean a compulsory "open source" type policy? If yes, and if patents are granted in relation to TK (the possibility of which doesn't seem to be closed under the policy), will these be subject to an automatic compulsory license? Most importantly, given that intellectual property law including patents, copyrights etc. fall within the Union List, (See Union List, "49. Patents, inventions and designs; copyright; trade-marks and merchandise marks. )"only the central government has the right to legislate on these issues. Doesn't this mean that the Kerala government policy will be subject to the Indian Patents Act? Doesn't this mean that the policy statement notwithstanding, the Kerala government may not be able to implement the "compulsory license/Open Source" type policy envisaged for "property rights" related to TK... I would be grateful if anyone out there could tell me what I'm missing here!

"Inventing Around" Patents: Astra vs Mylan and Implications for the "Access" Debate

In an earlier post, our guest blogger, Chris Ohly succinctly analysed a recent patent case involving Mylan (parent to home grown Matrix Labs) and Astra Zeneca, and fought over an anti heart burn drug "Prilosec". The court held in favour of "non infringment" by Mylan, owing to the fact that Mylan had cleverly "worked around" or "invented around" the Astra patent. The decision hinged significantly on what term "Alkaline Reacting Compound (ARC)" meant. The court held that it did not include "Talc" used by Mylan in its generic product.

Chris' post had me thinking that very often, when discussing pharmaceutical patents and the "access" issue in India, we tend to forget that pharma patent monopolies are restricted to what is "claimed" by the patentee. Depending on the pharma product and the technology in question, generic manufacturers may be able to cleverly work around a patent claim and thereby avoid infringement. As Mylan did in this case, by deploying "Talc" in its product and arguing that it wasn't an "ARC" (an essential element of the patent claim by Astra Zeneca).

To this extent, the "access" issue (i.e. that a patent over a pharma product always results in excessively priced products and a market without competition) may not turn out to be as extreme as we expect. Let me illustrate this point with the help of the pending Novartis litigation in India. As our readers know from the several posts around this controversy, the facts are as below (copied from a recent article that we have written):

Glivec (Novartis) Patent Case

“Imatinib,” a free base, discovered in the early '90's was seen to have anti-cancer properties. In 1993, Novartis filed a patent covering this free base and all pharmaceutically acceptable salts. Imatinib was then further researched upon and improved – first, by converting it to a particular salt form, namely imatinib mesylate. From this salt, Novartis found that the most stable version was a particular polymorphic form, namely the beta crystalline form.

Novartis then formulated the beta crystalline form of imatinib mesylate into a pharmaceutically useful drug, Glivec, which was approved by the FDA in 2001.

In short, the various steps in this alleged invention can be encapsulated as under:

i) Synthesizing imatinib as its free base, a compound that was patented in the US, EU and several other countries. However, this could not be patented in India, owing to the fact that in 1993, India did not provide product patents for pharmaceutical substances.

ii) Converting the free base to a particular salt form, imatinib mesylate, by adding methanesulfonic acid.

iii) Crystallising the imatinib mesylate to obtain the beta crystalline form, which is allegedly the most stable polymorphic form of the salt. A patent application was filed for this and it is this application that is the subject matter of dispute.

iv) Formulating the beta crystalline form of imatinib mesylate into a pharmaceutically useful drug, Glivec.

Novartis claimed that the active ingredient in Glivec (beta crystalline form of imatinib mesylate) is more effective than the imatinib free base, since it displays better bio-availability properties, i.e. it is absorbed more easily into the blood. To this effect, it submitted evidence before the Assistant Controller demonstrating an increase in bio-availability of up to 30%. It also claimed that the beta form “stores better, is less hygroscopic, is easier to process and guarantees a constant quality of the final drug product.” (See Novartis AG v Union of India, writ petition filed by Novartis para 4).

The Indian patent office however did not agree with Novartis and rejected the patent application on a variety of grounds, including section 3(d). It held that Glivec was not significantly more efficacious than previously existing pharmaceutical substances and did not therefore meet with the requirements of section 3(d).

As SpicyIP has been reiterating, as to whether or not Glivec is patentable is a technical patentable issue that ought to be decided by the Indian courts. And the case should be permitted to run its course. Not least because the contours of section 3(d) are still far from certain and we need more clarity on it.

Let us assume (for the sake of this discussion) that the IPAB/courts overturn the patent office ruling and grant a patent in favour of Novartis. The question then arises:

How is this patent covering the "beta crystalline form of Imatinib Mesylate" likely to impact "access' to this drug in India? Does the issue of the patent necessarily mean that there will no competitors in the market at all? And that the prices would therefore be exorbitant and unaffordable.

Cipla and Alpha Form of Imatinib Mesylate

What if a generic manufacturer such as Cipla "invents around" Novartis' patent? In fact, a Mint report suggests that this might be the case i.e. Cipla has a drug that corresponds to the alpha crystalline form of Imatinib Mesylate. Note that the Novartis patent in issue is restricted to the "beta crystalline form" (both alpha and beta are different polymorphic forms of the same salt, Imatinib Mesylate). In particular, the news item notes:

"Although Novartis is yet to launch a brand of the alfa crystal form of this cancer drug in India, a local drug maker, Cipla Ltd, has been selling a generic version of the drug here the last couple of years." The news item goes on to report that Cipla owns a process patent covering the alpha crystalline form.

