Natco to make Bayer drug under compulsory licence

By Abhai Pandey, Lex Orbis IP Practice
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The Indian generic pharmaceutical industry got a shot in the arm on 9 March when India’s Patent Office invoked the compulsory licence provisions of the Patents Act to allow Natco Pharma to manufacture and sell a generic version of the blockbuster cancer drug sorafenib tosylate (sold as Nexavar), patented by the German health care giant Bayer.

Under section 84 of the Patents Act, any interested person can apply to the controller for a compulsory licence after the expiry of three years from the date of grant of the patent if the reasonable requirements of the public with respect to the patented invention have not been satisfied, if the patented invention is not available to the public at a reasonably affordable price, or if the patented invention has not been worked in India.

Abhai Pandey Lex Orbis IP Practice
Abhai Pandey
Lex Orbis IP Practice

Availability

The controller concluded that based on the probable number of patients requiring the drug, Bayer had imported and made it available to a little above 2% of the eligible patients since the patent was granted in 2008. As a result, the reasonable requirements of the public with respect to the patented invention have not been satisfied.

The controller dismissed Bayer’s argument that sales of another Indian generic company, Cipla, should be taken into account in determining whether the reasonable requirements of the Indian public were being satisfied. Noting that Bayer had sued Cipla in Delhi and asked for an injunction to stop these infringing sales, he characterized this argument as “indulging in two-facedness” and “defend[ing] the indefensible”.

Affordability

In what is the crux of the matter, the controller deduced that the reasonable requirements of the public were not being met because the drug – priced at about280,000 (US$5,500) per month – was not reasonably affordable to the public.

Bayer argued that a blanket compulsory licence providing the patented drug to all sections of the public at the same “reasonably affordable price” is not warranted. A compulsory licence should not benefit those who could afford the drug at Bayer’s price in an attempt to provide the drug to those who could not. Interestingly, the controller agreed and wondered why Bayer did not implement differential pricing for different sections of the public in India. But his determination of whether the drug was available at a “reasonably affordable price” was construed largely with reference to the “public”.

Local manufacturing

Finally, the controller looked at whether the patent had been “worked in the territory of India”. He noted that the term is not defined in the Patents Act, and therefore must be construed with regard to international conventions and agreements, the Patents Act, and its legislative history.

The controller’s imposition of a local manufacturing requirement was aimed at putting in the right perspective the deletion of the phrase “default of the patentee to manufacture in India to an adequate extent and supply on reasonable terms the patented article” from the act. He observed that this was “one face of the coin”, but that the other was that the phrase was deleted from section 84(7)(a)(ii) with regard to the patented article being “reasonably available to the public” in favour of section 84(1)(c) which “was made a separate ground for grant of a compulsory licence”.

In this light, he decided that failure to manufacture Nexavar in India supported the grant of a compulsory licence. Ultimately, however, he construed “[p]atents are not granted merely to enable patentees to enjoy a monopoly for importation” in section 83(b), and “the grant of a patent right must contribute to the promotion of technological innovation and to the transfer and dissemination of technology” in section 83(c), coupled with the provision in section 83(f) that a patent should not be abused, as requiring that a patentee work a patented invention in India or license another do to so.

After refusing to adjourn the proceedings on the basis of section 86, and finding that Bayer had not established any justifiable reason for its “delay” in working the patent in India, the controller set the following terms for the compulsory licence: sublicensing is not allowed; the drug can be sold only to treat liver and renal cancer; a 6% royalty must be paid; the price is set at ₹8,880 for one month’s treatment; the drug is to be provided for free to at least 600 “needy and deserving” patients yearly; the licence is not assignable and non-exclusive, with no right to import the drug; Natco has no right to “represent publicly or privately” that its product is the same as Nexavar; Bayer has no liability for Natco’s drug, which must be physically distinct from Bayer’s.

Abhai Pandey is an attorney-at-law with extensive experience in civil and criminal enforcement of intellectual property rights. He has over 16 years of experience in practice in this domain.

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