Patents Rules 2024: Watch out for evergreening and costlier medicines!

Amid the hype over “$100 billion investment” and “1 million direct jobs” that the newly inked EFTA-India Trade and Economic Partnership Agreement (TEPA), signed on March 10, 2024, was to bring, few noticed India has significantly diluted statutory protection against evergreening of patents and unreasonably high cost of medicines. This dilution is part of the Intellectual Property segment of the treaty.

It then found its way to the new Patents (Amendment) Rules of 2024, notified on March 15, 2024, amidst the buzz over the 2024 general elections, making it applicable for all patents – adversely impacting the healthcare of millions of Indians. But first what the TEPA did.

How TEPA dilutes Indian patents law

Annex 8A: Protection of Intellectual Property of the TEPA has four key provisions that raise concerns about the availability and prices of medicines among health experts, rights activists and economists alike. These are:

(a) “Where a Party provides for a process that allows a third party to oppose a patent application prior to its grant, it shall ensure that this opposed patent application is processed and disposed of within a reasonable period of time and without undue delay including by swiftly rejecting prima facie unfounded oppositions, as determined by the competent authority.” (Article 11.7)

(b) “No Party shall require patent owners to provide annual disclosures of information concerning the working of a patent. Where a Party does provide for periodic disclosure of information concerning the working of a patent, the periodicity shall not be less than 3 years…” (Article 12.1)

(c) “With respect to the working of a patent, a patented invention may not be considered as ‘not worked’ within the territory of a Party merely because the product resulting from the invention was imported.” (Article 12.3)

(d) “A patent granting authority may give due consideration to information concerning the applicant’s corresponding foreign application and grants which is publicly available or otherwise available to the granting authority during the patent application process.” (Article 13.3)

These four elements diluted the procedural protections against the evergreening of patents that the Patents Rules of 2003 provided. But these changes were soon incorporated in the Patents Rules of 2003, amended on March 15, 2024, through an “extraordinary” gazette notification, making these applicable to all patent applications.

What new Patents Rules of 2024 say

The changes are tracked sequentially.

(i) The TEPA’s “swiftly rejecting prima facie unfounded oppositions” provision gets in by way of two procedural curbs/deterrents for questioning a patent application (called pre-grant opposition or PGO) in Rule 55 and First Schedule of the Patents Rul of 2003: (i) (Patents) Controller is empowered to “prima facie” determine if opposition to a patent application is made out or not and (ii) fees of ₹4,000 is to be paid by “natural person or startup or small entity or educational institution” for opposing a patent and ₹20,000 by “others”. The Centre’s statement announcing the new rules of 2024 said these were meant to “curb benami and fraudulent pre-grant oppositions and simultaneously encouraging the genuine oppositions”.

(ii) Once-in-three-year disclosure of “working of a patent” in the TEPA was introduced in Rule 131 stating that such information “shall be furnished once in respect of every period of three financial years”.

(iii) TEPA’s provision that a patent invention “may not” be considered as “not worked” simply because it was being “imported” finds its way into Form 27 as the earlier requirements of disclosing whether a patented medicine is “manufactured in India” or “imported”, country-wise details of “imported” medicines and “quantum and value” of medicines sold in India have all been removed.

(iv) TEPA’s provision of due consideration to “publicly available” information for granting patents has been incorporated in Rule 12 which says, “the Controller may use accessible and available databases for considering the information relating to applications filed in a country outside India” and “direct the applicant to furnish a fresh statement and undertaking “for reasons to be recorded in writing”.

Before looking at the implications of these changes, here is more about the EFTA’s promises on investments and jobs in return for India’s concessions, including a diluted patents regime. Commerce and Industry Minister Piyush Goyal said: “For the first time in the history of FTAs, the binding commitment of $100 bn investment and 1 million direct jobs in the next 15 years has been given.” The TEPA document uses phrases like “shall aim to increase” and “shall facilitate” for achieving these objectives.

The EFTA Secretariat’s “note” talks only about investment, not jobs, and says, if their “obligations” ($100 billion investment in 15 years) are not met “India may, after a further grace period of three years, suspend concessions” – that is 18 years later. Economist Biswajit Dhar of the JNU tells Fortune India he examined the EFTA’s investments for 23 years between 2000 and 2022 and found it was merely $10 billion – 10% of the promised investment in the past 23 years. There is no data to suggest how many jobs those $10 billion created.

Incidentally, the EFTA is a small trading block, consisting of Switzerland, Iceland, Norway and Liechtenstein. India hasn’t signed an FTA with either the European Union or the UK who are bigger trade partners. Besides, Switzerland is a well-known tax haven, listed at number 5 in the Corporate Tax Haven Index of 2021 of the Tax Justice Network. The incumbent Indian government had promised to bring black money stashed in its banks by Indians within 100 days of coming to power a decade ago in 2014 – but hasn’t. Another constituent of the EFTA, Liechtenstein, is also a known tax haven, ranking 35th in the list. More investment from these jurisdictions may mean more inflow of unaccounted (black) money.

How the changes hit patients

It must be kept in mind that the very purpose of giving patents under the Patents Act of 1970 is not just to promote innovation but also “to promote public interest”, ensure patented medicines are “available” at “reasonably affordable prices” to the public and if a patent fails to do any of those, it empowers the Indian government to give “compulsory licences” to local pharma companies to manufacture those very patented medicines. The “compulsory licenses” were brought in by adding Section 84 in the Patents Act of 1970 in 2003 – which then became part of the Patents Rule of 2003.

