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Clashing stands of India, U.K. on drug patents, R&D will offer clear lessons

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Today two countries on opposite sides of the world took radically different stances on pharma patents that will have a big impact on the future of drug R&D. In India, the Supreme Court ruled that Novartis ($NVS) should not be granted a patent for Gleevec, a breakthrough leukemia treatment that has fundamentally changed the survival prospects of leukemia patients, because the final product was the result of tinkering rather than true innovation. And in the U.K. the country ushered in the "Patent Box," offering a low rate of taxation on the profits made from patented products--which is intended to spark major investments to help revive a research industry that has been languishing for years.

Advocates for the poor--a group which includes the generic champion Y.K. Hamied at Cipla--heralded the new ruling in India because it will keep copycat drugs on the market for just a fraction of the price of the branded therapy. It also underscored the country's tough position on patents, which has already opened the door to cheap knockoffs for a number of blockbuster products. Novartis, though, quickly issued its own warnings about what's to come in India. 

"We'll continue to build our business, but we will certainly be cautious in investments in R&D and innovation in India," Novartis India chief Ranjit Shahani told Bloomberg. "And until the climate for intellectual property and the ecosystem is fully in place, I don't think any investment in R&D will take place here."

"Henceforth, multinational pharma companies are likely to want that their patents are first recognized in India before launch of a patented product," Ameet Hariani, a prominent attorney, told Reuters.

In the U.K., where R&D work has been languishing, the BioIndustry Association (BIA) heralded the arrival of the Patent Box--effective today--and its lower rate of corporate taxation. There's also an above-the-line R&D tax credit of 10% on offer as well.

"The Patent Box should make the U.K. a prime location for investment in R&D and manufacturing," said the BIA's Steve Bates, who credited the new tax rules for GlaxoSmithKline's ($GSK) decision to invest a half-billion pounds in a new manufacturing facility and AstraZeneca's equally large commitment to a new R&D center in Cambridge. AstraZeneca ($AZN), though, is also laying off hundreds of U.K. researchers, the latest in a series of retrenchments that has reduced R&D efforts in the country.

Whichever side you're on in this patent fight, and there's seemingly no neutral ground, the U.K. and India have now made clear choices on patent protection and potential rewards, creating test cases on how industry will respond. The next few years should offer a clear example of the R&D rewards and costs associated with each strategy.

-- John Carroll (email | Twitter)