Do any of our readers have more news of this alleged drug by Cipla that is based on the alpha crystalline form? I'm a little skeptical of this news, since Cipla could have introduced this drug at the time that it was injuncted by the Madras High Court in the EMR matter (prior to the Glivec patent rejection by the patent office, Novartis held a valid Exclusive Marketing Right over Glivec and injuncted several companies based on this). Cipla could have easily escaped the injunction order by relying on the non infringing alpah form (or perhaps it hadn't come up with the alpha form at that stage?).

The same Mint piece also reports that Novartis itself has a pending patent application covering the alpha form in India and that this is currently being opposed by Okasa. If this patent issues, then (depending on the claims), Cipla may not be able to sell its alpha form. But if Novartis fails to procure a patent for the alpha version, then Cipla is free to manufacture a Glivec equivalent based on the alpha form.

Hetero and New Form of Imatinib Mesylate

Interestingly, Hetero has a patent application covering "novel polymorphic forms of Imatinib Mesylate" (not sure if this has issued as yet). In particular, the portion in their application covering the "background to their invention" states as below:

"Imatinib and its salts are anti-tumor agents, which were disclosed in US 5,521, 184. Two crystalline modifications (a-form and (3-form) of imatinib mesylate were mentioned in WO 99/03854.

WO 99/03854 mentioned amorphous imatinib mesylate, but it did not make any reference to hydrate of imatinib mesylate.

We have discovered a stable novel crystalline form of imatinib mesylate. The novel form is at least as stable as the reported forms, a-and p-forms. The novel crystalline form is stable over the time and has good flow properties and so, the novel crystalline form is suitable for formulating imatinib mesylate.

Amorphous forms of pharmaceutical products are usually known to have better dissolution properties than their crystalline forms. If amorphous form of a pharmaceutical product is stable enough, it can be formulated to a pharmaceutical composition having good dissolution properties.

We have discovered hydrate of imatinib mesylate. We have also discovered a sufficiently stable non-hygroscopic amorphous form of imatinib mesylate hydrate. So, amorphous form of imatinib mesylate hydrate can be utilized to prepare stable pharmaceutical dosage forms having good dissolution properties."

Conclusion

In short, if a drug can be developed based on alternative forms of Imatinib Mesylate (forms other than the beta crystalline form), wouldn't this temper the perceived "access' issue that we all keep speaking about? Of course, this is not to say that the patent over the beta crystalline form ought to be granted (if it otherwise doesn't deserve a patent). But only to demonstrate that even if granted, the possibility of "inventing around"/"working around" and generic substitutes may help buffer the "access" issue a bit.

What do our readers think?

Guest Post: Chris Ohly on the Omeprazole Patent Litigation

We bring you another guest post from Chris Ohly, a reputed patent litigator and partner at a leading IP firm, Schiff Hardin. Chris' profile can be found here.

I have known Chris for a while now. Apart from all that is written on his firm website, Chris is one of the few US patent experts who is at equally at ease with the complex patent terrain in India (read "section 3(d)"!). I can't think of anyone more suited for undertaking a comparative analysis between the patent regimes of the world's most powerful democracy and the world's largest democracy. While writing an article on section 3(d) and the Novartis litigation, I benefited immensely from discussions with Chris. I have requested Chris to write a couple of "comparative" posts in future for the benefit of our readers.

In this post, Chris analyses the recent Omeprazole litigation where Mylan (parent of our very own Matrix Labs) was sued by Astra Zeneca and won a decree of non infringement. The suit pertains to patents covering Omeprazole (sold as "Prilosec" by Astra Zeneca), a drug for heartburn. Prilosec's progeny, Nexium (which some see as a classic case of evergreening, as it is not very different from Prilosec) has been involved in another spate of patent litigations. A recent Para IV litigation around Nexium filed by Ranbaxy was settled recently, prior to news of the alleged "sell out" by India's top pharma company.

Owing to blogger's inability to permit footnotes in this post, I have stored the original document on google docs here. So for those of you who want to read this article in its entirely (with footnotes), please click here. Please leave your comments in the comments box below this post (you have to visit the SpicyIP website for this) or write to Chris at dcohly@schiffhardin.com.


OMEPRAZOLE IS OVER- OR NEARLY SO

By D. Christopher Ohly. The author is a partner in Schiff Hardin, LLP. The views expressed in this article are those of the authors alone and do not necessarily reflect the views of Schiff Hardin, LLP, or any of its past, present or future clients, or those of any other person or party.
Introduction

Omeprazole is a proton pump inhibitor used to treat peptic ulcers and gastro-esophogeal reflux disease (GERD). AstraZeneca received FDA approval to market the drug in the United States, in 1989, as Prilosec®. By 1999, AstraZeneca’s product became one of the most widely prescribed drugs of any kind in the world, with sales of some $6.1 billion annually.

The AstraZeneca Patents

In 1999 AstraZeneca commenced suit in the United States against four generic pharmaceutical manufacturers , alleging that the filing of their Abbreviated New Drug Applications infringed as many as eight different patents issued to claimed inventors and assigned to AstraZeneca. Among these patents were U.S. Patent Numbers 4,786,505 and 4,853,230, both of which expired in October 2001. The ‘505 patent claims, in relevant part,

1. An oral pharmaceutical preparation comprising
(a) a core region comprising an effective amount of a material selected from the group consisting of omeprazole plus an alkaline reacting compound, an alkaline omeprazole salt plus an alkaline reacting compound nd an alkaline omeprazole salt alone;

(b) an inert subcoating which is soluble or rapidly disintegrating in water disposed on said core region, said subcoating comprising one or more layers of materials selected from among tablet excipients and polymeric film-forming compounds; and

(c) an outer layer disposed on said subcoating comprising an enteric coating.

