India: Compulsory License Granted To NATCO

Last Updated: 15 May 2012
Article by Abhai Pandey

The viewpoint of being able to provide cheap drugs to a population which cannot afford it has started yet another debate in the pharma sector about how drug companies should price the life saving drugs in the developing world. On March 9, 2012, the Indian generic pharmaceutical industry got a shot in the arm when Indian Patent Office, by invoking the compulsory license (CL) provisions of the Patents Act, allowed NATCO PHARMA LTD, an Indian generic drug manufacturer to manufacture and sell generic version of the blockbuster cancer drug Sorafenib Tosylate (sold as Nexavar) patented by the German health care giant, BAYER CORP. The crux of the controversy hinges on an aspect of the Indian Patents Act, where under Section 84 of the Act, any interested person can make an application to the Controller for a compulsory licence after the expiry of three years from the date of grant of the patent if 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 if the patented invention has not worked in the Indian territory.

The Controller dwelled upon the competing claims of Natco (the CL applicant) and Bayer (the patentee) to draw a conclusion that the annual requirement, on the probable number of patients requiring the drug, could lie between 27000 and 70000 bottles per annum and that Bayer has made available the drug to only a little above 2% of the eligible patients (Bayer estimated the number of patients eligible for Sorafenib Tosylate as 8842 per year). The Controller also assessed Bayer's behaviour in fulfilling the "reasonable requirements of the public" from the working statement (Form 27) filed by Bayer to deduce that figures showed no logical information about sales in 2009 and import of only 680 units (60 table pack) in 2010. He noted that Bayer's conduct of not making the drug available since grant of patent in 2008, as per the requirement of the public in India since the grant of the patent, is not justifiable considering that Bayer was marketing the drug worldwide since 2006 and held that Bayer imported and made available only an insignificant proportion of the reasonable requirement of the patented drug in India, hence the reasonable requirement of the public with respect to the patented invention have not been satisfied. The Controller disregarded Bayer's argument that sales of another Indian generic company, Cipla, should be taken into account in determining whether the Indian market was being reasonably satisfied, noting that Bayer had sued Cipla in Delhi and asked for an injunction to stop these infringing sales. In this regard, the Controller characterizes this argument as "indulging in two-facedness" and "defend[ing] the indefensible."

In addition, and in what is the crux of the matter, the Controller stated that the sales of the drug, exorbitantly priced at about Rs. 2,80,000/- per month, constitute a fraction of the requirement of the public and therefore, logically deducting, the drug was not bought by the public due to only one reason i.e. its price was not reasonably affordable to them. For its part, Bayer argued that the cost of drugs supports the pipeline of future drug development and therefore it is not reasonable to look at past R & D expenditure for a launched product to decide whether its current price is reasonable, rather an account of the total R & D spending and the need and desire to finance such R & D sustainably to ensure ongoing innovation, has to be taken.

In what seems to avoid a complete washout, Bayer also argued that a blanket compulsory license providing the patented drug to all sections of "public" at the same "reasonably affordable price" is not warranted at all. The compulsory license should not benefit those in India ("the Rich class" and "the middle class") who could afford the drug at Bayer's price in an attempt to provide the drug to the "common man" who could not i.e. affordable to public is required to be considered as affordable to different classes / sections of public in India. Interestingly the Controller here is in agreement and wonders why Bayer did not execute the concept of differential pricing for different sections/classes of public in India. But the Controller's determination of whether a drug was available at a "reasonably affordable price" was construed predominantly with reference to the "public" and under the admitted facts of this case these considerations fell in favor of granting the license.

Finally, the Controller looked at the fact that Bayer did not "work" the invention in India. The Controller noted that the term "worked in the territory of India" had not been defined in the Patent Act, and therefore the term was construed with regard to "various International Conventions and Agreements in intellectual property," the Patents Act, 1970 and the legislative history. The Controller's emphasis on imposition of local working requirements (in the sense of local manufacturing) on patents granted in India was to put in 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.  The Controller oberved 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 "reasonable available to the public" in favor of Section 84(1)(c) which "was made a separate ground for grant of a compulsory license."

In this light, the Controller decided that failure to manufacture Nexavar in India supported the grant of a compulsory license to Natco (which it termed "reasonable fetter" on Bayer's patent rights).  Ultimately, however, the Controller construed Indian patent law to require that a patentee work a patented invention in India or license another do to so in Section 83(b), which states that "[p]atents are not granted merely to enable patentees to enjoy a monopoly for importation of the patented article" and Section 83(c) that "the grant of a patent right must contribute to the promotion of technological innovation and to the transfer and dissemination of technology" coupled with the provisions of Section 83(f) that a patent should not be abused.

After refusing to adjourn the proceedings based on Section 86, finding, inter alia, that Bayer had not established any justifiable reason for its "delay" in working the patent in India, the Controller established the terms of the compulsory license, wherein:

  1. the right to make and sell sorafenib limited to applicant (no sublicensing)
  2. the compulsorily licensed drug can be sold only for treatment of liver and renal cancer;
  3. the royalty shall be paid at a rate of 6%
  4. the price set at Rs. 8,800/- for one month treatment;
  5. the applicant commits to provide the drug for free to at least 600 "needy and deserving" patients per year
  6. Compulsory license not assignable and non-exclusive, with no right to import the drug
  7. No right for the licensee to "represent publicly or privately" that its product is the same as Bayer's Nexavar
  8. Bayer has no liability for Natco's drug product, which must be physically distinct from Bayer's dosage form

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Khurana and Khurana
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Khurana and Khurana
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions