The WHO reported that 60% of essential life-saving drugs reflect incremental innovations.  Thus, there is a need to encourage pharmaceutical companies to invest in such innovations, which is done by most countries across the world by rewarding such innovations with patent protection.  India, however, has taken a tougher stand in her recent Novartis v. Union of India decision.  To prevent “evergreening” and promote her domestic generic industry, in an abundance of caution India has introduced an additional test that disqualifies all incremental pharmaceutical innovations from being considered an “invention” unless they have increased “therapeutic efficacy.”  The strict and narrow test has crucial effects on the socio-economic interests of the country.  This paper is an evaluation of the effects of the Novartis judgment on the different players in the economy and how the law should be interpreted to balance everyone’s competing interests.


A.             Types of innovations


Innovation can be classified into three categories: revolutionary, radical, and incremental.  Revolutionary innovations are conceptual advances, such as new scientific theories or principles, which form the basis for subsequent research.[1]  For example, a new biological or metabolic pathway can be considered revolutionary. Radical innovations are products that put these conceptual advances into practice and set the standard for utilizing an underlying principle. For example, a “first-in-class” medicine (the first medicine of its type) is normally considered a radical product. 

Incremental innovation is marked by improvements in radical products. For example, in pharmaceuticals, incremental innovation includes improvements in therapeutic quality, safety, and efficacy over existing medicines.[2]  Incremental innovation advances medicines by expanding therapeutic classes, increasing the number of available dosing options, discovering new physiological interactions of known medicines, and improving other properties of existing medicines. Incremental innovation can include reformulating a medicine to encourage children’s compliance with treatment regimens or increasing a medicine’s shelf-life and heat-stability to ensure that the medicine is effective in diverse environments (Rephrase last two sentences).

A study conducted in 2007 found that nearly 60% of the medicines enlisted in the WHO Essential Drug List reflect incremental improvements of older drugs.[3] In India alone, the National Knowledge Commission reported in 2007 that while 37.3% Indian companies had introduced breakthrough innovations in the recent years, no fewer than 76.4% had introduced incremental innovations.[4]

There are many reasons for companies to invest in incremental innovations. First, some argue that obtaining patents for incremental innovations, which are mostly trivial, is merely a strategy to delay generic market entry and prevent other firms from entering the market at lower prices.  However, this loses sight of the fact that once the patent exclusivity period of a medicine expires, any firm may produce and market that medicine irrespective of patents being granted on subsequent incremental innovations.  The demand of the improved drug will obviously be decided by patient needs, affordability (other factors?), however, generics are not entirely barred from entering the market.

Second, commercialization of incremental pharmaceutical innovations can generate enough revenues to assist pharmaceutical companies fund the high cost and mitigate the risks of new drug development.  For example, between 1995 and 2000, drugs based on incremental innovations accounted for approximately US$17B of new retail prescription drug spending in the US (or 38% of all new spending in the retail prescription drug market).

B.             Patent Law in India


Pursuant to the Patents Act 1970, India did not grant patents for pharmaceuticals to ensure widespread access to medicines and food, at the lowest prices, and to promote the development of the local industry in the chemical and pharmaceutical sector.[5]  Thus, the patent applications filed by foreign entities decreased from 4248 in 1968 to 1010 in 1979.  It also resulted in the rise of generic drug manufacturing industry and a reduction in drug prices in India. However, the level of domestic R&D investments did not rise.


Consequently, when India was required to comply with the TRIPS Agreement to become a member of the WTO, the Amendment of 2002 was adopted, which introduced several changes to the Patents Act, re-casting the meaning of “invention” as “a new product or process involving an inventive step and capable of industrial application,” and “inventive step” as “a feature that makes the invention not obvious to a person skilled in the art.”[6] 


Along with these changes, the Amendment Act of 2005 was introduced in an attempt to conform with the other requirements of TRIPS.  The Amendment Act of 2005 allowed the grant of product patents for pharmaceutical substances for the first time after 1970.   Additionally, it re-defined the concept of “inventive step” to be a “feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art.” And lastly, it radically modified §3d, which read as follows:


            The following are not inventions within the meaning of this Act,


(d) the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant . . .




For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy’.


This test introduced the concept of “enhanced efficacy” as a test for patentability of incremental innovations.


These changes raised significant concerns for the different players – generic companies, big pharmas and the patients – and provided a clash between patent protection on the one hand and universal access to food and drugs on the other.


C.            India’s §3d provision


As expected as a result of the introduction of §3d, many pharmaceutical companies that were able to obtain patents in other parts of the world faced problems obtaining patents in India.  One of these was Novartis, which ultimately, brought a constitutional challenge to the §3d test in the Indian courts.


1.     Patent for Gleevec’s active ingredient in US

On 28 May 1996, a patent was granted to the researchers from Novartis patent for their innovative product, derivates of N-phenyl-2-pyrimidine-amine, including Imatinib, and its use in the treatment of several forms of tumor (the “Zimmerman” patent).  In 2001, the drug,  Gleevec, with its active ingredient as imatinib, was launched.  It helped treat pateients with chronic myeloid leukemia, a cancer that affects between 5000 and 8000 patents each year, in USA alone. 

Gleevec proved to be a blockbuster drug even though its price raised considerable criticism- rising from US$30,000/yr in 2001 to US$92,000/yr in 2012 – and put it out of reach of many patients.  Thereafter, Novartis filed a separate patent application for the active ingredient of Gleevec in USA. The patent was granted on May 17, 2005.


2.     The controversy in INDIA

On 17 July 1998, Novartis filed a patent on an incremental innovation of the drug Gleevec - Imatinib mesylate in beta crystalline form.  This application claimed that the beta crystalline form had better flow properties, higher thermodynamic stability, and lower hygroscopicity than the alpha crystalline form. Initially, the application did not provide a comparison of the beta crystalline form with Imatinib in free base form or Imatinib mesylate, but later, in four affidavits, Novartis alleged that beta crystalline form had higher bioavailability than imatinib in free base form.  However, the application was rejected by the Assistant Controller of Patents and Design in India, on the basis that the invention (i) was anticipated by the Zimmerman patent (ii) was obvious to a person skilled in the art and (iii) was non-patentable under §3d.

Novartis challenged this decision in the Madras High Court which transferred the claim to the Intellectual Property Appeal Board (IPAB)

The IPAB reversed the findings of the Assistant Controller on anticipation and obviousness, but upheld that beta-crystalline form was non-patentable under §3d.  It clarified that §3d was a higher threshold for patentability of incremental innovations and patent law was aimed at providing more affordable life-saving drugs to Indian citizens.

Finally, Novartis challenged the IPAB’s Order before the Supreme Court.  The Court heard the case on two main issues

(1)  Does Imatinib Mesylate qualify as an invention under §2(1)(j) and (ja) of the Patents Act, and

(2)  Is the beta crystalline form patentable in light of §3d?


First, the Court did a detailed description of the development of patent law in India and its consequences on the economy of India- market share effects (in short).


On the merits, the court concluded that the Zimmerman patent covered not only imatinib but also imatinib mesylate.  Thus, imatnib mesylate did not qualify as an “invention” within the meaning of §2(1)j and ja. 


With regard to the beta crystalline form, the court turned to §3d. As Imatinib mesyalte was a “known substance” with a  “known efficacy” as demonstrated by the clinic studies conducted by Novartis before the regulatory approval of GLeevec, the beta crystalline form was thus, a “new form” of a “known substance,” which required compliance with §3d.  The court held that the meaning of “the test of efficacy in the context of §3d [depends] upon the result the product under consideration is desired or intended to produce”.[7] For pharmaceutical drugs, “the test of efficacy can only be therapeutic efficacy.”


In line with the Explanation inserted in the Amendment Act of 2005, which states that the substance to be patented shall “differ significantly in properties with regard to efficacy,” the judges added that §3d required a strict and narrow interpretation of the “enhanced efficacy” of a substance. 