The similar ‘230 patent, subject to a terminal disclaimer, claims:

1. A pharmaceutical preparation comprising:

(a) an alkaline reacting core comprising an acid-labile pharmaceutically active substance and an alkaline reacting compound different from said active substance, an alkaline salt of an acid-labile pharmaceutically active substance, or an alkaline salt of an acid-labile pharmaceutically active substance and an alkaline reacting compound different from said active substance;

(b) an inert subcoating which rapidly dissolves or disintegrates in water disposed on said core region, said subcoating comprising one or more layers comprising materials selected from the group consisting of tablet excipients, film-forming compounds and alkaline compounds; and

(c) an enteric coating layer surrounding said subcoating layer, wherein the subcoating layer isolates the alkaline reacting core from the enteric coating layer such that the stability of the preparation is enhanced.

The Lawsuits

The litigation against the first four generic manufacturers was eventually consolidated, and assigned by the US Judicial Panel on Multi-District Litigation to a single US District Court Judge, in the Southern District of New York. Discovery was commenced. Millions of pages of documents were produced by AstraZeneca, including millions of pages in warehouses overseas.

By mid-2000, more than 135 depositions were taken. In early 2000, four more generic pharmaceutical manufacturers were sued. Included among these “Second Wave” defendants were Mylan Laboratories Inc. and Mylan Pharmaceuticals Inc. (together “Mylan”), and its supplier, Esteve Quimica, S .A. and Laboratorios Dr. Esteve, S .A. (together “Esteve”). Mylan filed its ANDA on May 17, 2000 and was sued within 45 days thereafter.

Initially, each of these new, Second Wave defendants was sued in a separate judicial district. After all were served, AstraZeneca moved before the Multi-District Litigation Panel, to consolidate all of these new cases with those already underway in the First Wave. Some of the Second Wave Defendants resisted consolidation, and sought to have their case separately heard in the judicial districts in which AstraZeneca had initially sued them. These Second Wave Defendants opposed consolidation on grounds that, by the time they were sued, fact and expert witness discovery in the earlier consolidated actions was nearly complete, and the most critical hearing in a US patent case, the claim construction or “Markman” hearing, was imminent. These Second Wave Defendants asserted that, by AstraZeneca’s motion, they would need to become intimately knowledgeable, almost immediately, about all that had happened in the previously consolidated actions within about six weeks. They asserted that it would be prejudicial to the newcomers to require that they conduct expert discovery, file dispositive motions, and prepare for the determinative hearing on claim construction in such a short period of time.

AstraZeneca’s answer was to have two Waves, and to stay all litigation in the Second Wave, with the exception of limited involvement in claim construction proceedings, until the conclusion of the First Wave trial.

The Judicial Panel on Multi-District Litigation consolidated the Second Wave Defendants with the First Wave, assigning all of the cases to the same US District Court Judge. Although views of the Second Wave Defendants about claim construction were solicited, the balance of the litigation against the Second Wave Defendants was stayed, pending completion of trial of the First Wave cases. Of course, the trial court’s claim construction in the First Wave effectively became the “law of the case,” and governed the proceedings in the Second Wave.

Trial of most of the First Wave claims occurred before the court, sitting without a jury, on fifty-two trial days between December 6, 2001, and June 13, 2002. On October 16, 2002, more than two years after the litigation against the Second Wave Defendants was commenced, the District Court issued its rulings on the First Wave cases, in a 175 page opinion. Only Kudco was found not to infringe the ‘505 and ‘230 patents. Andrx and Genpharm, under FDA rules applicable at that time, shared 180-day exclusivity, although both lost to Astra. Both agreed to give up, to the world, their respective rights to 180-day exclusivity, in exchange for a 30 percent share in Kudco's profits, which they split. Kudco was thus enabled to market its 10 mg and 20 mg extended-release omeprazole capsules. It began to market its generic omeprazole products in December 2002.

Only after the First Wave proceedings concluded, following the trial court’s October 2002 opinion, did the proceedings in the Second Wave begin. Once again, millions of pages of documents were produced by AstraZeneca, including transcripts of all of the depositions taken in the First Wave, and the transcript of proceedings in the First Wave trial. Interrogatories were propounded and, after many hearings before a special master appointed by the Court to deal with a plethora of discovery disputes The Second Wave Defendants noted their own depositions and focused their defenses, in light of the claim constructions announced in the October 2002 First Wave trial decision. New expert witnesses were retained by the Second Wave Defendants, to deal with the myriad issues raised by the First Wave opinion, including experts in attenuated total reflectance Fourier transform infrared spectroscopy (“ATR-FTIR”), ultraviolet fluorescence, energy dispersive x-ray analysis, confocal laser scanning microscopy (“CLSM”) and atomic force microscopy. AstraZeneca offered testimony from several experts, as well, continuing to rely principally on one, Dr. Davies, whose laboratory in England, Molecular Profiles, Ltd., conducted the tests whose results were employed by AstraZeneca at trial in their effort to prove infringement.


In the middle of pre-trial proceedings against the Second Wave Defendants, the 30-month stay imposed by the Hatch-Waxman Act expired. On June 2, 2003, the FDA granted final approval to Mylan’s ANDA for its 10- and 20-mg. omeprazole products, and tentative approval to its 40-mg. product. Mylan began marketing its 10- and 20-mg. products “at risk,” in August 2003. AstraZeneca’s complaints against Mylan was thereafter amended, to include claims for damages. In June 2003, the US Food & Drug Administration approved AstraZeneca’s application to market Prilosec®, its own omeprazole product, as an over-the-counter product in 20 mg. doses, with three years of market exclusivity for its OTC product.

