India's highest court has dismissed Swiss drug maker Novartis AG's petition seeking patent protection for a cancer drug, a serious blow to Western pharmaceutical firms which are increasingly focusing on India to drive sales.

In a landmark judgement, the Supreme Court said on Monday that the drug Glivec failed to qualify for a patent according to Indian law.

Since 2006, Novartis was challenging the Indian government to demand protection against Indian companies copying its drugs.

But the court ruled that the drug for which Novartis was seeking a patent "did not satisfy the test of novelty or inventiveness" required by Indian law.

In 2009 it took its challenge against a law that bans patents on newer but not radically different forms of known drugs to the Supreme Court.

Al Jazeera's Sohail Rahman, reporting from New Delhi, said the ruling is a "huge disappointment" for Novartis, as it allows Indian companies to continue producing cheaper generic medicine for domestic and international consumers.

Rahman said the ruling could raise questions about India breaking rules set by the World Trade Organization.

The case is the most high-profile of several patent battles being waged in India and could have far-reaching implications in defining the extent of patent protection for multinational drug firms operating in the lucrative market.

'Dangerous precedent'

INDIA'S GENERIC DRUG INDUSTRY In 1970, India prohibited patents on drugs, which spurred the growth of the country's large generic drug industry. A World Trade Organization agreement, implemented in 2005, required India to grant patents to some drugs. Nevertheless, the country remains a major producer of generics. India has the world's third-largest pharmaceutical industry by volume.

Its drug industry is growing at about 16-17 percent a year.

The value of India's generic drug industry is estimated at $26bn.

India is estimated to supply about 20 percent of the world's generic drugs.

Indian companies make about 60,000 different generic drugs.

Of the anti-AIDS medicines purchased by anti-AIDS groups such as The Global Fund, about 80 percent were generics made in India, a 2010 study found. Source: AP, AFP, Reuters, BMJ, Frost & Sullivan Market Insight

The Swiss firm has threatened to halt supplies of new medicines to India if the court did not rule in its favour, London's Financial Times reported on Sunday.

"If the situation stays as now, all improvements on an original compound are not protectable and such drugs would probably not be rolled out in India," said executive Paul Herrling, who is leading the company's handling of the case.

But Leena Menghaney, a lawyer with medical charity Medecins Sans Frontieres (MSF), says a legal victory for Novartis could "set a dangerous precedent, severely weakening India's legal norms against evergreening".

It would "be dire for people in the developing world who depend on generic drugs made in this country. It could seriously curb access".

Generic drug firms in India - long known as the "pharmacy to the developing world" - have been a major supplier of copycat medicines to treat diseases such as cancer, TB and AIDS for those who cannot afford expensive branded versions.

The cost difference between generic and branded drugs is crucial for poor people around the world, MSF says.

It points out that Glivec - often hailed as a "silver bullet" for its breakthrough in treating a deadly form of leukaemia - costs $4,000 a month in its branded form while its generic version is available in India for around $73.

In the case of Glivec, Al Jazeera's Rahman also said that most of the consumers in India could not even afford the drug given the average wage is only $120.

But Novartis and other global drug makers say India's generics industry inhibits pharmaceutical innovation and reduces commercial incentives to produce cutting-edge medicines.