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IP: India’s compulsory licensing case

A tussle over a Bayer drug patent could set a precedent in developing countries

A March decision from the Indian Patent Office has caught the attention of pharmaceutical patent holders around the world. For the first time in India, a generic drug manufacturer has been granted a compulsory license to manufacture and sell a generic version of a patented drug. Though Bayer Corp., the drug’s manufacturer, has appealed, the decision may provide a framework that supports future efforts at compulsory licensing in India and, perhaps, beyond.

Bayer’s patented drug in India

Bayer holds the patent to the pharmaceutical compound sorafenib tosylate. Marketed under the brand name Nexavar, sorafenib is used to treat advanced stages of kidney and liver cancer. Nexavar is not a life-saving treatment. Its use, however, can extend the lives of patients with advanced kidney and liver cancer.

Bayer obtained a patent covering Nexavar in India in 2008. A month’s supply of Nexavar costs Indian patients approximately $5,600—or the equivalent of 3 ½ years of salary for India’s lowest-paid government workers. Sales of Nexavar in India stayed at about 200 monthly doses per year, despite the fact that statistical analysis showed that, at best, that amount met only 2 percent of kidney- and liver-cancer patient needs.

Cipla, a generic drug manufacturer, has manufactured and sold sorafenib in India since mid-2010. A month’s supply of Cipla’s generic sorafenib sells for about $550 in India. Bayer sued Cipla for patent infringement in India and that litigation is well under way.

India’s drug patent laws

India did not issue drug patents until 2005. India began extending patent protection to drugs in 2005 in an effort to adhere to the World Trade Organization’s (WTO) multilateral agreements on intellectual property, including the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

TRIPS requires that WTO members make patents available for “any invention, whether products or processes, in all fields of invention.” TRIPS also allows member countries to enact laws to prevent abuse of patent rights and specifically contemplates the use of compulsory licensing as a means of preventing any abuse of patent rights. India patent law has allowed the grant of compulsory licenses since 1970.

Generic manufacturer’s case for compulsory licensing

Natco Pharma Ltd. is a well-known generic drug manufacturer in India. Natco developed the process needed to manufacture generic sorafenib, sought and obtained government permission for bulk manufacture, and then approached Bayer for a voluntary license. Bayer was unwilling to grant the license.

Natco then brought its application for a compulsory license under Section 84 of the applicable Indian Patent Act. Granting a compulsory license under Section 84 for a patented drug was a matter of first impression in India.

Section 84 outlines the circumstances whereby a compulsory license may be granted. Under Section 84, grounds for compulsory license include a patentee’s failure to:

  • Meet the public’s “reasonable requirements” for the patented product
  • Make the patented item available at reasonably affordable price
  • Work the patented item within the territory of India

Natco persuaded the controller of patents that it was entitled to a compulsory license on each of these grounds.

  1. Meeting public need

Natco argued that data on Nexavar’s use and need proved that Bayer was not meeting the Indian public’s reasonable requirement for the drug, especially given its high price. The controller agreed. Noting evidence of strong sales of the drug outside of India and Bayer’s well-established Indian sales force, the controller found Bayer could not justify its failure to make Nexavar more available to the Indian public.

The controller also rejected Bayer’s argument that the generic supply of the drug manufactured by Cipla should be considered in determining whether or not Bayer was meeting public need—and noted Bayer’s “two-facedness” in suing Cipla for infringement on the one hand and trying to use Cipla’s production to avoid the compulsory license on the other. 

  1. Affordability

Natco and Bayer also differed sharply on the question of affordability. Natco argued that the term “reasonably affordable price” applied primarily to the public. Bayer claimed that the concept of “reasonably affordable price” should take into account what is reasonable for the drug manufacturer, which must recoup the costs of both failed and successful research and development efforts in those drugs that actually come to market.

Bayer also complained that a compulsory license would disadvantage it because it would give India’s wealthier populations access to the drug at a price determined by India’s poor—though Bayer could not demonstrate why it had not implemented its own graduated pricing scheme. 

Ultimately, the controller found that a reasonable affordable price has to be construed with reference to the public. Bayer could not overcome the evidence that the cost of Nexavar put it out of reach for the vast majority of potential Indian cancer patients—justifying the award of the compulsory license.

  1. Worked in India

Section 84 does not define the term “worked in the territory of India.” Bayer contested Natco’s claims that “worked” meant manufacture. Instead, Bayer argued that deletion of the term “manufacture” from another section of the Patent Act meant that the term should not be interpreted to require manufacture of a drug in India.

Construing the language of the Section 84 for the first time, the controller looked at various international treaties before concluding that “worked” does indeed mean manufacture. The controller rejected Bayer’s argument that the term “worked” could include utilizing imported, patented goods within an operating commercial Indian venture.

As a result, the controller held that, to avoid compulsory license, a patentee must manufacture the patented good in India or grant a license to another to do so.

Compulsory license terms

Concluding that Natco had made the necessary showing under Section 84, the controller granted it a compulsory license. Under the terms of that license, Natco must sell the drug for about $160 per month, as well as give the drug for free to 600 needy patients per year. Natco must pay Bayer a 6 percent royalty and may not sell the drug outside of India or sublicense any of its rights.

Conclusion

Commentators differ on the long-term impact of the compulsory license granted to Natco—especially because it is subject to change on appeal. World health organizations have applauded the broader access to medicine the controller’s decision contemplates. Pharmaceutical and biotechnology concerns worry about the effect additional compulsory licenses could have on research and development and argue that compulsory licenses for patented drugs should be limited to situations like national health crises or truly unaffordable, truly life-saving drugs.

Ultimately, only time will tell whether Natco’s action against Bayer ends up as a one-off claim, limited to the specific circumstances of a unique drug market—or whether it will serve as the first in a line of cases that leverage a developing country’s ability to use compulsory licensing of patents in order to make otherwise unaffordable drugs accessible to their population.  

Contributing Author

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Bryan J. Vogel

Bryan J. Vogel is a trial lawyer and partner with the firm Robins, Kaplan, Miller & Ciresi L.L.P. He is a registered patent attorney with...

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