The Swiss drugmaker had been denied a patent by Indian authorities on the grounds that the new version was only slightly different from the old.
The decision means generic drugmakers can continue to sell copies of the drug at a lower price in India, one of the fastest growing pharmaceutical markets.
Novartis said the decision "discourages future innovation in India".
"This ruling is a setback for patients that will hinder medical progress for diseases without effective treatment options," said Ranjit Shahani, vice-chairman and managing director of Novartis India.
Personally (and before anyone jumps all over my post here, know that I understand how unrealistic this would be at this moment in time. Or, more-so, how difficult such an ideal would be to adopt), I don't believe that companies should be able to patent and profit from technologies and treatments that can help to save lives, while the poor die because they cannot afford treatment. I know that patents are important, but human life is vastly more important. When you have Africans dying from AIDS due to extremely expensive treatments, and, hell, even some Americans die because they cannot afford healthcare (disgusting in such an advanced country), we really need to start looking at the whole system differently, like Doctors Without Borders and others are trying to get people to do.
I hold my hand up to countries that produce these drugs themselves and sell them for 90% less than those being sold in the current medical racket. And I can see a not-too-distant future where Americans (and others forced to pay for their own treatment) will be heading off to developing countries to get treatment - somewhat of a role-reversal!