Novartis Finance Case Study

Patent is a monopoly right of an inventor for a limited period. Many countries in the world, the patents are granted for a maximum term of 20 years. However, there are patentees (mostly pharmaceutical companies) they want to extend this monopoly right beyond the period of 20 years. So what do they do? Usually When it comes to the end of the term, these companies make trivial variations to the existing patented invention and files for new patent.  This is called evergreening of patent.

1. GlaxoSmithKline plc (GSK) is a British pharmaceutical company. LamictalTM is a medication sold by GSK for use in the treatment of epilepsy. The active ingredient: lamotrigine). In 1980 a patent for the active ingredient was applied and it expired in 2000. In 1992, a new patent was applied which is chewable tablet formulation of lamotrigine in terms of its ease of use. The second patent expired in 2012. So, for the same active ingredients it had a patent term of 32 years. So, in this example, the evergreening strategy helped the company to successfully delay the entry of generic products to the market. Prevent generic competition.
2. Novartis is a leading healthcare company producing drugs. Gleevec is a drug sold by Novartis used to treat cancer, very expensive. patent of G expires in 2015. In the meantime, many Indian companies produce the generic drug at very cheap price, but after amended law 2005, India can no longer do so.

Later in time, Novartis decided to seek a new patent in order to give it longer period of market exclusive. However, India’s Supreme Court rejected Novartis application, on the basis that the formulation was not significantly different or better than previous drugs on the market. As a result, India can continue to produce generic version of G and sell it in India and to export. Good for domestic and customers because they made it more affordable to the patient with the same effect.