Pharmaceutical Industry Faces Compulsory Licensing in India

Last month, the Indian patent authorities ruled that Bayer must grant a compulsory license to the generic-drug manufacturer Natco for Bayer’s anticancer therapy Nexavar (sorafenib), a drug to treat advanced kidney and liver cancer. The judgment represents the first time the Indian Controller General of Patents, Designs and Trademarks has granted a compulsory license to a generic-drug manufacturer (1).

In its ruling, Indian patent authorities asserted that compulsory licensing, when a government allows a party other than the patent owner to produce a patented product or process without the consent of the patent owner, is permissible under Indian patent law, patent laws of certain other nations, and the World Trade Organization’s (WHO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It acknowledged, however, that this case by which the applicant, Natco, sought a compulsory licensing under Indian patent law, was the first time such a case has been considered.

In its ruling, Indian patent authorities noted that Bayer launched the drug worldwide in 2006, received regulatory authority to import and market the drug in India in 2008 and launched the product in 2009 in India. Natco, a generic-drug manufacturer based in Hyderabad, India, developed a process to manufacture the drug. It received approval for manufacturing the drug in bulk and marketing the drug in tablets from the Drug Controller General of India in April 2011. In its ruling, the Indian Controller General of Patents, Designs and Trademarks said that Natco had sought a voluntary license from Bayer to manufacture and sell the drug in India, but that had not materialized. Natco had sought to sell the drug for 8800 rupees ($178) for a month’s supply of a generic version of the drug compared with the 284,428 rupees ($5698) for a month’s supply sold by Bayer.

In its decision, the Indian patent authorities asserted that a compulsory license may be granted if an invention is not available to the public at “reasonably affordable price.” The limited use of the drug in India, a delay by Bayer in bringing the drug to market in India, the lack of affordability of the drug to the public, the absence of local manufacture of the drug in India, and limited imports of the drug by Bayer into India were factors in the controller’s ruling that Bayer had not adequately “worked the invention” on a commercial level. Bayer had countered by asserting that price should reflect development costs not the public’s ability to pay for the drug. It further noted that a generic version of the drug is now being sold by the generic-drug manufacturer Cipla, an action that is the subject of a patent-infringement case between the two companies, which has impeded its ability to market the drug in India.

Under the granting of the compulsory license, Natco must pay Bayer 6% of the net sales of the drug and sell it for 8800 rupees ($178) for a month’s supply of 120 tablets. Natco also must manufacture the drug at its own manufacturing facility and not outsource the production of the drug, and the drug must only be sold in India.

Industry feedback

The Pharmaceutical Research and Manufacturers of America (PhRMA) weighed in on the issue of compulsory licensing. Although not specifically commenting on the specifics of the case, the association stated it did not favor the use of compulsory licenses.

“While India has not routinely issued compulsory licenses (CL), PhRMA believes it is not an appropriate tool even if granting CLs may be a legal option,” said PhRMA President and CEO John Castellani, in a Mar. 14, 2012, statements. “Assessments of particular compulsory licensing policies and decisions need to be made on a case-by-case basis, taking into account a number of factors. Legitimate health emergencies that require making exceptions to intellectual property rights can and should be accommodated under the international framework, but only after exhausting all other efforts and under extraordinary circumstances.”

PhRMA said it will not address the specifics of this case, but did offer a perspective on intellectual property rights. “One aspect that is particularly troublesome is the contention that ‘working’ a patent requires a company to manufacture within India. It is our firm belief that this is fully at odds with India’s TRIPS commitment (as well as its broader WTO obligations), and distorts what was intended as a public health exception into an industrial policy,” said Castellani, in the statement.

PhRMA also stressed the industry supports increasing access to medicines, but is against the use of compulsory licensing to achieve that objective. “The research-based pharmaceutical industry fully supports the objective of improving access to innovative medicines; however, CLs cannot solve India’s larger problems regarding access to medicines and healthcare. If countries begin to routinely use CLs, we could see a ‘race to the bottom’ in which governments in the developing world walk away from their responsibility to support research and innovation in public health. In the absence of the investment made by our members, and the resulting research and development, there would be no generic medicines for the world’s patients. The responsibility to promote development of new drugs lies with all countries, not solely those in the developed world.”

Reference

1. G. Anand and R. Ahmed, “Bayer Loses Drug Ruling in India,” Wall Street Journal, Mar. 13, 2012.