India’s First Compulsory Licence Upheld, But Legal Fights Likely To Continue

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New Delhi – India’s Intellectual Property Appellate Board (IPAB) today upheld the country’s first compulsory licence on a pharmaceutical product. The much-awaited verdict by Justice (Ms) Prabha Sridevan upholds the compulsory licence issued to Hyderabad-based Natco Pharma Ltd, an Indian generic drug manufacturer, which sells a much cheaper version of German pharmaceutical company Bayer AG’s kidney and liver cancer drug Nexavar in the market.

[Update:] Bayer on 5 March announced it will appeal the decision (IPW, Developing Country Policy, 5 March 2013).

Sridevan cited affordability and product access as the reasons for the decision to dismiss Bayer’s appeal against the compulsory licence (CL). However, the Chennai-based IPAB hiked the royalty which Natco would have to pay to Bayer (under the terms of the CL) from 6 per cent to 7 per cent.

Mr. Madineedi Adinarayana, company secretary and general manager of Legal and Corporate Affairs at Natco Pharma Ltd, told Intellectual Property Watch that the IPAB decision is “very significant” and he is “happy” that the CL had been upheld. But, he said, “This is unlikely to be the end of the legal battle.”

“The only relief that Bayer has got is a rise in royalty,” Adinarayana  said, adding that the company did not wish to comment on its plan of action for the future. “We will have to see what happens in the coming days,” he said. “We will decide about our legal options after studying the IPAB decision in detail, and after seeing what Bayer does.”

If Bayer wants to continue the legal fight, it has the option of going  to the High Court in Mumbai, or in Chennai, or going to India’s Supreme Court.

At the time of writing, the full text of IPAB judgment on the Nexavar case, was not public. Public health advocates and intellectual property rights experts shared their initial thoughts with Intellectual Property Watch. Bayer has yet to issue an official reaction to the IPAB decision, and not yet responded to inquiries.

Background

Bayer holds an Indian patent for the chemotherapy drug sorafenib tosylate, sold under the trade name Nexavar. On 9 March 2012, the then Indian Patent Controller issued the first-ever compulsory licence to Natco Pharma to manufacture an affordable generic version of sorafenib tosylate. Bayer promptly filed an appeal against the compulsory licence order before the IPAB in Chennai. Meanwhile, the CL had a dramatic effect on the drug’s price – bringing it down to 8,800 rupees (approximately USD 160) for a month’s dose – a fraction of Bayer’s price of 280,000 rupees (approximately 5,098 USD). Under the terms of the compulsory licence, however, Bayer got a six per cent royalty on sales by Natco.

The mechanism of compulsory licence, which has generated a lot of heat globally, is embedded in India’s patent law. Section 84 of India’s Patents Act provides that an interested person may apply for a compulsory licence to work the patented invention on any of the following grounds: the reasonable requirements of the public with respect to the patented invention have not been satisfied; the patented invention is not available to the public at a reasonably affordable price; or the patented invention has not been worked in the territory of India.

Granting the CL to Natco reinvigorated the old debate about patents versus patients in India and turned the spotlight on the escalating battle between multinational pharmaceutical companies and the country’s generic drug manufacturers.

In an emailed statement to Intellectual Property Watch in May 2012, a Bayer spokesperson had said, “We strongly disagree with the conclusions of the Patent Controller of India and have appealed his order on May 4th 2012 with the Intellectual Property Appellate Board. We will rigorously continue to defend our intellectual property rights which are a prerequisite for bringing innovative medicines to patients” (IPW, Public Health, 20 May 2012).

What does the IPAB decision on Nexavar mean for the future of compulsory licensing in India? James Love, president of  Knowledge Ecology International (KEI), an international NGO that tracks debates around intellectual property policy and practice worldwide, told Intellectual Property Watch that “on the whole, based upon reports, the decision looks like a big win for cancer patients” Love, however, agrees with the view that there is likely to be more litigation in the days ahead.

“Natco and Bayer are both likely to appeal parts of the decision,” he said. “Bayer has far more things to appeal, since they lost almost every argument. But Natco may appeal the 7 percent royalty, which is higher than the 2005 (Canada,) 2001 (UNDP) and 1998 (Japan) royalty guidelines, and about two points higher than the median royalties in the Parr study.”

Leena Menghaney India campaign manager, Médecins Sans Frontières (MSF) Access Campaign said in a statement that they have not yet been able to read the decision, but said, “We’re relieved with the decision by the IPAB to uphold India’s first compulsory licence. The decision confirms that the Indian Patent Office is able to use all the means legally at its disposal to check the abuse of patents and open up access to affordable versions of patented medicines.”

Most importantly, Menghaney said, “the decision means that the way has been paved for compulsory licences to be issued on other drugs, now patented in India and priced out of affordable reach, to be produced by generic companies and sold at a fraction of the price.” She said she hoped that, in the near future, compulsory licences will be issued for the newest drugs to treat HIV and affordable generic versions will be available not only in India, but in the rest of the developing world.

MSF has urged Bayer “to address the reality that their prices are too high and not to appeal this decision. It is not the use of a compulsory licence that should be challenged, but the continued pursuit of excessively high profits over public health needs.”

Shamnad Basheer, an Indian academic specialising in intellectual property law told Intellectual Property Watch that the IPAB’s decision had given a “lot more legal certainty to the generic sector in India.” This, he said, is a “good thing.” Basheer points out that since March 2012, when Natco got the CL, no new compulsory licences have been filed. He reasons that this could be because other generic drugmakers are waiting to see what happens to Bayer’s appeal against the CL.

“I think compulsory licenses will be on the rise all over the world because it is the middle path between extreme patent protectionism and patent abolitionism,” Basheer said. 

The IPAB decision comes at a time when the final verdict on another landmark case involving patents and pharma is awaited in India. Novartis is seeking patent protection for the most recent formulation of its blockbuster leukemia drug, imatinib, sold as as Gleevec in the United States and Glivec in India. Novartis has sought patent protection for this drug. Indian courts have rejected the Swiss drug maker’s petition on the grounds that the new formulation is not a novel invention, and therefore does not merit intellectual property rights. India’s Supreme Court is expected to take a final decision on this matter very soon.

 

Patralekha Chatterjee may be reached at info@ip-watch.ch.

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Comments

  1. Prof. Vijay Oak says

    The IPAB ruling is very significant as a number of people cannot afford expensive life saving drugs. Now the pharma companies themselves should start producing generic medicines to some extent along with patented ones for economically weaker section. Although for the time being some monetary loss will be there, service to humanity will help such companies in long run.

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