According to the Court, the properties claimed by Novartis to be better in beta crystalline form – improvement in bioavailability, more beneficial flow properties and better processability, more stability and less hygroscopicity- did not meet the threshold of “enhanced efficacy”.  What is required for an invention to qualify as a patentable incremental innovation was “therapeutic efficacy,” which was not present for the beta crystalline form.   Thus, the Supreme Court found that the beta crystalline form failed §3d and effectively, set a higher threshold for incremental innovation.


3.     The Indian Supreme Court decision


There are many underlying factors that went into the Novartis decision.


The first factor was to uphold the intent of the legislature in introducing §3d – prevent evergreening.  Although there is no scientific definition of evergreening, it is a patenting strategy “consisting of acquiring patents on minor, often trivial, modifications of existing pharmaceutical products or processes in order to indirectly extend the period of patent protection over previously patented compounds.”[8]  Thus, it is an improper extension in patent monopoly, which does not convert to a significant benefit for the patient.[9]   Allegedly, this is what Novartis was attempting to do by filing for the beta crystalline form of imatinib mesylate.


The Madras High Court mentioned in its interpretation that §3d was introduced to “prevent evergreening; to provide easy access to the citizens of this country to life saving drugs and to discharge their Constitutional obligation of providing good health care to its citizens.[10]  Essentially, it attempts to only grant patents for truly meritorious patents.


Another factor that could have swayed the judges was probably that Novartis had recouped its R&D costs for the Gleevec drug in a very short period of time.[11] For example, in 2012,Novartis earned more than US $4B from sales of Gleevec – a sum several times higher than its initial research investments.  Thus, Novartis had recovered its research expenses well before the expiry of the patent term.  Hence, a question for the judges was whether Novartis deserved further reward for its innovation. 


D.            Other countries’ approach to prevent evergreening


As compared to India, jurisdictions across the world prevent evergreening through other mechanisms.  Mostly, they do not have a distinct and separate test for incremental innovations.  For example, in the US, it is built into the statutory requirements of anticipation (§102) and obviousness (§103).  The US adopts technologically specific applications of the general patentability standards to include the §3d test as a species of the “obviousness” test.  Courts have found that structural similarities between a pharmaceutical substance that is sought to be patented and an earlier known substance trigger off a presumption of prima facie obviousness.[12]  This presumption can be rebutted if the patent applicant demonstrates that the invention exhibits “unexpected or surprising results”.[13]


Therapeutic advantages are given relatively more weight while assessing non-obviousness as compared to physical properties such as processability or improved stability.[14]


Other mechanisms that indirectly prevent evergreening are the principles of inherent anticipation, patent misuse and double patenting.  Elaborate


E.             Effect of the Novartis judgment


The intended result of the Novartis decision is to allow inexpensive generic version of a patented product to enter the market and reduce drug prices making them more accessible to Indian patients.


Also, §3d of India is codifying the case law of US and providing better guidance in the form of a short cut to the patent office and patentees for guidelines to grant patents for incremental pharmaceutical innovations.[15]


However, there are two big risks that are associated with this decision by the SC. First, whether the threshold has been set too high by this narrow and strict interpretation of §3d, preventing the patentability of incremental innovation that in the field of pharmaceuticals may still yield beneficial effects for the patients. 

And second, the underlying policy considerations made by the judges may undermine the coherency of Indian Patent Law.


a.     How do incremental innovations benefit the economy and society?


Advocates of incremental innovation are worried that the Novartis decision will harm India more than benefit her.  They argue that it will hinder medical progress and discourage future innovation.


They argue that there is substantial clinical value of incremental pharmaceutical innovation.  It leads to increased effectiveness that is mostly a result of advances in dose delivery systems and dosage forms, such as transdermal delivery and extended release formulations, which increases the rate of absorption and reduces toxicity and side-effects. Breakthrough drugs normally have side-effects which get cured by more effective incrementally improved versions.  Also, as drugs enter new markets with different environments, such as a more hot and humid climate in India, they are improved so that they can be more stable. 


