India's Supreme Court rejected Monday a patent bid by Swiss drug giant Novartis in a landmark ruling that activists say will protect cheap generic drugs and save lives in developing nations.
Novartis fought a seven-year legal battle to gain patent protection for an updated version of its blockbuster leukaemia drug Glivec, arguing the compound was a significant improvement because it is more easily absorbed by the body.
But in a ruling that went to the heart of patent law in a country known as the "pharmacy to the world", the top court said the compound "did not satisfy the test of novelty or inventiveness" required by Indian legislation.
India's law restricts pharmaceutical companies from seeking fresh patents for making minor modifications -- an industry practice known as "evergreening" -- and the ruling enables generic drugmakers to continue copying Glivec.
Leena Menghaney, a lawyer with medical charity Medecins Sans Frontieres (MSF), said Monday's ruling was "a big relief" that would save lives in India and elsewhere in the developing world.
"Breakthrough, innovative medicines will still get patents in India but the judgement means drug companies cannot keep seeking patents for small changes to one drug," she told a news conference.
The legal case was the highest-profile of several being pursued by multinationals in the Indian market, set to touch $74 billion in sales by 2020 from $11 billion in 2011 according to the PricewaterhouseCoopers consultancy.
Novartis, which reported net profit of $9.6 billion in 2012 on sales of $56.7 billion, condemned the judgement, saying it "discourages innovative drug discovery essential to advancing medical science for patients".
"The ecosystem in India to encourage investment is not there. We have been boxed in from all sides," Novartis India managing director Ranjit Shahani said in Mumbai. He said the company would continue to invest "cautiously" in India.
Shares of Novartis India, the local unit of the Basel-headquartered group, slid nearly seven percent before paring losses to end down 1.81 percent at 587.95 rupees.
Indian generics giant Cipla gained 1.2 percent to 384.30 rupees.
The Supreme Court upheld the view of India's Intellectual Property Appellate Board, which refused to grant Novartis protection in 2009 on the grounds that the amended form of Glivec was not vastly different from the earlier version.
The Madras High Court had also rejected Novartis' arguments in 2007.
Lawyer Anand Grover, representing the Cancer Patients Aid Association in the case, said he was "ecstatic", adding the ruling will "go a long way in providing affordable medicine for the poor".
India's huge generic drug industry has been a major supplier of vastly cheaper copycat medicines to treat diseases such as cancer, TB and AIDS for those who cannot afford expensive branded versions across the developing world.
The copycat drugs industry, which supplies one-fifth of the world's generics, grew into a powerhouse because the country did not issue drug patents until 2005 when it began complying with World Trade Organisation rules.
Only Argentina and the Philippines have legislation similar to India stipulating that medicines can only receive patents if they are novel, Grover told a news conference.
"Only 25 percent of patents in the West are awarded for breakthrough drugs. This judgement should encourage companies to look for genuine innovations," MSF's Menghaney said.
She said the ruling might only be a "breather" as campaigners fear a new India-European Union free trade deal expected to be struck this month could contain intellectual property clauses restricting generic drug makers.
"But today we are celebrating," she added.
Global drugmakers say India's generics industry reduces commercial incentives to produce cutting-edge medicines.