In today’s Finshots, we explain how the ‘evergreening’ of patents created a hurdle in India’s Free Trade Agreement with the UK.

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The Story

Pharma companies take decades to formulate a drug. They spend billions in research and development and they spend even more to market their invention. But things don’t always go according to plan. On occasions, the products fail. The trials could derail all the hype. You could end up wasting billions in the process.

So to incentivize pharma companies to keep innovating and burning money, regulators across the country offer them a special kind of protection. If they create something magical that could alter the course of human history— say a drug to battle AIDS, cancer, or even the dreaded coronavirus — they’ll be granted a patent. For 20 years. And during that period, they’ll have exclusive rights to manufacture and sell the drug. No other company can create the same drug with the same formulation.

The pharma company can price it as they wish (usually quite exorbitantly), recoup their investment, make a profit, and use the proceeds to create even better drugs.

Once the 20 years are up, other companies can step in. These copycats create their own versions of the drug and sell them in the market. They’re called generics. The competition heats up and it drives drug prices downwards. It becomes more affordable.

And well, the cycle repeats.

Or does it???

You see, once the pharma companies get the sweet taste of success, they just can’t get enough of it. Also, they really don’t know when they’ll chance on the next blockbuster drug. So they think, “How can I continue to squeeze more out of my current portfolio of patented drugs?”

And they come up with an idea. They decide to make a few minor tweaks to the formulation. They might replace compound X with compound Y. The difference might be trivial but they’ll claim this as a breakthrough. They’ll say the drug is 25% more effective now. That it can save more lives.

They go back to the patent office. And they’ll do this maybe a year before the current patent on the drug is due to expire. They’ll file another patent and ask for an extension. They tell the patent officers that the innovation must be protected because they put their blood, sweat, and tears into it.

The pharma company hopes they can continue to milk the drug for all it’s worth. And keep the patent for a good 39 years (19+20).

This, folks, is called the evergreening of patents — when a pharma company uses a small tweak to keep its patent monopoly. And this delays the entry of generic drugs that can drive the price down.

In fact, one researcher looked at all the drugs in the market between 2005 and 2015 and found something shocking. Out of all the patents being issued, a whopping 78% were for extensions. Or rather, for evergreening.

It’s insane!

Now here’s the thing you must know about India. We’re pretty wise to the antics of the pharma industry. And in 2005, the government tweaked the Patent Act of 1970. It inserted a Section 3(d) to prevent evergreening. And it said, “mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant”, cannot be given patent protection.

Basically, India wanted to distinguish real innovation from trivial tweaks. So, companies trying to evergreen their drugs patent in India don’t have it easy.

Just look at what happened with Swiss pharma giant Novartis in 2013. Novartis tried to get a patent for a new version of its cancer drug Gleevec/Glivec and said that with the tweaks they made, the drug could be more easily absorbed into the bloodstream. It could more easily save lives. But the Indian Patent Office denied the request. And when Novartis went to the courts, India’s Supreme Court put its foot down too. It cited Section 3(d) and said, “Sorry, here’s a 112-page order just to say NO!”

Hold on Finshots, you were meant to talk about the hurdle in the India-UK Free Trade Agreement…what’s going on?

Yes, yes, we’re getting to that. But we had to give you all this background first.

So, India and the UK are hashing out an FTA and it has been in the works for a while now. It’s expected to facilitate trade between the two countries. Remove tariffs and stuff. But it seems there’s something in the draft about India’s patent laws too. A leaked excerpt (first appearing on revealed that the UK wants India to relax its strict evergreening laws. It wants leeway for British pharma companies. And apparently, it says that both India and the UK “shall not require a patent applicant to prove enhanced efficacy “— in complete contrast to the pathbreaking Section 3(d). It’ll allow pharma companies to evergreen their patents. It’ll keep drug prices sky-high and help pharma giants to mint more money. And worse? It’ll hamper the entry of generics. And don’t forget, India is the generic king of the world — 20% of the global supply comes from us. It’s India-made generic drugs that are lifesavers in low and middle-income countries. And if we dilute our patent laws, it can hinder the production of generics. And this could have unintended consequences across the globe.

That’s the problem everyone’s pointing out.

But why would Britain enforce such a clause?

Well, obviously one would think that this would benefit pharma companies in Britain. But ever since the leaked documents hit the public domain, there seems to be a concerted effort from British officials to distance themselves from the controversy altogether. And responding to a query from Livemint, a British Spokesperson noted that they wouldn’t introduce provisions that would hurt the interest of either country, despite the fact that officials rarely comment on such matters.

And yes, this also hurts the United Kingdom by the way. The NHS — Britain’s public healthcare system relies heavily on cheap generics imported from India. But if we were to dilute patent laws, it could have a massive impact on health outcomes in both countries. So hopefully, this clause doesn’t make it into the final agreement.

Until then…

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