India Grants First Compulsory Licence, For Bayer Cancer Drug

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In a move welcomed by many in the international community, India has granted an application, its first, from a homegrown generic drug maker to manufacture and sell a patented cancer drug under a compulsory licence.

In an order dated 9 March 2012, the Controller of the Indian Patents Office ruled against the patent owner German pharmaceutical giant Bayer Corporation.

The link to the decision is here.

With the ruling, Indian generic drug manufacturer Natco Pharma Ltd. has received a green light to start manufacturing and selling in India Bayer’s patented drug “Sorafenib tosylate.” The compound, used for the treatment of advanced stages of kidney and liver cancer, is sold by Bayer under the brand name Nexavar.

Natco has already developed a process to manufacture the drug and received a licence to manufacture the drug in bulk and to market it in April 2011. It is expected that Bayer will make an appeal against the decision.

Bayer launched the drug in 2006. It received a licence to import and market the drug in India on 1 August 2007. The Patent Office found that Bayer did not import the drug at all in 2008 and only started importing in small quantities in 2009 and 2010.

Seeing that Bayer was not making the drug accessible to more people, Natco applied for a compulsory licence. Compulsory licensing is when a government allows someone else to produce a patented product or process without the consent of the patent owner, but under strict terms. It is one of the flexibilities on patent protection under the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

“The patentee (Bayer) thus took no adequate or reasonable steps to start the working of the invention in the territory of India on a commercial scale and to an adequate extent,” according to the decision.

In its defence, Bayer argued that the operation of another pharmaceutical company, Cipla, which is selling a similar drug, is the reason why it could not maximize the distribution of the drug in India. Bayer, in a separate case, has sued Cipla for infringement.

According to the decision, Natco must pay a quarterly royalty at 6 per cent of the net sales of the drug. This was lower than Bayer’s asking royalty of 15 per cent of net sales.

“I am satisfied that anything lesser than 6% would not just be just and reasonable given the facts and circumstances of this case,” the decision said.

A royalty of 6 per cent is aligned with the United Nations Development Programme recommendation of a 4 per cent royalty, which can be adjusted upwards as much as 2 per cent for products of particular therapeutic value or reduced as much as 2 per cent if development of the drug made use of public funds.

Under the terms of the compulsory licence, Natco shall provide the drug for free to at least 600 needy and deserving patients pear year; sell the drug at no more than 8,880 Indian rupees (about US$178) for a pack of 120 tablets; and is prohibited from outsourcing the manufacturing of the drug.

Non-governmental groups have welcomed the landmark decision.

“We hope this will lead to more standardized policies for the grant of compulsory licenses when products are so expensive that access is limited to only the most wealthy patients,” said James Love of the Knowledge Ecology International in a statement posted on his group’s website. The link to the full statement is here.

Médecins Sans Frontières (MSF, Doctors without Borders) said the ruling ends Bayer’s monopoly in India on the drug and could set precedent for making more expensive patented drugs available for compulsory licensing.

“But this decision marks a precedent that offers hope: it shows that new drugs under patent can also be produced by generic makers at a fraction of the price, while royalties are paid to the patent holder. This compensates patent holders while at the same time ensuring that competition can bring down prices,” Tido von Schoen-Angerer, director of the MSF Access Campaign, said in a statement.

Maricel Estavillo, an intern at Intellectual Property Watch, is an LL.M. in Intellectual Property and Competition Law Candidate at the Munich Intellectual Property Law Center (MIPLC). A former business journalist in Manila, Philippines, she is currently working on research on copyright in digital media for her Master’s thesis.

Maricel Estavillo may be reached at maricelestavillo@gmail.com.

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