First Compulsory License Grant in India to Natco

The Controller General of India passed an order of compulsory license (CL) against Bayer’s patent on drug Nexavar on March 09, 2012, which is India’s first compulsory license and is resulting from India’s first CL application filed by Natco last year which was reported and discussed by us here. The complete CL order is available at the Indian Patent Office website here.

The grant permits Nacto to manufacture and market a generic version of Nexavar for Rs. 8800 for 120 tablets per month treatment (against Rs 284,428 per month by Bayer) in return for paying 6% royalty on sales to Bayer. The order also makes it obligatory for Natco to supply the drug free of cost to at least 600 needy patients per year.

The CL was granted in accordance with the grounds described under section 84 of the Indian Patent Act.

Section 84(1) of the Indian Patent’s Act allows any interested person to make an application to the Controller for grant of compulsory license after the expiry of three years from the date of grant of patent on any of the following grounds:

a. that the reasonable requirements of public with respect to the patented invention have not been satisfied

b. that the patented invention is not available to the public at reasonably affordable price,

c. that the patented invention is not worked in India.

The Controller gave his reasoning and conclusion separately on each of the above three grounds and found that all the grounds are satisfied in granting the CL against Bayer. His brief reasonings are as below:

1.      Reasonable Requirements of public are satisfied [84 (1) (a)]

Controller found that the drug is available to only 2% of the eligible patients and thus reasonable requirements of the public are not satisfied. He noted: “…there is requirement of at least 8842 patients. Even after the lapse of three years, the Patentee has imported and made available only an insignificant proportion of the reasonable requirement of the patented product in india.”  He did not take into consideration the sales of the generic version of the same drug in India by Cipla at lesser prices which was one of the reasons given by Bayer for lesser sales of the patented drug by Bayer in India. The Controller has also taken into consideration the Form 27 (Working of invention statement) filed by Bayer in 2009 and 2010 which show only an insignificant quantum of sales (only Rs. 2 crore for 2009) for the eligible patients.

2.      Non-availability at reasonably affordable price [84 (1) (b)]

Controller concluded that sales by Bayer at a price of about Rs. 2,80,000/- (for a month) constitutes a fraction of the requirement of the public and the only reason for not buying by them is due to no reasonable affordability.  He concludes, “Hence, I conclude beyond that the patented invention was not available to public at a reasonably affordably price…Consequently a compulsory license be issued to the Applicant…”

3.      Non-working in India [84 (1) (c)]

Controller after reading together the international agreements on intellectual property including TRIPS, Paris convention and the Indian Patent statutes including 83, 90, 84(6), came to the conclusion that the “worked in the territory of India” means “manufactured to a reasonable extent in India”. And Bayer failed to manufacture the drug in India even after four years from the patent grant date and further failed to grant voluntary licence for manufacturing in India and thus CL is to be issued to the Applicant.

 What can be the possible implications of the grant? :

  • Encouraging  for generic industry: More CLs to follow

Just the other day, even before CL decision came out, one of the top five Indian pharma companies (name undisclosed) discussed with us regarding their interest in filing six CL applications against six patented drugs separately owned by three different big players of the world.

This decision definitely could encourage more generic companies resorting to this route. As we have seen in majority of the generic – innovator patent battles in India, the pricing and public health issues always arise which seems to always go in favour of generic drugs over the patented ones. Further majority of the patented drugs are imported into India and in accordance with this decision, not complying with the “working in the territory of India” condition  which would further the chances of more CL application filings.

  • Bayer’s possible appeal to the court

It is strongly speculated that Bayer would appeal the Controller’s decision and try best to protect its IP rights.

  • MNCs may consider Differential Pricing structure

This decision may make the MNCs to consider the differential pricing structure for selling drugs for different sections/classes of the public in India. Even the Controller himself in his order brought this point as to why Bayer did not consider differential pricing.

  • Very positive for patients in India

This decision definitely would be having positive impacts on the patients suffering from kidney and liver cancers in India, who were not able to afford the such a high cost treatment.

  • Other countries may get motivated

This decision may motivate other low and medium income countries to adopt the same provision in their Patent Laws.

  • Precedent for the following cases

This is the first decision on Compulsory Licence Application in India and would act as precedent for all possible future cases.

About the Author: The Author of this article is Meenakshi Khurana, Patent Specialist at Khurana & Khurana, IP Attorneys and reachable at meenakshi@khuranaandkhurana.com

One thought on “First Compulsory License Grant in India to Natco”

  1. In Natco Vs Bayer first Compulsory License case in India, one of Patentee Terms and conditions was that the Applicant Natco should not invalidate the patent (directly or indirectly)…very strange that the applicant has accepted for this and the Controller in his order, never appreciated this condition but said ” the license is for the the balance of Term of patent”. Order could have been better if he would have introduced a clause regarding revocation (by the controller itself ) and the invalidity ( by NATCO) of the patent. Any thoughts on this? Thanks

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