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India's Supreme Court rejected Monday a patent bid by Swiss drug giant Novartis in a landmark ruling activists say will allow continued supply of cheap generic drugs and save lives in poorer 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 judgement 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 and set a legal precedent.
"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," such as introducing paediatric dosages, she told a news conference.
The legal case was the highest-profile of several being pursued by multinationals in the vast Indian market, set to touch $74 billion in sales by 2020 from $11 billion in 2011 according to a study by financial services firm PwC.
Global drugmakers say India's powerhouse generics industry and strict patent filtering reduce commercial incentives to produce cutting-edge medicines.
Novartis, which reported a 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".
"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.
Mark Elliot, executive vice president of the US Chamber of Commerce's Global Intellectual Property Center, also criticised the ruling as damaging prospects for "future innovation".
But shares of Indian generics giant Cipla gained 1.2 percent to 384.30 rupees and its chairman, Yusuf Hamied, who revolutionised AIDS treatment over a decade ago by supplying cut-price drugs to the world's poor, praised the ruling.
It "prevents use of frivolous patents to deny access to medicines" and "is a victory for patients both in India and around the world," Hamied said.
The Supreme Court upheld the view of India's Intellectual Property Appellate Board, which refused to grant Novartis protection in 2009.
Lawyer Anand Grover, representing cancer patients 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 sector grew because India did not issue drug patents until 2005 when it began complying with World Trade Organisation rules.
Just two other nations, Argentina and the Philippines, have similar legislation but their laws are not as strict at filtering patents, Grover told reporters.
"Only 25 percent of patents in the West are awarded for breakthrough drugs. This judgement should encourage companies to look for genuine innovations" rather than claiming ever longer patent protection on older drugs, MSF's Menghaney said.
The ruling might only be a "breather" as patient rights campaigners fear a new India-European Union free trade deal expected soon could contain intellectual property clauses seeking to restrict generic drugmakers, she said.
"But today we are celebrating," she added.