The Trial Court Decision

On May 31, 2007, following a 42-day long bench trial between April 3 and June 14, 2006, at which the trial court received testimony from 18 expert witnesses, the court entered its opinion on the Second Wave omeprazole cases, consuming some 254 pages. Mylan's omeprazole products “are oral pharmaceutical preparations in the form of capsules filled with omeprazole-containing pellets,” that are “comprised of a sugar seed, a drug layer, two sublayers, and an enteric coating.” Although AstraZeneca contended, at trial, that Mylan’s formulation infringed the ‘505 and ‘230 patents for other reasons rejected by the trial court, the principal dispute arose from AstraZeneca’s contention that the “core region,” which is prepared by Mylan “by spraying a suspension of [purified water], omeprazole, HPMC, and [micronized] Microace® talc onto sugar spheres,” contained an “effective amount of an “alkaline reacting compound,” and, in particular, that “carbonates in Mylan/Esteve's Microace® talc and HPMC” were an “ARC” that was present in an “effective amount” in the “core region.”

The trial court noted that “Talc is a naturally occurring material, which is comprised of purified, hydrated, magnesium silicate,” that “[d]ifferent grades or types of talc can have different properties and different pHs,” and that the “Handbook of Pharmaceutical Excipients lists a range of pH values for talc, from an acidic pH of 6.5 to a highly alkaline pH of 10.” It noted that “Talc is known to contain materials such as calcium carbonate and magnesium carbonate.” Mylan’s “specifications for Microace® talc require that it have a pH of not less than 7.0.”

In an effort to prove that Mylan’s talc is an “ARC,” despite AstraZeneca’s description of talc, in the ‘505 patent specification, as an “ordinary excipient,” rather than an “ARC,” AstraZeneca relied upon ATR-FTIR and energy dispersive x-ray tests performed by Molecular Profiles, under the supervision of Dr. Davies. Dr. Davies testified that the ATR-FTIR tests showed peaks that were “diagnostic of carbonates present within talc,” and that the x-ray analysis “indicate[d] that calcium and magnesium are present.”

“In contrast to Dr. Davies's results,” the trial court said, “both Esteve and the supplier of Microace® talc, Nippon, tested batches of Microace® talc for the presence of carbonates and found no detectable amount of carbonate.” The court continued:
… This result does not conclusively establish that carbonate is not present, as carbonate could be present in an amount below the level of detection; however, it does suggest that if there is any carbonate present, it is only in very small amounts.

Thus, the Court finds that the empirical evidence of the presence of carbonates in the talc used in Myan/Esteve's product is inconclusive.

As suggested above, Mylan prevailed at trial. The court entered a judgment in Mylan’s favor, concluding that Mylan’s product “does not meet the limitation of claim 1(a),” and “that Plaintiffs have failed to prove by a preponderance of the evidence that Mylan/Esteve infringes, either literally or under the doctrine of equivalents, any of the claim 1 of the '505 and ‘230 Patents.”

The Fed Circuit Decision

AstraZeneca nevertheless appealed. The Court of Appeals for the Federal Circuit heard oral argument on Astra’s appeal from the trial court’s judgment in Mylan’s favor, in mid-May 2008. At the same time, it heard oral argument on the appeals taken by Impax and Apotex from the judgments entered against them. On June 10, 2008, the Federal Circuit issued its opinion affirming the trial courts’ decision in Mylan’s favor.

Agreeing with the District Court that AstraZeneca had not met its burden of proving Mylan’s infringement of either the ‘505 or the ‘230 patents by a preponderance of the evidence, the court noted that “[a]fter weighing the competing evidence, the court found that Astra failed to prove the presence of carbonates in the talc of the accused products.” Such a determination, the Court of Appeals said, “is based on the district court’s fact findings and cannot be overturned unless we find them to be clearly erroneous, and we do not.” AstraZeneca AB, et al. v. Mylan Laboratories, Inc., et al., Slip. Op. at 8.

Curiously, after arguing to the Federal Circuit repeatedly that the District Judge clearly understood the burdens of proof imposed on the litigants in both the First and Second Waves, in it arguments supporting its appeal from the same trial court’s ruling in Mylan’s favor, AstraZeneca argued that the judgment in Mylan’s favor “is flawed because the district court applied the wrong legal standard.” According to Astra, the court said, the trial court “misapplied the legal standard by requiring ‘conclusive evidence’ that carbonates were present in the talc, rather than preponderant evidence.” Rejecting these contentions, the Court of Appeals stated that a “plain reading of the district court’s decision … reveals that the district judge knew, understood, and applied the proper standard of proof.” Indeed, the Court of Appeals noted, the Second Wave opinion stated:

Plaintiffs bear the burden to prove their claims of infringement by a preponderance of the evidence. A preponderance of the evidence means such evidence which, when considered and compared with that opposed to it, produces a belief that what is sought to be proved is more likely true than not. The fact that section 271(e)(2) creates an artificial act of infringement does not lessen that burden.

Id. Having found no clear error in the district court’s decision that AstraZeneca failed to prove that Mylan’s products contain non-negligible amounts of carbonates, and that AstraZeneca thus failed to show the presence of an ARC, the Court of Appeals did not address Astra’s remaining contentions. It affirmed the trial court’s decision. Id.

