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Natco gets India’s first compulsory licence-CH Unnikrishnan

In a landmark decision, India’s intellectual property office on Monday allowed Hyderabad-based Natco Pharma Ltd to make and sell a copycat version of German drug maker Bayer AG’s patented cancer treatment Nexavar. It’s the first time that an Indian company has been granted the so-called compulsory licence to market a generic version of a patented drug.

The drug, patented by Bayer in India in 2008, is used in the treatment of liver and kidney cancer, and costs Rs.2.8 lakh for a month’s dosage. After Bayer rejected Natco’s request for a commercial licence to manufacture Nexavar, the Indian company in September applied for a compulsory licence to make a copy of the drug, claiming the patent holder had failed to meet the needs of the local market.

A compulsory licence allows a generic drug producer to make and sell its version of a patented drug without the consent of the patent holder.

According to the World Health Organization, India has an estimated 29,000 patients with liver and kidney cancer.

In a 62-page order, the Controller General of Patents, which completed hearing both companies in February, said a compulsory licence under section 84 of the Patents Act has been granted to Natco to make the drug.

The patent office 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.

“We will stick to the terms on pricing and drug accessibility to patients,” said a spokesperson for Natco. The company’s stock gained 6.17% on BSE to close at Rs.314.95 on Monday; the benchmark Sensex rose 0.48%.

Section 84 lays down that three years after the grant of a patent, any entity may apply to the patents office for a licence to sell a generic version of the drug on grounds that the patented version has not worked in India, that the requirements of the public haven’t been met or that it isn’t available to users at a reasonable price.

The order is globally significant because India hadn’t previously invoked the compulsory licensing provision although several developing countries, including Brazil and Thailand, have used the provision to increase citizens’ access to expensive, life-saving drugs.

“The order will have a global impact as developing as well as developed countries were eagerly following this case to see how the world’s largest democratic country uses these patent laws,” said Gopakumar Nair, a patent expert and intellectual property consultant. “The order paves the path for using the flexibilities provided by trade-related intellectual property rights against the abuse of patent rights.”

Bayer is currently fighting a patent infringement case with another local drug maker, Cipla Ltd, on the drug, and is awaiting a verdict in the case from the Delhi high court.

The order by the patents office said Natco was being permitted to produce a generic version of Nexavar because it had established that thedrug wasn’t affordable in the local market. The patentee continued importing the drug, but was able to provide it to only a small fraction of patients.

“We are disappointed by the decision of the patent controller in India to grant a compulsory licence for Nexavar,” Bayer India’s spokesperson Alok Pradhan said in an email response. “We will evaluate our options to further defend our intellectual property rights in India.”

The foreign drug makers’ lobby, the Organisation of Pharmaceutical Producers of India, echoed its disappointment.

“Today’s announcement to issue a compulsory licence is disappointing, as such measures cannot be the permanent solution of improving access to innovative medicines in India, while creating an appropriate ecosystem to foster innovation in the country,” said Tapan Ray, director general of the group.

Mint had in February reported that Bayer, during hearings on the matter, had been asked to justify the high price of the drug. Natco claimed in its application that the patentee could supply Nexavar only to a fraction of the patient population in the local market because the majority couldn’t afford it.

Bayer argued that it will be difficult for the company to reduce the price because it had incurred a substantial cost in developing the drug, while saying that it supplied the drug at a discount to the needy through its patient access programme.

The patents office’s order showed that the company had failed to furnish data specific to the drug to establish its claims.

“During the hearing, the patentee submitted that the cost of making the invention and developing a new medical entity like the drug in the case works out to be about €1.8 billion (around Rs.11,775 crore today),” controller general P.H. Kurian said in the order.

“However, the figure arrived was for the cost of R&D (research and development) for five years preceding 2010... In the absence of any definite figure on the cost of developing the drug and making it available to the market, including the patenting, etc.... I am unable to arrive at the actual cost...,” the order said.

Natco’s lawyer Rajeshwari H. had in the hearing stated that since Nexavar (generically known as sorafenib) was developed as an orphan drug, which typically receives patent grants from governments and other agencies as such a product is meant for meeting the needs of a tiny patient segment that is otherwise ignored by commercial entities, the cost may not have been substantial.

The US Food and Drug Administration has on its website identified sorafenib as an orphan drug.

“This decision heralds the start of a new era in the history of pharmaceutical patents and public health,” said Shamnad Basheer, a professor of intellectual property law at the National University of Juridical Sciences, Kolkata. “It will effectively spur other generic manufacturers to apply for compulsory licences and we’ll soon see the start of a phase where prices of patented pharma drugs drop significantly, at least in developed countries, where the threat of a compulsory licence looms large.”

Namrata Nandakumar in Mumbai and Viswanath Pilla in Hyderabad contributed to this story.