Compulsory License Will Allow Natco To Sell Generic of Bayer's Nexavar in India

Bloomberg BNA’s Patent Trademark & Copyright Law Daily™is the IP industry’s premier news service, offering objective, timely,and reliable daily news coverage and commentary from leading IP law...

By Madhur Singh  

MUMBAI—In a landmark decision, India's patent office has granted Hyderabad-based Natco Pharma Ltd. a compulsory license to sell Sorafenib, a generic version of the German Bayer AG's patented kidney and lung cancer drug Nexavar, in India.

This is the first compulsory license to be granted in India since the country began implementing its obligations under the WTO's Trade-related Aspects of Intellectual Property Rights agreement in 2005. The ruling, dated March 9 but made public March 12, opens the doors for more Indian generics makers demanding compulsory licenses, and may have a ripple effect across developing countries.

Compulsory licensing is a legal remedy under TRIPS for addressing non-availability and non-accessibility of expensive drugs. A government can order a patent holder to give licenses to generic drug makers to manufacture generic copies of their patented drug in return for a royalty.

Natco Makes Case for Compulsory Licensing

In March 2008, Bayer was issued a patent (215758) to sell Nexavar in India.

Natco Pharma, an Indian generics maker, applied to Bayer to license the patent for a generic version of Nexavar—Sorafenib—under India's compulsory license rules. Unsuccessful with that application, Natco filed an application for grant of a compulsory license with the Controller General of Patents, Designs and Trade Marks, in July 2011.

In its application, Natco argued that the availability of Sorafenib is limited in India as all of Bayer's supplies are imported and made available for sale only in a few major cities and some states. Natco alleged that Sorafenib reaches less than 1 percent of the patients who need it.

It further argued that the cost of the drug, $5,600 per month, is prohibitively expensive for Indian patients, who have to pay out of their pockets.

Further, Natco said, the case met the requirements laid down under Section 84 of the Patents Act, 1970 : (1) more than three years had elapsed since the grant of the patent and Bayer had failed to take adequate steps to manufacture Sorafenib in India; and (2) there was a prima facie case that the reasonable requirements of public accessibility and affordability were not being met.

Natco claimed it had the capability to manufacture Sorafenib and could supply it at 74 rupees ($1.48) per-tablet, which works out to 8,800 rupees ($176) per-month. It said it would also provide the tablet free of cost to patients who could not afford even 74 rupees for a tablet. It also undertook to not export Sorafenib to other countries if it were awarded a compulsory license.

Bayer Counters Licensing Request

In several hearings over the last nine months, Bayer actively opposed the grant of a compulsory license, arguing that the applicant had submitted inaccurate figures regarding the requirement and availability of Nexavar in the Indian market.

While arguing that it could not sell the drug at a lower price because of the amount invested in its development, Bayer had insisted that the local demand is being met Bayer and another Indian drugmaker, Cipla Ltd., which had launched an “at risk” generic version of Nexavar.

An “at risk” launch is when a non-patentee company launches a copy of a patented drug. Cipla is currently fighting a case for patent infringement filed by Bayer in the Delhi High Court, and faces a possible injunction.

In the latest hearing in the last week of February, the controller general of patents, designs and trade marks had asked Bayer to submit data on the cost of Nexavar to the company, including research and development expenditure, to justify the price.

Ruling Favors Natco

From records submitted by Bayer, the controller of patents, P.H. Kurian, concluded that Bayer had failed to make available an adequate amount of the drug, and ruled that “the Patentee's conduct of not making the drug available as per the requirements of public in India (sic) during four years, since the grant of Patent, is not at all justifiable.”

He also found that the drug's price was too high for Indian patients, and that the company had not adequately “worked” its patent. To “work” a patent, the controller said, means to “manufacture to a reasonable extent.”

Controller Kurian did not agree with the argument that Cipla's supply is meeting market requirements, pointing out that as an alleged infringer, it could not discharge the responsibility of the patentee to make the drug available and accessible in India.

“Accordingly, I hold that the reasonable requirements of the public with respect to the patented invention have not been satisfied in this case and consequently a compulsory license is issued to the Applicant under Section 84 of the Act,” he ruled.

Implications: Lower Costs, Additional Licensing

The license allows Natco to sell the drug at a maximum price of 8,880 rupees for a pack of 120 tablets, which comprise a month's therapy. Natco will pay a royalty of 6 percent of net sales of the drug on a quarterly basis to Bayer.

Natco will not be able to import or export Sorafenib, and will also have to ensure that its product looks visibly different from Bayer's.

Further, Natco will have to supply the drug free of cost to at least 600 needy patients every year.

Natco Pharma welcomed the ruling. Its legal and corporate general manager M. Adinarayana, said to Bloomberg BNA March 12, “This is a wonderful, remarkable ruling for generics and for Indian patients.” He said the license had been granted for the remaining life of Bayer's patent (20 years from the date of application), which adequately rewards Natco's “16 months of efforts” fighting for a license.

A Bayer spokesperson said in an email March 12 the company is disappointed by the decision and “will evaluate our options to further defend our intellectual property rights in India.”

Natco's Adinarayana said Bayer may issue a license to Natco's rival companies to undercut the profitability of Natco's license, since the license granted by the patent office was non-exclusive.

Analysts say the decision will pave the way for other generic companies to apply for compulsory licenses. “And it will also have international ramifications, since it will perhaps trigger an active compulsory license regime in other developing countries,” Shamnad Basheer, a professor of intellectual property law at the National University of Juridical Sciences, Kolkata, said in an email interview March 12.

“One hopes this order prompts innovator drug companies to engage in more significant differential pricing schemes and introduce drugs at much cheaper prices in countries with significant numbers of extremely poor patients,” Basheer said. He added that Bayer may appeal the order and may “adopt creative legal strategies” to prevent the controller's order from being implemented.

He also pointed out that both Cipla and Natco have challenged the validity of Bayer's patent on Nexavar in the Delhi High Court. If that challenge is successful, Basheer said, Natco's compulsory license will become ineffective, thereby allowing any manufacturer to make and sell Sorafenib.

For More Information

Ruling at