Conclusion

The decision of the Court of Appeals in the Mylan case does not represent a major departure from any prior holding. It does not establish any new principle, or set any precedent. It simply ends a case won by Mylan after protracted litigation. Not all Hatch-Waxman litigation, and certainly not all patent litigation, in the United States takes as long to resolve. The lessons, to be learned have more to do with strategy and tactics, or at least endurance, than with any significant legal principles. The costs of litigation for Mylan were undoubtedly great. The legal costs for AstraZeneca were certainly even larger. Nevertheless, for both, the economic rewards were far greater. Almost exactly eight years after AstraZeneca commenced suit against Mylan, and nearly five years after Mylan decided to market its 10- and 20-mg. omeprazole products “at risk,” Mylan’s decision was vindicated by the Court of Appeals and, at least for Mylan, the omeprazole case is over.

The Federal Circuit has yet to rule on the appeals taken by Apotex and Impax. At oral argument, attended by the author, the panel questioned counsel for AstraZeneca and Impax at length about the “public use” of technology described in the ‘505 and ‘230 patents, during the long clinical studies conducted by AstraZeneca. The forthcoming decision of the Court of Appeals, resolving the appeals in the Impax and Apotex cases, will be far more interesting and will likely bring the long history of omeprazole litigation to a final conclusion … maybe.

SpicyIP Comments

Chris' succinct analysis helps us appreciate a patent ruling with a rather complex history. The decision hinges on claim construction i.e. what does the term "Alkaline Reacting Compound (ARC)" mean? Does it include "Talc" used by Mylan in its generic product.

Depending on the pharma product and the technology in question, generic manufacturers may be able to cleverly work around a patent claim and thereby avoid infringement. As Mylan did in this case, by deploying "Talc" in its product and arguing that it wasn't an "ARC" (an essential element of the patent claim by Astra Zeneca).

UNFCCC requiring a new Patent Regime?

With more and more reports showing the increasingly close dangers of climate change due to global warming, delay is no longer a viable option in deciding policy matters of the United Nations Framework for Climate Change Convention (UNFCCC). The need for a global framework on fair and effective methods of controlling climate change is undeniable and that is what the UNFCCC, together with its Kyoto Protocol, seeks to establish. However, as past experience has shown on almost all global forums, it’s been extremely difficult for north and south countries to see eye to eye. The latest UNFCCC rounds at Bonn have proven to be no different with continued debate centered around the interests of developed countries as against those of developing countries. Although not always on the priority list of most countries, climate change is one of the most pressing problems of our times. The current situation with regard to climate change has mostly been brought about by environmental damage over the years, a majority of which has come from the now developed countries and it would be unequitable to require that developing countries now put their own interests aside due to the past actions of already developed countries. If developing countries are to carry on with their economic growth in an environmentally friendly manner (i.e., sustainable development) it’s vital that they have access to climate-friendly technology at affordable prices.

A few of the key Articles of the UNFCCC include Art. 4.3 which states that developed countries shall provide financial resources including technology transfer needed by developing countries to meet their agreed full incremental costs of implementing measures; and Art. 4.5 which states that developed countries shall take all practicable steps to facilitate and finance transfer of and access to environmentally sound technologies and know how particularly to developing countries and shall support the development and enhancement of endogamous capacities and technologies of developing countries.

At a workshop held in the beginning of June this year, the Ad-hoc Working Group on Long-term Co-operative Action (AWG-LCA) under the UNFCCC, developing countries have called for new technology transfer mechanisms which would better enable them to adapt and develop technologies of their own to address climate change. As a general observation, developing countries also seem to be calling for a new and innovative financial architectural structure the generate the required money and resources for more mitigation and adaption activities. Most developing countries called for all funding for these activities to come from only within the UNFCCC. The background reason to this is because the World Bank is planning to establish a portfolio of climate investment fund called the Clean Technology Fund. The main focus in this would be on mitigation and not adaptation technologies. This fund sees its origins in initiatives mainly by US, UK and Japan. Developing countries and civil societies have not been involved in the creation of these funds. In order to ensure that the US driven Clean Technology Fund doesn’t become a parallel policy maker, many developing countries have also called for a multilateral fund for climate change financing.

The Kyoto protocol, which separated a set of developed countries, as Annex 1 countries, laid down that these Annex 1 countries would aid developing countries in two main ways – financial help, as well as aid with transferring of technology. Evidently most developing countries are of the opinion that these Annex 1 countries haven’t been very successful in either.
In their meeting on June 5 at a roundtable discussion, certain tangible proposals with regard to operationalising the transfer of technology were put forward by China, Brazil, India and Pakistan among other countries. Meena Raman has covered a good portion of the discussions which took place in her article. I’ll be putting down portions more relevant to this blog.

India pointed out that this was not just a question of transferring technology by itself, but in order to effectively bring about the required change, methods of generating new technologies as well as research, development and deployment were required. Speaking about developed countries, it said that governments could compensate private companies for the transfer of technology from private players in them. Drawing a distinction from purely market based transfer arrangements, a more suitable IPR regime was called for by India, stating that this transfer of technology arises out of a responsibility of parties under the Convention without any requirement of reciprocity. India put forward the idea of sharing IPRs vide a research consortium. India also stressed upon the need for a more open source approach for science and technology and/or global financing arrangements requiring global public procurement of IPRs. It pointed out that in the context of global climate change urgent steps such as these were required. USA argued that IPRs should be viewed as a source of creation and innovation and as such stronger IPRs would be more beneficial. According to India however, the benefits of private players and the public needed to be more evenly balanced. While the innovator shouldn’t be denied his rewards, it’s equally important that the public sector has access to the technology and is able to make optimal use of it. It viewed this not as replacing IPRs but rather as a balancing act which provided inventors/innovators with rewards while at the same time ensuring that the technology is put to optimal use as quickly as possible.

