The application had been opposed by Indian generic drug maker Natco Pharma Ltd and New York-based Initiative for Medicines, Access & Knowledge (I-MAK) on the grounds that the drug, chemically called sofosbuvir, is not inventive enough compared with a previous formulation, according to patent office order documents seen by Reuters on Wednesday.
India's patent laws allow a third party to dispute the validity of a pending patent application.
The patent office's order said Gilead's request for Sovaldi, which is normally given for either three or six months and costs $84,000 for a 12-week course in the United States, was rejected on the basis that "minor changes in the molecule" did not improve efficacy of the drug.
The rejection will allow the Indian generic companies to make and sell versions of the drug in country where a majority of people live on less than $2 a day and health insurance is scarce.
Gilead could not immediately be reached for comment. Natco chief executive Rajeev Nannapaneni was not available outside regular Indian business hours.
Foreign drug makers in India, a global hub for making generic drugs, have been frustrated by a series of decisions on patents and pricing, with the government looking to improve healthcare access.
Market access and patent protection for US drugs are expected to feature when Prime Minister Narendra Modi hosts President Barack Obama later this month for Republic Day celebrations.
The patent office's order comes amid a growing clamour by healthcare campaigners and doctors to ensure Sovaldi and other new hepatitis C pills are affordable in developing countries.
In a bid to make Sovaldi available in 91 developing nations including in India, Gilead licensed the drug, hailed by doctors as a breakthrough in treating the liver-destroying disease, to seven India-based drug makers in April last year.
Campaigners, however, were critical of the licensing deals, saying they would not ensure access to several middle-income countries where health authorities would still struggle to provide treatment to patients.
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