Compulsory Licenses: Indian Debut
28 August 2012
Innovator pharmaceutical corporations have recently faced a tough time enforcing their patent rights in India. The past couple of years have seen the power of low pricing by generics manufacturers as a major threat to the pharma patents monopoly system. To add to their fears, the recent first-ever grant of a compulsory license in India has shaken the pharma industry. Remarkably, there is no precedent to guide the tribunal, and the order is first ever of its kind in India.
Natco filed an application seeking a compulsory license under Section 84 of the Indian Patents Act, from Bayer for the drug Sorafenib tosylate, which is useful in advanced stages of liver and kidney cancer. Section 84 states that at any time after the expiration of three years from the date of the grant of a patent, any person may make an application to the Controller for grant of compulsory license on the grounds that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or that the patented invention is not available to the public at a reasonably affordable price, or that the patented invention is not worked in India.
It is worth noting that Sorafenib is not a life-saving drug but a life-extending drug. Prior to filing the compulsory license application, the Applicant had already made effort to obtain from Bayer a license for making and selling the drug, which was refused by Bayer as Applicant did not propose any terms and conditions in their request. The Patent Office Tribunal, at which the Controller General of Patents, Designs and Trademarks were present, considered the following three substantial issues:
(i) whether or not reasonable requirements of the public have been satisfied;
(ii) whether or not the patented invention is available to the public at a reasonably affordable price; and
(iii) whether or not the invention is worked in India.
Natco submitted statistics based on liver cancer patients in India that 90% of the cases are detected at a later stage, which require the treatment by drugs like Sorafenib. Natco also submitted that only 200 bottles of the drug were imported in 2009, in contrast to the requirements of 23,120 bottles for kidney and liver patients. Thus, Natco said, the patentee had not done enough to meet the reasonable requirements of the public and that drug was available only in metro cities. Bayer said that the Applicant failed to mention that Cipla has been selling the generic version of the drug since April-May 2010. Moreover, Bayer has systems in place to ensure supply of the drug to the hospitals, distributors, pharmacies and patients. The treatment of cancer is supervised by specialized doctors that reside in big cities and therefore, providing drug to the small villages is not required. Thus, Bayer said, the applicant’s argument that the drug is not accessible to the public is not justified.
The Controller said that supplying the drug to the country is the responsibility of the Patentee and not the third parties. Cipla is already facing a suit of infringement in this matter, and is presumed to be only an infringer. Cipla may face an injunction anytime during the judgment, thereby stopping its sales. Under such circumstances, the Controller said, the public cannot be left at mercy of such an uncertain supply.
With regard to affordability, the Applicant submitted that the drug is sold at very high rates and that a monthly supply of the drug would cost approximately Rs280,000 (US$5,600) per patient. Bayer replied that the generic version of drug sold by Cipla costs only Rs30,000 per month and that innovation-based products cost more than generics. The costs of the drug includes R&D costs but also the costs that go into failed projects, which represent 75% of all projects. Interestingly, Bayer tried to define the term “reasonable price” considering the expenditure in R&D and defined the term “affordability” by stating that the drug is affordable under insurance cover.
As regards the invention being worked in India, the Applicant submitted that the patent is not being worked in India, as it is imported into India and not manufactured here. Bayer replied that local working does not mean “local manufacturing.” As the term “worked in India” has not been defined in the Act, the Controller had to seek meaning from various international conventions and agreements. The Controller concluded that “worked in territory of India” implies manufactured in India and not merely imported. Presently, in absence of any clear case law, “importation” is also generally considered to constitute working. The decision by the Controller will potentially affect the status of working of several inventions within India.
This first-ever attempt of Natco for a compulsory license will encourage other generics manufacturers operating in India to seek such license rather than directly selling the patented drug and then bearing the costs of the infringement suits. This trend may eventually lead to the entry of low-cost life-saving and life extending drugs, and will surely have a long-term effect on the pharma industry in India. However, it is likely to result in some foreign pharma innovator companies stopping investments into R&D for drugs specific to developing countries while some other innovator companies may increasingly try to reduce development costs by setting up R&D units in lowcost economies like India and China and consider differential social pricing to make the drugs affordable to wide cross-section of society.
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