The revolutionary impact of this “compulsory licences” provision was India manufacturing the life-saving cancer drug Sorafenib, by the Hyderabad-based Natco Pharma in 2012. A monthly dose of this medicine costs ₹8,800 (3%) – as against Bayer’s Nexavar costing ₹284,428 a month at the time – saving the lives of thousands of poor cancer patients. Understandably, that success was never repeated and the new Patents Rules of 2024 rules out that possibility in future.

Fortune India spoke with multiple stakeholders, particularly the Médecins Sans Frontières (MSF) and Third World Network (TWN), to decipher what the Patents Rules of 2024 mean for Indian patients.

The deterrents introduced – “prima facie” power to (Patents) Controller to dismiss objections to patents and “fee” to raise such objections – attack a very potent tool of checks and balances, called pre-grant objections (PGO). In fact, the Patents Act of 1970 provides (Section 25) elaborate grounds for raising such objections and the Patents Rules of 2003 (Rule 55) says “anyone” can raise such objections without paying any fee (as against ₹4,000-20,000 now).

“Prima facie” power gives leeway to the (Patents) Controller to decide the fate of objections to patenting – thereby, making it easier for Big Pharma to evergreen patents on “frivolous” grounds, maintain monopoly and charge exorbitant prices for medicines. It also weakens the case for post-grant objections (that can be initiated within one year of patents being given) to patents as well – if the PGO has been dismissed prima facie.

The claim that this was done to “curb benami and fraudulent” PGO is contrary to facts.

The Ministry of Commerce and Industry’s annual “Intellectual Property India” report of 2022-23 shows, that of all the patent applications published, objections (PGOs) were raised in very small number of cases – 0.7% in FY22 and 0.4% in FY23 – falling from 1.6% in FY20 and 1.1% in FY21 (averages 1% during FY19-FY23). The words “benami” and “fraudulent” PGO don’t find a mention anywhere.

Rampant evergreening

In sharp contrast, evergreening by pharma companies is rampant – 72% of all patents granted during 2009-2016.

A 2018 study by the Azim Premji University, “Pharmaceutical Patent Grants in India”, said: “The majority (72%) of granted patents for pharmaceuticals are secondary patents, granted for marginal improvements over previously known drugs for which primary patents exist.” This had hit the headlines then.

Who needs curbing – evergreening by pharma companies or objections to it?

Anyone familiar with the health sector in India or the world knows Big Pharma wants unrestrained monopoly and evergreening of patents – to be able to charge higher prices. Contrary to the claims, medicines aren’t costlier because of R&D expenses or even curative values.

In September 2020, an international team of researchers evaluated drug prices in the US (60 new drugs approved during 2009-2018) to find (i) no association between R&D expenses and high prices and (ii) the curative value of drugs had nothing to do with high pricing. The University of California published a paper at the time, which said: “Companies are estimated to spend somewhere between $1 billion and $3 billion on average to bring a single new product to market. In 2019, the US drug market generated more than $490 billion in revenue…” That is, a revenue of over $490 billion from an R&D spend of $83 billion (17%)!

Diluting disclosures means little checks

Disclosure norms have been diluted in multiple ways: (i) once-in-three-year disclosure of “working of a patent”, instead of annually earlier (“not being less than six months”) (ii) omitting from Form 27 the details like “quantum and value” of patented medicines sold in India, whether “manufactured in India” or “imported” and details of “imported medicines which are key to determine if a patent is working or not working in Inda and (iii) (Patents) Controller to use “publicly available” information while granting patents and seek “in writing” fresh statement and undertaking” about the patents explaining the reasons for so.

If disclosures are made once in three years, nothing would be known about the availability and cost of medicines (particularly if imported and sold at high costs) for the intervening three years. Indian patients could suffer that long before corrective measures can be taken. This is compounded by the fact that the pharma companies are no longer required to disclose the “quantum and value” of medicines sold and whether their medicines are “manufactured in India” or “imported” – critical to know if the patent is serving the “public interest” and “available” (as the Patents Act of 1970 requires).

The significance of Form 27 disclosures is best understood in the case of the life-saving TB drug Delamanid. It was the Form 27 disclosures that led to the discovery in 2017 that Japan’s Otsuka Pharma, which had got the patent in 2011, was not supplying it for years. In January 2017, civil rights groups protested and months later in August 2017, Otsuka registered its medicine with the Central Drugs Standard Control Organisation (CDSCO), made it available in India and later set up a manufacturing unit in India.

The rules of 2024 also shift the burden (in fact, double burden) of collecting information about a patent to the (Patent) Controller and explain in “writing” if it needs more information – when a pharm company applies for a patent. This is a role reversal. Why should the (Patents) Controller of India act as clerical staff of the applicant (pharma) is not clear. That was never the case until now. Besides, health activists and experts say, that collecting adequate information about a patent, which may have been granted in any jurisdiction in any language, is tough given the secrecy around the business of Big Pharma.

The new patent rules are executive action (“extraordinary” gazette notification by the Ministry of Commerce and Industry) undermining the law – the Patents Act of 1970 – under which these are supposed to be framed. It promotes the interest of Big Pharma at the cost of Indian patients. As per the Ayushman Bharat (PM-JAY) document, 60 million Indians slip into poverty due to “catastrophic expenditure on medical treatment” each year in normal times. Health experts and activists say it breaks decades of political unanimity in protecting the sanctity of the Patents Act of 1970 so far as medicines go.

Moreover, these rules go against the very ‘Make in India’ mission.