India Issues First Ever Compulsory Licence:

In what can be seen as a precedent, the Controller General of India issued the first ever compulsory licence to Natco Pharma ltd on March 9, 2012 in India thereby permitting Natco to sell Nexavar at a fraction of the price of the patented product.  The order opens doors to a new era in the pharmaceutical field and public health.  Till date, compulsory licence was considered as an almost dead letter provision, with a foregone conclusion that any attempt to utitlise it would only result in prolonged legal battles with no practical result.  Natco Pharma Ltd a Hyderabad based company took the bold step of unravelling this myth and locked horns with Bayer Corporation.

Facts of the case: Bayer in partnership with Onyx Pharma had developed a tyrosine kinase inhibitor effective against liver and kidney cancer- this compound emanating from the ‘nib’ family was named as sorafenib and is popularly known by its market name Nexavar.  Sorafenib is normally prescribed to patients at advanced stage (stage IV) of liver cancer.  While Nexavar may not cure the disease, it prolongs life by another 6-8 months in case of liver cancer and almost 5 years in case of kidney cancer.

Bayer Corporation was granted a patent for this drug in India on March 3, 2008.  Nexavar was launched in US in 2005 and was launched in India in 2008 at a price of about USD 5,600.

As expected, a generic version of sorafenib, manufactured by Cipla, came up in May 2010 priced at about USD 600 for a month’s therapy.  Bayer immediately sued Cipla in Delhi High Court for patent infringement, injunction and other reliefs.  The suit was pending adjudication.

Meanwhile, Natco Pharma Ltd approached Bayer and sought voluntary licence for sorafenib.  Bayer declined to grant any such licence and instead in May 2011, sued Natco also in the same High Court.  This suit is also pending adjudication.

In July 2011 Natco took the step of filing application for compulsory licence invoking section 84(1) of the Patents Act 1970.  Natco, in its application alleged that: a) reasonable requirements of the public were not satisfied b) the patented product was not available in India at a reasonably affordable price and c) the patented invention is not worked in the territory of India.

Course of proceeding:

After Natco’s application under section 84 was filed, the Controller published the same in the Patent Journal, inviting opposition from the public including the patentee.  The Patentee normally has a statutory period of 2 months to file its reply along with any evidence.  At the fag end of the deadline, Bayer filed a writ in the High Court, challenging the publication by the Controller.  The Mumbai High Court did not entertain the same for lack of jurisdiction; and expecting similar reaction from the Delhi Court, Bayer gave up this route.  A reply was eventually filed in November and the parties completed the pleadings by December by filing evidence.  Natco relied not only on internal experts but also filed affidavits from James Love regarding affordability and pricing structures as well as from doctors.  Bayer relied on internal experts.

Submissions by the parties:

Both parties submitted volumes of evidence on record and eventually, the matter was set down for hearing and heard over January and February 2011.

Natco, in support of the ground that ‘reasonable requirements of the public are not satisfied’   relied on data extracted from Globocan & National cancer registry, to demonstrate that the total number of patients in India suffering from liver and kidney cancer may be around 30,000 and since the disease is detected only at advanced stage, most of the patients would require this drug.  Natco also argued that a 6-month therapy of Bayer’s drug amounting to approximately USD 33,000 was clearly beyond the reach of a common patient, at least in India considering the country’s status on the World  report and the purchasing Power parity.  Natco’s third argument was based on Bayer’s own statements to the Patent Office to the effect that over the last 3 years, they had catered to not more than 500 patients in all.

Bayer prayed for refusal of the licence for reasons including that:

• The number of patients according to Bayer, at advanced stage and requiring Nexavar therapy was not more than around 8000 per year;- Keeping in view the patient base, the R&D costs incurred by Bayer, and effort taken to market the product in India, the price of the drug is ‘reasonably affordable’;
• There are patient access programs wherein certain concessions can be availed, further reducing the overall cost of the drug;
• Cipla was already selling the drug in the market at Rs 30,000 and thus a cheaper alternative was already available;
• Together Cipla and Bayer are able to cater to over 500 patients and hence the requirements of the public are
• In addition, patients may avail insurance covers/policies;

During the hearing, Bayer sought adjournment of one year (as provided under sec 86) to work the invention and proposed to modify its patient access program and make the drug available at Rs 30,000 to needy and deserving patients.

The order:

Finally, the Controller of Patents, after hearing the parties at length, held in favour of Natco Pharma and issued the first ever compulsory licence for various reasons including that:

• Bayer’s worldwide launch of the product was 2006 whereas in India Nexavar had been launched only in 2008.  The Controller found that even going by Bayer’s statistics, only a fraction  of the patient base (less than 2%) was catered to by Bayer, which is a lapse in working of patent that remains unexplained;
• Bayer’s own statements show that it had taken minimum steps to work the patent in India; whereas the law requires ‘working’ to the fullest extent which mandate was not satisfied.  The Controller dismissed the modified patient access program as ‘philanthropy’ and noted that market price was still pegged at Rs 2,80,000 which is the main issue in the matter;
• 'Affordability’ as per the Controller, has to be determined keeping in view predominantly, the public and their power to afford & pay for the drug.  He noted that UK refused to subsidise Nexavar since it was too expensive.  In the given case, the Controller found that the price of sorafenib was far beyond the reach of an average common man in India;
• Because the product was priced at a premium, most of the patient population could not purchase the drug, eventually leading to non-availability of the drug in India;
• Controller also refused to consider sales made by Cipla as the obligation to work the patent was cast on the patentee not on any infringer.  And further, Bayer while alleging infringement and trying to injunct Cipla at the High Court was asking for Cipla’s sales to be taken into account, which shows its dual stand, which is totally unacceptable.

Having so found, the Controller issued the compulsory licence to Natco Pharma and kick-started the regime in India.  The Controller has stipulated that Natco price the drug at Rs 8,880 for a pack of 120 tablets (a month’s dosage) and pay 6% of net sales as royalty to Bayer.

The order is very significant because this is the first time that the compulsory licence provisions have actually been used to make a life saving drug accessible to the public.  It could act as a catalyst spurring innovators to come up with creative strategies, including differential pricing, distribution alliances etc. to fulfill the requirements of the Act.  The decision would be challenged in appeal, making this space very interesting.