India also spoke about the lack of countries willing to take on the task of negative emission commitments. It said that unless some parties were willing to take on negative emission commitments, there would soon be buyers but no sellers of carbon credit on the market.
What some call the last remaining super-power of the world, USA stated that it was already meeting all its obligations under Art. 4. It went on to say that the current discussions should be more practical. Private capital is what governments should be looking towards for help. In response to the further action being taken by developing countries, it stated that they needed more knowledge of the actions being taken before they could think of providing funding, and calling for developing countries to report their actions in a measurable, reportable and verifiable manner. In response to India’s position on the IPR regime, it stated that IPRs were a source of innovation and creativity and as such a stronger IPR regime would be more beneficial to access to technology.

(I recall reading this somewhere and I can’t resist mentioning it, perhaps providing some context, that though the Clinton administration was actively involved in the drafting of the Kyoto Protocol, the ratification of the protocol was rejected twice by the US Senate. The 2nd time the Bush administration stated that it wouldn’t sign an agreement that could potentially harm the country’s economic progress and did not require developing countries like India and China to also agree to set reductions.)

Pakistan focused on the affordable accessibility of required technology for developing countries. It had a mixed opinion regarding the role of IPRs stating that while it facilitates the development of technology, it also provides monopoly pricing power which acts as a barrier in the spreading of this technology. It proposed certain additional measures which would speed up the process of allowing the technology to spread which included compulsory licensing for climate friendly technologies at low cost, reduction of the period of patents, as well as incentives for owners of technologies which would facilitate the introduction of a system of differential pricing.
China put forward that Environmentally Sound Technologies (ESTs) that needed to be transferred would be effective only when they were grouped together as a comprehensive package. This package would include hardware, software, intellectual property rights, human resources, financial resources as well as an enabling environment which could be provided by a regulatory framework. It called for a new innovative international mechanism for these ESTs comprising of an institutional arrangement, an innovative financial mechanism and performance assessment and monitoring.

It also proposed an intergovernmental body for the development, diffusion and transfer of ESTs as well as the establishment of a Multilateral Technological Acquisition Fund (MFTA) for climate technologies. This could be based on a public-private partnership framework by providing incentives for the private sector and providing favourable conditions for EST related export credits, subsidies, etc. In this regard, it also spoke about the removal of barriers such as technology export bans and other regulations.

Brazil emphasized the fact that this was not an ordinary market situation and that it’s important that countries realize that an ordinary “business as usual” strategy wouldn’t suffice. Speaking about patented technologies, it stressed upon action befitting the urgency of the matter of climate change and spoke about the possibility of introducing compulsory licensing along the lines of what was undertaken in the health sector. It also stressed upon the need for public-private partnerships in developing countries. It also called for the consideration of incentives to stimulate technology transfer within companies with a view to strengthening capacity in subsidiary companies located in developing countries. It concluded by saying that there was a need for a new coherent and comprehensive instrument for technology development and transfer; and mechanisms for measuring, reporting and verifying (MRV as mentioned in the Bali Action Plan) the effectiveness of technology transfer to developing countries as opposed to the measurable, reportable and verifiable actions themselves. (i.e., the actual effectiveness of the actions, as opposed to mere actions)

Yvo de Boer, executive secretary of the UNFCCC, states that the relationship of IP to environmental technology is not an area fully understood. He says that more clarity is required on the issue before any special IPR arrangements can be made and lists it as one of the important issues to be addressed by parties in the two year negotiating process up to Copenhagen. When compared to the health industry, as it often is with regard to essential technology being transferred, he says that in pharmaceuticals there are only a limited number of medications that apply to a life-threatening disease however thousands of technologies are to be deployed when it comes to climate change and energy.

Unfortunately, while there are some technologies in the public domain, many key technologies are patented. It’s been seen even the rights arising from technology that stems from government funded R&D are to a large degree allocated to the research institute. These research institutes more often than not prefer to diffuse these climate friendly technologies by way of licensing or royalty payments rather than free usage in the public domain. Coming to patented products, compulsory licensing is something that should be considered more seriously. If the damage that’s being caused / going to be caused by the climate change is as serious as some reports show, then individual commercial interests must give way to more concerted action for the public good. Patented technology shouldn’t come in the way of developing countries getting access to them at affordable prices. There have already been instances of developing countries not being able to adopt climate friendly technologies due to prohibitive pricing. It’s in these instances especially that compulsory licensing would play a vital role. As important as IPRs are, the seriousness of the situation needs to be examined. Governments need to realize that commercial interests of a few aren’t more important than the millions of lives that are at stake due to global warming and take the necessary steps.