Incremental innovations also have several positive impacts on society and economy, including reduction of healthcare and other social and economic costs.  First, they increase the number of different drugs in a specific class, thereby increasing the price competition among those drugs and ultimately resulting in price reduction.[16]  Hence, the drugs become more accessible to patients.  Second, the incremental advances reduce overall treatment costs by increasing drug biolavailability, reducing dosage frequency, increasing patient compliance by reducing side-effects and toxicity, which in turn reduces costs of extended treatment schedules.[17]  Better treatment regimens would also result in the need for fewer hospital stays and physician visits.


Incremental innovation is also beneficial for the economy because due to its more effective treatment regimes, it reduces employee absenteeism and mitigates the impact of illness on labor productivity.[18]  It also benefits the generic industry as it makes a greater range of products available for generic marketing once applicable patent protection expires.  Further, it increases revenue for the pharmaceutical companies, which can be used to support expensive R&D of blockbuster drugs.[19]


Effects of allowing incremental innovations without limitations, such as a “therapeutic efficacy” test, are easily discernible from economies such as China, Japan and Italy.  For example, in China, from 1985 to 2003, over half of the total patent applications were made by domestic applicants.  Most of these were deemed to be incremental and presented a wide section of innovation that was previously untapped.  Similarly, Japan and Italy allow pharmaceutical product patents and have benefited significantly through higher investment in pharmaceutical R&D and higher employment in the sector.[20]


Even with these easily detectable benefits throughout the world that result from allowing patents for incremental pharmaceutical innovations, the Novartis judgment shows that presently India thinks differently.  She is primarily concerned about her domestic generic industry and poor patients.   However, it is easily predictable that this will discourage Indian and foreign investors from investing in India and also from making new formulations or drug delivery systems that are more suited to Indian climate.  Thus, overall, it seems that the judges made a judgment call in which the country’s social interests outweighed the current economic needs.


b.     Incoherency in Indian Law due to the Novartis decision


F.             CONCLUSION: How should the law change to balance all interests?


To balance the competing interests of generic companies and patients against drug originators, §3d should be redefined.  There are various options for this.


First, §3d can be redefined to include “safety and/or efficacy” as in the EU directive _________ from which §3d was borrowed originally.[21]  However, Prof. Basheer correctly points out that the EU directive is for the drug regulatory process that views “safety” and “efficacy” distinctly, whereas the patenting process does not require such a distinction to be made.  Elaborate.


Second, there are two ways of applying the §3d test.  It can either be treated as separate and distinct from traditional patentability criteria, such as novelty, inventive step and utility or it can be considered a species of the general “inventive step” or “non-obviousness’’ test.  


The former approach is easier as it first requires the assessment if the alleged invention qualifies as “inventive” under §2(j) and (ja) and then separately, requires the assessment if §3d test is satisfied.  Consequently, an invention can be found to be “inventive” but at the same time not be granted a patent as it fails §3d.  However, Prof. Basheer correctly points out that this violates the TRIPS mandate that states “patents shall be available for all inventions.”[22]


However, this will be solved through the latter approach, i.e. if the law disqualifies the inventions covered by §3d from the class of “inventions” all together by including the test for §3d in the “inventive step” test.  Thus, in essence, §3d can work as a negative or exclusionary definition of “invention”, just like mental processes and laws of natures do in the US (and also, in India).  This would provide a simpler framework for the judges also that is in conformity with the rest of the world.


            Effect of this on economy, if any? Will clearer and more uniform standards give more surety to multinational drugs companies and attract them to the country?


Another approach that will address the concern of evergreening for the country without a separate test and still allow it to conform with the rest of the world is if India simply considers such products within the framework of the policy exclusion definition as mentioned in §3(b), which excludes from patentability “an invention the primary or intended use or commercial exploitation of which could be contrary to public order or morality or which causes serious prejudice to human, animal or plant life or health or to the environment.”  These products can also be included in another definition, § 3(i), which …...


