On September 17, the Indian pharma industry won an important battle: the Intellectual Property Appellate Board dismissed German drugmaker Bayer AG's petition seeking a stay on the 'compulsory licence' (CL) issued to Natco Pharma for selling generic copies of the cancer drug Nexavar in India.
To understand the import of this decision and what it means for those who cannot afford the prohibitively expensive Nexavar drug, let's go a bit into the history of this patent battle. In 2005, India signed the WTO-Trips (Trade Related Intellectual Property Rights) agreement and moved from a process to a product patent system for pharmaceutical products. The former, which existed from 1970 to 2004, allowed domestic firms to innovate and produce low-cost generic versions of patented medicines. Under the post-2005 system, multinational drug-makers with new inventions are allowed market exclusivity for 20 years from the date of the filing of the patent application. This prevents generic drug-makers from innovating and producing low-cost generic versions for 20 years.
However, India's patent law, in line with the WTO's Trips agreement, incorporated CL. A CL is issued by the government to authorise procurement, import, manufacture and marketing of an affordable generic version of an expensive patented medicine on the payment of a royalty to the patent holder. This is done to make medicines affordable. Understandably, there was tremendous pressure on developing countries to reserve CL for emergencies only. This is a misguided reading of the domestic patent legislation and international trade law.
Like many other countries, India, too, included several CL provisions in the Patents Act. Thus, CLs can be issued to generic producers if patented drugs are unavailable or unaffordable domestically - as in the case of sorafenib tosylate (brand name: Nexavar, marketed by Bayer) - or if countries that lack production capacity order drugs from India. The government can also notify drugs on which CLs are required for public non-commercial use and in situations of national emergency or extreme urgency.
India's first CL has come seven years after the implementation of the Trips agreement and was initiated not by the government but by an application made by a generic manufacturer - Natco - before the Indian Patent Controller. Bayer obtained patent and marketing rights in India for Nexavar, a drug used in advanced kidney and liver cancer, in 2008. Bayer priced it at Rs. 2.8 lakh per patient per month. Cipla entered the market in 2010, launching sorafenib tosylate, charging Rs. 30,000 per patient per month for the drug.
In 2011, Natco started CL proceedings by applying first for a voluntary licence from Bayer and then following it up with an application before the Patent Controller. Offering to market the drug at Rs. 8,800 per person per month, Natco received the first CL in March 2012, against the payment to Bayer of 6% royalty on sales.
Immediately after the CL was issued to Natco, Cipla went into the market by dropping its price further to Rs. 6,840. While Cipla is facing an infringement suit from Bayer for violating patent law, Natco's case was challenged by Bayer in the Intellectual Property Appellate Board (IPAB). But Natco was granted the CL because Bayer had made the drug available only to a small percentage of patients (approximately 2%), which did not meet the requirements of public interest. The IPAB upheld Natco's claim for CL and dismissed Bayer's petition. This is a major victory for the people of this country.
The critics of CL claim that foreign investment would be hampered and economic growth would suffer if such licences are issued to the detriment of foreign players. This is wrong. In the past 20 years, India has been receiving less than 2% of its foreign direct investment in pharmaceuticals. The Indian pharmaceutical industry is growing because of investment by domestic companies rather than multinationals.
Different stakeholders need to work together to identify potential candidates for the issuance of compulsory licences in the future. This will not only accelerate access to essential medicines in India but will facilitate its access in several developing countries that are looking to India for direction.
Sakthivel Selvaraj is a health economist with the Public Health Foundation of India
The views expressed by the author are personal