The Access to Medicine Index released - Ranking Pharmaceutical Companies

Starting from the Pretoria patent litigation in South Africa to the Novartis patent litigation in Chennai last year the big pharmaceutical companies in the world have endured a particularly brutal image bashing exercise due to a series of strategic mistakes which have (rightly and wrongly) portrayed them as putting profits over patients. Obviously the negative publicity was beginning to worry institutional investors and when these concerns were coupled with philanthropic charities such as the Access to Medicine Foundation, the world was presented with the Access to Medicine Index – a novel index to measure how the top 20 pharmaceutical companies were dealing with the question of access to medicines for the global poor. The index serves as a tool for ‘socially’ responsible institutional investors to choose the best companies for future investments. The hope is that such an index would create pressure amongst pharmaceutical companies to improve their practices. (The report can be found here)

The initiative was spearheaded by the Netherlands based Access to Medicine Foundation along with several institutional investors and market research agencies. The top 20 companies were measured on 8 criteria – Management, Influence, R&D, Patenting, Capacity, Pricing, Drug Donations & Philanthropy. What was refreshing about this initiative was the fact that it is one of the few reports that does not view the pharmaceutical industry in terms of black & white i.e. it does not pander to the usual stereotypes of classifying all innovator patent owning companies as bad and all generic companies as good. Instead the report does realize that there are several shades of grey and that there are quite a few innovator pharmaceutical companies which have engaged in creditable ventures to increase the access to medicines to the poor. Demonizing the entire industry is not going to help anybody and the ATM index is the first step in helping to clarify this point. In this regards the ATM index will hopefully shift the access to medicines debate away from its current patent-centric focus to a more diverse range of factors.

Results: GSK was ranked number one 1 as the company having the best access to medicine practices. Two Indian companies Cipla and Ranbaxy feature in the list at ranks 14 and 16. Both Indian companies are ranked above global MNCs such as Pfizer but still far below the favourite whipping boy of the Indian NGOs – Novartis – which is ranked at number 4! On the whole European companies are reported to have much better practices than American companies especially when it comes to the question of Africa. (The entire ranking can be viewed here)

Possible shortcomings of the Report: In the section regarding investments into R&D for neglected diseases the report does mention several initiatives by MNCs to develop drugs for neglected diseases. It however completely forgets to mention that most of these ventures are Public Private Partnerships where the research is heavily subsidized by charitable organizations. In my opinion it was very important to clarify this point since not doing so conveys the wrong impression that it is the investor’s money which is being used in such research while this is clearly not the case. Moreover it is necessary to keep harping on the point that IP regimes are not the only factor influencing R&D instead it is more often the market and funding priorities which dictate decisions to invest in particular types of R&D. (SpicyIP had carried a detailed note on this point earlier.)

Overall however the Report is a very interesting initiative. More details can be found at the ATM foundation’s extremely informative website.

Ranbaxy and Pfizer Bury the Hatchet.... For Now.

In a bid to sweeten the kitty for Daiichi Sankyo, Ranbaxy has reached an out of Court settlement with Pfizer in the baap of all patent litigations involving latter’s patents on the blockbuster drug, Lipitor bringing to a close a bitter row in 12 countries except Finland, Spain, Portugal, Denmark and Romania. According to the Business Standard:

“Under the deal, Ranbaxy will drop all legal challenge to Pfizer's patent on Lipitor in these markets, which expire between 2011 and 2018. In return, India's largest pharmaceutical company will get 180-day exclusive rights to sell a generic version of Lipitor in the US sometime in 2011.”

Although Ranbaxy is not going to be compensated in cash, conservative estimates predict that it is bound to be quids in to the tune of $200 million from the exclusive 180-day selling period once the drug goes off patent. The BS further reports that the settlement resolves additional patent litigation between the companies involving Accupril (a hypertension drug) in the US and Viagra in Ecuador.

Earlier, SpicyIP had reported on the AstraZeneca deal involving patents on the purple pill Nexium. Apparently, Ranbaxy’s fabian tactics have paid off with this deal being the fourth settlement this year including one each on Flomax and Valtrex with Astellas Boehringer and GlaxoSmithKline respectively.

However, the ET reports a 7.7% fall in Ranbaxy’s share price, which according to it, is a fallout of the settlement. This is also because the launch of Lipitor has now been pushed to November 2011 as opposed to the earlier expected date in 2010, which means a fall in the expected revenues from Lipitor sales.

As for Pfizer, the settlement pushed its share prices by 2.1%; more importantly, it gives Pfizer a much-required breather to introduce new drugs to replace Lipitor before it goes off patent. In a bid to put at rest speculations of a counter-offer to Ranbaxy to block Daiichi Sankyo’s attempts, Pfizer denied it had any intentions of taking over the Indian drugmaker.

For more details, see here, here and here.

Guest Post by Latha Nair on the GI Controversy Surrounding "Pashmina"

SpicyIP is pleased to bring you a guest post from a very renowned intellectual property practioner from India, Latha R Nair. She has a number of distinctions to her credit, but we list a few of them below:

"She is a partner with the Delhi based law firm K&S Partners, one of the top IP firms in India. She received her Honors degree in Bachelor of Arts and Law from the National Law School of India University at Bangalore in 1994 and was admitted to the Bar in the same year. Apart from handling matters relating to protection and enforcement of trademarks and copyrights, she is actively involved in advising clients on TRIPS related issues, protection of geographical indications in India and abroad, domain name disputes and intellectual property aspects of the entertainment industry and the Internet. In particular, she has been advising the Government of India in the protection of various geographical indications including Basmati and Darjeeling.

In 2005, she received the India Traveling Fellowship Award offered by the ITechlaw Association (formerly, ‘Computer Law Association’) which enabled her to successfully complete an internship with four European law firms specializing in Intellectual Property and Information Technology law. She has co-authored a seminal work on geographical indications, titled “Geographical Indications – A Search for Identity” published by Lexis Nexis Butterworths India, which is a first work of its kind on the subject. She has also authored several articles on various aspects of intellectual property and information technology law and is a regular speaker at various fora, both national and international. She has been selected by the International Trademark Association (INTA) to serve on its Publications Committee for the years 2008 and 2009."