With regard to §3b, it can be argued that as Gleevec was being sold at an excessive price of Rs 1,20,000/month to poor cancer patients in India (where the avg. monthly income is ____/month), it would create public disorder and thus, §3(b) could be met.  However, if excessive drug pricing is held to be a sufficient reason to not grant a patent for a drug that appropriately deserves such protection, the entire institution of patent protection that grants a monopoly for the costs spent on R&D will be threatened.  Thus, excessive drug pricing cannot be found to make a substance ineligible for a patent under §3b.  Other mechanisms such as compulsory licensing or price control can be used to address excessive drug pricing but penalizing by not granting a patent is not appropriate.  It also defies TRIPS, which requires patents to be granted for all inventions.


Thus, to still comply with TRIPS, India can argue that § 3d is a policy-based exclusion itself, i.e. it should be treated separately from “inventive” step test (as proposed above) and is an exclusion based on policy reasons which Member States are allowed to do under TRIPS[23].  However, this would subject India to a TRIPS challenge as it begs the question - what is the extent of these exceptions from the term “invention” for the Member States?


Along with using §3d as a species of the “inventive” step test, another way of assuring that the benefits of patents on incremental pharmaceutical innovations are properly reaped by all is to broaden the definition of §3d such that it includes more properties of incremental innovations to be worthy of an “invention,” but with varying levels of weight put on the properties depending on the specific drug.  Even though this would not provide an objective criteria to the patent office, it will bring India in conformation with the rest of the world.  For example, like the US, the §3d test can value therapeutic efficacy more than processability or storability and assess this on a case-by-case basis.  This way mutinationals that obtain the patents in other jurisdictions will have better direction of what is going to happen in India and will be more willing to enter the market.


 Additionally, India will be able to reap the benefits of incremental innovations more effectively by not barring deserving drugs that provide drastically better stability or processability and indirectly would bring down the prices due to these properties.  Hence, the drugs would continue to be affordable for patients and generics can still invest in a plethora of options to continue their businesses and further bring down the prices.



[1] Incremental Innovation: Adopting to Patient Needs by IFPMA. Feb 2013.

[2] Incremental Innovation: Adopting to Patient Needs by IFPMA. Feb 2013.

[3] The Value of Incremental Pharmaceutical Innovation: Benefits for Indian patients and Indain businesses (White & Case and Dua Consulting)

[4] Id.

[5] Incremental pharmaceutical innovation in India: the Supreme Court’s judgment in the Novartis Gleevec Case by Stefano Barzarra in Jounral of Intellectual Property Law & Practice, 2013, Vol. 8 No. 10

[6] Patents (Amendment) Act Section 2(1)j and 2(1)ja

[7][7] Novartis v. Union of India

[8] See Carlos Correa “Guidelines for examination of Pharmaceutical Patents”

[9] (2013) 6 SCC p.92 para 16

[10] (2013) 6 SCC p.92 para 15

[11] Stefano Barazza’s article

[12] In re Diane M. Dillon, 919 F.2d 699 (Fed. Cir. 1990).

[13] Takeda, 492 F.3d 1350 (Fed. Cir. 2007)

[14] Pfizer v. Apotex, 480 F.3d 1348 (2007).

[15] But it has to be borne in mind that it is only a species of the “inventive” step test and not the entire genus, because it is possible that a substance has therapeutic efficacy but was “obvious to try”, in which case it does not merit a patent. This means that after applying the short cut, the usual “inventive” step test still needs to be applied



[16] Incremental Pharmaceutical Innovations: Impact on Public Health and Economy by Priyanka Rastogi (Singh & Associates)

[17] The Value of Incremental Pharmaceutical Innovation: Benefits for Indian patients and Indian Businesses, White & Case and Dua Consulting, June 2009. 

[18] Id.

[19] Singh & Associates

[20] The importance of Incremental innovation for development, prepared by International chamber of commerce

[21] Novartis . p.93.20.

[22] SCC p.101.60

[23] See Article ___ for exception to subject matter allowed by TRIPS – Member states may not grant patents if against public morality and ordre.