Third World Economics No. 517 (16-31 March 2012)

India issues compulsory licence for anti-cancer medicine

In what public health advocates have hailed as a landmark decision, India’s patent authorities have granted a local manufacturer a compulsory licence to produce a low-cost generic version of a key cancer drug.

by K M Gopakumar

NEW DELHI: India’s Patent Office on 12 March issued a compulsory licence on Bayer’s anti-cancer medicine sorafenib tosylate to a domestic manufacturer Natco Pharma, opening the door to a much cheaper generic version of the life-saving medicine.

Sorafenib is used in the treatment of primary renal cell carcinoma (kidney cancer) and advanced primary liver cancer known as hepatocellular carcinoma that cannot be treated with surgery. Sorafenib can extend the life of kidney cancer patients by 4-5 years and of liver cancer patients by 6-8 months.

The compulsory licence (CL) is granted to Natco under Section 90 of the Indian Patents Act with 13 terms and conditions, and is operational for the remainder of the term of the patent till 2020. When the patent expires in 2020, there will be no restriction on other generic production.

The patented version produced by German pharmaceutical giant Bayer costs about $5,600 per month. Under the CL, the price of the generic medicine sold by Natco shall not exceed Rs8,880 (about $176) for a pack of 120 tablets required for one month of treatment. This constitutes a price reduction of nearly 97%.

Natco must maintain records including accounts of sales in a proper manner and shall report the details of sales to the Controller of Patents as well as the licensor (Bayer) on a quarterly basis, on or before the fifteenth day of the succeeding month. Natco shall have the right to manufacture the medicine covered by the patent at its own manufacturing facility and  shall  not  outsource the production.

The licence is non-exclusive (i.e., others may be licensed to manufacture) and non-assignable. Natco shall pay royalty to Bayer at the rate of 6% of the net sales of the drug on a quarterly basis and such payment shall be effected on or before the fifteenth day of the succeeding month.

The licence is granted solely for the purpose of making, using, offering to sell and selling the medicine covered by the patent for the purpose of treating the two types of cancer in humans within the territory of India.

Natco shall supply the medicine to at least 600 needy and deserving patients per year free of cost. It has to annually submit in the form of an affidavit the details of such patients, i.e., name, address and the name of the treating oncologist, to the Office of the Controller of Patents and such report shall be submitted on or before 31 January of the year, in respect of the preceding year.

Natco shall not have the right to import the medicine. The licence does not include any right to represent publicly or privately that Natco’s generic product is the same as Bayer’s or that Bayer is in any way associated with Natco’s product.

The generic product must be visibly distinct from Bayer’s product (e.g., in colour and/or shape), the trade name must be distinct, and the packaging must be distinct. Bayer will provide no legal, regulatory, medical, technical, manufacturing, sales, marketing or any other support of any kind to Natco.

Natco is solely and exclusively responsible for the product and for all associated product liability. Bayer, its directors, officers, employees, agents and affiliates shall not be held liable in any manner whatsoever for any action of Natco.

Bayer is free to do whatever it wishes with its residual patent rights subject to the non-exclusive licence to Natco, and is free to compete with Natco and to grant its own licences to third parties to compete with Natco.

(It has been shown in previous cases that the availability of generic versions of a patented medicine results in competition that drives prices down, making essential medicines much more accessible to patients.)

In reaching the decision, the Controller of Patents found that Natco’s CL application was justified on three grounds under Section 84(1)(a), (b) and (c) of the Patents Act that allows for a CL after the expiry of three years from the date of grant of a patent.

These grounds are: (a) the reasonable requirements of the public with respect to the patented invention have not been satisfied; (b) the patented invention is not available to the public at a reasonably affordable price; and (c) the patented invention is not worked in the territory of India.

Natco had sought the CL citing all these three grounds. The Controller accepted Natco’s contention that Bayer as a patentee failed to fulfil the above three grounds under the law.

“Not at all justifiable”

On the first ground, the Controller stated that “the patentee’s conduct of not making the drug available as per the requirements of the public in India during the four years since the grant of patent, is not at all justifiable”.

The Controller further stated that “it is also not the case of the patentee that there is no demand for the drug because as per their own submission, there is requirement for at least 8,842 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”.

The Controller further held that Bayer also failed to fulfil Section 84(7)(a)(ii) of the Patents Act. This provision states that reasonable requirements of the public with respect to the patented invention shall be deemed not to have been satisfied if, by reason of the refusal of the patentee to grant a licence or licences on reasonable terms, the demand for the patented article has not been met to an adequate extent or on reasonable terms.

