The Supreme Court of India in a landmark decision, Monday, rejected the Swiss pharma major Novartis AG’s (NYSE:NVS) plea for patent rights of its cancer drug Glivec in India, dealing a serious blow to the desires of multinational pharmaceutical companies who are battling for patent rights of their high-priced life saving drugs.   

The decision is likely to become a benchmark against similar patent pleas by other multinational companies and pave way for more generic companies to manufacture and distribute affordable versions of costly drugs, once the original patent expires.

Dismissing Novartis' request for patent rights for an amended version of its chronic myeloid leukemia drug (imatinib mesylate), the apex court of India said it does not qualify for a patent as it does not meet the parameters of a “new invention” to invoke patents rights. The apex court made it clear that the companies could seek patents only if the new formulation is substantially different from the older drug.

Novartis had challenged the Indian Patents Act’s Section 3(d) that prohibits “evergreening” – a practice employed by the pharmaceutical companies to extend the patent life of the drugs by making minor changes to the existing drug.

Novaris had sought to extend the patent rights for Glivec on the grounds that it has updated the drug with a component that would make its absorption in the body faster. However, the court rejected the argument ruling the change was a trivial one to merit a monopoly right.

“Patents will now be granted only for genuine inventions and not on repetitive inventions. The Supreme Court said there was no new invention in the Novartis’ drug,” advocate Pratibha Singh, appearing on behalf of Indian drug firms Ranbaxy and Cipla, which had opposed Novartis’ plea said, according to a PTI report.

The court decision that ends a seven-year-long legal battle by the Swiss pharma for patenting rights was widely welcomed by the healthcare activists, who argue that high-priced branded patent drugs are not affordable in countries like India, which have a third of its over a billon population below the poverty line. Moreover, the health insurance coverage in the country among the poor is negligible, and a favorable decision to Novartis apparently would have exacerbated the woes of cancer patients.   

The drugs like Glivec are proven successful for curing certain forms of blood cancer, but its high prices – up to $70,000 per year for a patient – had prevented the poor patients from purchasing the drug. The generic version of the same drug costs only about $2,500 a year. The gigantic price difference had prompted the government and the health activists to promote the generic version.

The Indian government has been recently promoting the manufacture of cheap generic forms of life saving drugs, and many domestic firms had launched generic versions of the important drugs for nominal rates under the compulsory licensing system under the Patents Act. India issued the first ever compulsory license to a domestic company to manufacture a much cheaper version of Nexavar – a cancer drug patented by Bayer and Onyx Pharmaceuticals, last year.

Bayer, which had lost its appeal against the Indian government's decision in the Intellectual Property Appellate Board, would be battling the case in Mumbai High Court.

The big pharmaceutical corporations have been targeting emerging economies like India and Brazil for expansion activities in the branded drug sector. The companies have been concerned about the unfavorable patent rules in the countries as an obstacle to future investments for innovations.

The Apex Court decision that defines the extent of patent protection for branded drugs in India without a doubt is a considerable blow to the branded drug industry, as the multinational companies fear the emulation of the strategy by other countries such as China, Brazil and other Latin American and African countries.

Novartis in a statement said the decision "discourages innovative drug discovery essential to advancing medical science for patients," AFP reported.  

Novartis had threatened to halt supplies of new medicines to India if the court does not rule in its favor, London's Financial Times reported Sunday.

"If the situation stays as now, all improvements on an original compound are not protectable and such drugs would probably not be rolled out in India. Why would we?" executive Paul Herrling, who is leading the company's handling of the case, told the newspaper.

Shares of Natco Pharma (BOM: 524816) and Cipla (BOM:500087), which are already selling generic versions of Glivec in India, gained after the Indian Supreme Court’s decision. Natco was up 4.5 percent, while Cipla rose 2 percent at 11:33 a.m. local time, while the shares of Novartis India Ltd (BOM:500672), the Indian unit of the Swiss drugmaker, fell over 5 percent after the verdict.