For those of you interested in GI's (well, who isn't, now that the government is on a roll handing out GI's to all and sundry), I would seriously recommend Latha's book. Her in-depth practitioner experience in this area contributes extensively to the insightful discussions that she takes her reader through.

In particular, note that she has advised the government of India on the Darjeeling and Basmati issues. Co-incidentally, I am in Darjeeling, which is now submerged in a political turmoil, with the agitation for Gorkhaland having increased in intensity. A couple of papers carried stories on how the 45 day strike declared by the Gorkha leader, Bimal Gurung, is likely to impact potential sales of the famed second flush Darjeeling tea. See here, here and here. In particular, see this Business Standard article which states that:

"...Khaitan declined to give any figures when asked about the quantum of losses the tea industry has been suffering because of the agitation. But media reports have quoted Siliguri Tea Traders Association Secretary Rajiv Lochan as saying that the industry was losing an estimated Rs 20 million everyday because of the shutdown."

Anyway, back to Latha and her piece on the GI controversy surrounding Pashmina.

A PEACE PROPOSAL WRAPPED IN PASHMINA

(By Latha R Nair, Partner K&S Partners, New Delhi)

India and Pakistan are two nations sharing a language, ethnicity and a 5000 year old culture, yet separated by a man-made political border for the last 60 years. Their animosity is vocal and open, be it for a piece of land or a game of cricket. It is no surprise that the political hostility between the two and their ironical cultural similarities have been the delight of many a story teller.

The latest addition to the list of woes between the two countries is the soft, warm, luxurious wool called Pashmina, produced from a particular breed of a Himalayan mountain goat, ‘capra hiracus’, which is indigenous to high altitudes. The genesis of the controversy was an application filed by the Srinagar based Craft Development Institute to register “KASHMIR PASHMINA” as a geographical indication with the Registrar of Geographical Indications, Chennai in early 2006. The application stated that, ‘Pashmina is produced in the State of Jammu and Kashmir in India’. After examination, the application was advertised for opposition in September 2006. It now appears that an opposition has been lodged against the application, apparently by a Pakistani body, staking a claim to the rights in the geographical indication on the grounds, inter alia, that Pashmina is also produced in Pakistan.

For the uninitiated, geographical indications are a form of intellectual property owned by a community in a specific geographical region and they identify a product to possess a certain quality, characteristic or reputation essentially attributable to its geographical origin. While the opposition is yet to be decided, the controversy raises an untested and untried legal issue, not only in India but also in many other parts of the world, – and that is, how would you protect a geographical indication shared by more than one nation.

To suggest that such a geographical indication may be registered in their respective territories for the respective regions is to oversimplify the issue because geographical indications are born into public perceptions as to their origin, quality and characteristics. Hence, if the consuming public perceives Pashmina to originate from a certain region that is shared by India and Pakistan (because the mountain goats are ignorant of the political boundaries and roam and breed across the borders, generously shedding their wool on both sides) then the geographical indication ‘Pashmina’ is indeed shared by India and Pakistan. And, in that event, there is only one ‘Pashmina’ and that is a Pashmina sans any adjectives, be it ‘Kashmiri’, ‘Indian’ or ‘Pakistani’. Any attempts to qualify it would defeat the very objectives of protection of geographical indications, namely, prevention of consumer deception and preserving and protecting the uniqueness and goodwill of the product. Further, it could deny the consuming public of the right to know about the origin of the product, which the law relating to geographical indications seeks to protect.

In this particular case at hand, if either of the countries proceeds to register Indian Pashmina or Pakistani Pashmina as the case may be, the obvious corollary would be that Australia may very well call a wool produced from ‘capra hiracus’ bred in Australia, ‘Australian Pashmina’ and the United States may clone ‘capra hiracus’ and produce wool to call it ‘American Pashmina’ and so on. And that would be a death knell for Pashmina as a geographical indication which the consuming public identifies to be originating from a certain region in the Indo-Pak border and possessing certain qualities. Last but not the least, all the right holders on both sides of the Indo-Pak border may forget about priding themselves to be the creators of the famed wool. So where would that lead us to?

While the WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights is silent about trans-border geographical indications, the European Council Regulation 510/2006 (though Pashmina may not qualify to be registered under this Regulation which is essentially for agricultural products and food stuffs) provides that such geographical indications must be applied for jointly by all the stake holders (See Article 5.1). Also, the Indian law on geographical indications does not prevent a joint application by one or more countries to register a geographical indication shared by all. Hence, ideally, any application for a trans-border geographical indication must be applied for jointly by all the stake holders.

Any unilateral effort to do so will spell the doomsday for the concerned geographical indication and the collective rights attached therein. If those involved in the protection of Pashmina can see that, then perhaps, some day, the Pashmina goat may find itself unwittingly opening a peace dialogue between India and Pakistan.

© 2008 New Delhi

(The author may be contacted at latha@knspartners.com)
SpicyIP Comments

SpicyIP has, in the past, carried several posts on this controversy. In particular, see Sumathi's post here. For other SpicyIP posts on this issue, see here. Also, for a recent scholarly work on India and GI's, see here.

We at SpicyIP sincerely hope that the respective governments of India and Pakistan take Latha's prudent suggestion seriously. They ought to put their political skirmishes behind them and come together to protect Pashmina in the international market. As Latha suggests, an increase in trade and culture driven collaboration may itself lead to a breaking of the "political" ice between these countries. And what better way to break the ice than the warmth of Pashmina wool. If the governments do manage to "patch up" and successfully collaborate on this venture, perhaps we might need to relabel this wonderfully warm GI as "patch-mina".