Re­in­forc­ing the rights of na­tions

Drugs ma­jor Eli Lilly has lost its case against Canada. It af­firms the right of a coun­try to set its own patent laws

Down to Earth - - COLUMN -

THERE ARE rea­sons to cheer and cheer again in the in­ter­na­tional ar­bi­tra­tion case which saw the de­feat of a pharma gi­ant and the en­dorse­ment of a na­tion’s right to for­mu­late its own patent laws. The case was filed in 2012 by US drug maker Eli Lilly against Canada for what it termed wrong­ful ter­mi­na­tion of patents on two of its drugs: Strat­tera (ato­m­ox­e­tine) for At­ten­tion-Deficit Hyper­ac­tiv­ity Dis­or­der and Zyprexa (olan­za­p­ine), an an­tipsy­chotic med­i­ca­tion. The patents were struck down in 2010 and 2011 un­der Canada’s kpromise util­ity doc­triney, which stip­u­lates that patent own­ers have to prove that their patents ful­fil the prom­ise of be­ing use­ful in the treat­ment of a cer­tain con­di­tion.

Eli Lilly sought dam­ages of $500 mil­lion, claim­ing a krad­i­cal changey in Canada’s patent law had un­fairly in­fringed its profit-mak­ing rights till the ex­piry of the patent term. This is the first suit on patents to be filed un­der in­vestor-state dis­putes. Although the Philip Mor­ris case against Uruguay was also on in­tel­lec­tual property rights (ipr), it dealt with trade­mark in­fringe­ment. In­vest­ment treaties (see kIn­vest­ment ter­rory, Down To Earth, 16-31 De­cem­ber, 2012) give pri­vate en­ti­ties ex­tra­or­di­nary priv­i­leges to chal­lenge sov­er­eign na­tions on pol­icy mat­ters if these im­pact profit flows. Eli Lilly used nafta or the North Amer­i­can Free Trade Agree­ment to sue Canada, claim­ing the util­ity doc­trine con­tra­vened the agree­ment.

Cana­dian courts have con­sis­tently up­held the va­lid­ity of the util­ity doc­trine, en­abling other com­pa­nies to mar­ket lower-cost generic ver­sions of some wrongly patented drugs. Ely Lilly, with its profits re­duced, had ac­cused Canada of main­tain­ing an kel­e­vated stan­dardy for prov­ing the util­ity of a new drug, a stan­dard it says is not found else­where. But there is a para­dox here. Although phrma, Big Pharma’s lobby group, has said the prom­ise doc­trine is kfun­da­men­tally in­con­sis­tent with tripsy, the global ipr rules set by the World Trade Or­ga­ni­za­tion (wto), no coun­try has yet chal­lenged the Cana­dian law.

Does this ring a bell? Sec­tion 3d of In­dia’s patent law, which sets the ground rules for what is patentable or not by drug mak­ers, has faced a sim­i­lar chal­lenge. Pharma gi­ants have con­tested this sec­tion in In­dian courts although no coun­try has chal­lenged it in wto. The fact is trips al­lows cer­tain flex­i­bil­i­ties that mem­bers can in­cor­po­rate in their patent laws.

For­tu­nately for Canada and for coun­tries such as In­dia, the ar­bi­tra­tor, In­ter­na­tional Cen­tre for the Set­tle­ment of In­vest­ment Dis­putes (ic­sid) in Wash­ing­ton, gave a rul­ing that up­holds na­tional sovereignty. Re­ject­ing Eli Lilly’s claim that its profits were un­fairly curbed by Cana­dian court rul­ings, ic­sid em­pha­sised that tri­bunals could over­rule na­tional courts only in ex­cep­tional cir­cum­stances. This is a re­fresh­ing break from the past when global ar­bi­tra­tors have usu­ally sided with in­vestors, over­rul­ing even be­nign pol­icy changes that would in any way im­pinge on in­vestor profits. On the sub­stance of the case, ic­sid said Eli Lilly was not able to pro­vide any ev­i­dence that Canada had made a fun­da­men­tal change to its patent law so as to trig­ger a claim un­der nafta pro­vi­sions. Had the drug gi­ant won the case, it would have cast a dark shadow over the Cana­dian ju­di­cial sys­tem and also opened the flood­gates to com­pen­sa­tion claims from a host of com­pa­nies since 25 patents on 21 medicines have been in­val­i­dated over the last decade. In­stead, Eli Lilly has been or­dered to make good the costs Canada has in­curred in fight­ing this suit.

Point of in­ter­est: The rea­son why a Cana­dian fed­eral judge in­val­i­dated the Strat­tera patent was be­cause Eli Lilly had re­lied on an in­cred­i­bly small, re­stricted clin­i­cal trial to demon­strate the drug’s util­ity: a seven-week, dou­ble-blind placebo-con­trolled study of just 22 pa­tients. Lit­tle sur­prised that the court found it “too small and too short to pro­vide any­thing more than in­ter­est­ing but in­con­clu­sive data”. Hear, hear.


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