The Controller General of Patents, Designs and Trademarks has allowed Natco Pharma, a Hyderabad-based company, to sell a generic copy of a patented Bayer cancer drug, saying Bayer charged a price unaffordable to most of the nation. This is the first time a compulsory licence of a patented drug has been granted in India since it signed up for the World Trade Organisation’s Trade-Related Aspects of Intellectual Property Rights (Trips) agreement in 1995.
The Trips agreement provides flexibility to governments to produce the patented product or process without the consent of the patent owner, for domestic consumption and at specified price. In this case, Bayer must license Nexavar, or sorafenib, to Natco Pharma. In exchange, Natco will pay Bayer a 6% royalty on its net sales and must sell the drug for Rs 8,800 a month, about 3% of the Rs 280,000 that Bayer charges for it in India.
The patents office went by rules governing affordability of drugs three years after they are patented in the country and by the multilateral requirement that the patent holder must be compensated. The Trips agreement says, “The right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorisation”, but it does not define adequate remuneration or economic value.
Bayer, of course, can appeal against the decision in India. But the big worry for Big Pharma is does this open the door to a flood of other compulsory licences in India and possibly in other developing countries, creating a new supply of cheap generic drugs?
The Trips flexibility was further widened during the WTO’s Doha Round negotiations to allow the export of drugs produced under compulsory licence to countries that do not have the capability to make even their generic versions. These are typically the poorest nations, but Indian pharmaceutical companies have in the past done brisk business selling them cheap generics allowed under a product, not process, patent regime.
The framework for allowing generics made under compulsory licences to be exported to countries that lack production capacity was agreed upon in 2003. Rich countries, 33 in all, have committed not to import drugs under this system. Another 11 countries said they would use it only in a national emergency. Potential exporting countries, whose laws complied with the original Trips provision requiring production under compulsory licensing to be predominantly for the domestic market, were required to modify them suitably.
Norway, Canada, India and the EU have informed the WTO they have done so. And so long as a drug is not patented in a least-developed country, its government does not need to issue a compulsory licence to import. But the supplying nation must issue a compulsory licence to export a generic copy of a drug patented in that country. Bayer’s drug could be a test case on whether India wants to use the Trips flexibility for trade promotion.