The  Controller  rejected  Bayer’s argument that  there is an adequate supply of sorafenib if one takes into account the number of boxes sold by another generic manufacturer Cipla, which is facing a patent infringement suit from Bayer for producing a generic version of sorafenib.

According to Bayer, 8,842 patients require sorafenib treatment. The affidavit filed by Bayer stated that the projected sales in 2011 would be 5,279 boxes, with a break-up of 593 boxes from Bayer and 4,686 boxes from Cipla. Bayer also submitted a sales projection table showing that Cipla and Bayer would reach out to 9,463 patients by 2015.

Rejecting this submission, the Controller found out from Form 27 [the statement regarding the working of a patented invention on commercial scale in India under Section 146(2) of the Patents Act] that Bayer imported only 340 units (60-tablet pack) of “support pack” and 340 units (960-tablet pack) of sample pack “both having an invoice value of Rs1,045,692 (about $20,941) packets”.

Hence, the Controller held that “from the Form No. 27 filed by the patentee for the year 2009 and 2010, ... only an insignificant quantum of the drug was made available by the patentee to the public during these two years. As discussed, I am not inclined to buy the argument of the patentee by taking shelter of ... Cipla’s supply”.

[Section 146(2) of the Patents Act states that “every patentee and every licensee (whether exclusive or otherwise) shall furnish in such a manner and form and at such intervals not being less than six months as may be prescribed, statements as to the extent to which the patented invention has been worked on a commercial scale in India”.]

The Controller further stated that “for  argument sake, even if I consider the sale of 4,686 packets during 2011 by ... Cipla, the supply in India was not anywhere near the requirement”.

On the second ground, i.e., whether the patented invention is not available to the public at a reasonably affordable price, the Controller decided that “during the last four years the sales of the drug by the patentee at a price of about Rs280,000 (for a therapy of one month) constitute a fraction of the requirement of the public. It stands to common logic that a patented article like the drug in this case was not bought by the public due to only one reason, i.e., its price was not reasonably affordable to them. Hence, I conclude beyond doubt that the patented invention was not available to the public at a reasonably affordable price and that Section 84(1)(b) of the Patents Act 1970 is ‘invoked in this case’”.

On the argument of Bayer that “affordable to the public” is required to be considered as affordable to different classes/sections of the public, the Controller stated that “I fully agree with the patentee. I only wonder why the patentee did not execute this concept by offering differential pricing for different classes/sections of public in India”.

On the third ground of whether the patented invention is not worked in the territory of India, the Controller decided that “it is an admitted fact that the patentee does have manufacturing facilities for manufacturing drugs in India, including oncology drugs.

However, even after the lapse of four years from the date of grant of patents, the patentee failed to do so ... Accordingly, I hold that Section 84(1)(c) is attracted in this case and consequently a compulsory licence be issued to the applicant under Section 84 of the Act”.

In reaching this decision, the Controller rejected Bayer’s argument that the working of patents does not mean manufacturing but that importation is sufficient to fulfil the Section 84(1)(c) requirement.

To support its argument, Bayer cited Article 27(1) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and argued that the deletion of the words “manufactured in India” from Section 84(7)(a)(ii) during the Patents Act amendment in 2002 was to comply with the TRIPS Agreement.

[According to Article 27(1), patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether the products are imported or locally patented.]

Rejecting Bayer’s argument, the Controller held that “When Article 27(1) of the TRIPS Agreement is read with the afore-mentioned provisions of the TRIPS Agreement and the Paris Convention [for the Protection of Industrial Property], it follows that importation of a patented invention shall not result in forfeiture of a patent. However, a reasonable fetter on the patent rights in the form of a compulsory licence is very well within the purview of the Paris Convention and TRIPS Agreement, when there is an abuse of patent rights.”

Landmark decision

According to several experts, this is a landmark decision in the post-TRIPS Agreement era. Even though many CLs were issued after the conclusion of the TRIPS Agreement, especially after the adoption of the Doha Declaration on the TRIPS Agreement and Public Health, these have mainly been for HIV/AIDS medicines and have been in the form of “government use” orders. This is believed to be the first time that a CL has been granted in a developing country at the request of a generic company.

Experts also pointed out that this would pave the way for issuance of more CLs especially for medicines for non-communicable diseases that are increasingly becoming a public health problem.

There are at least 33 more patented medicines which are sold at exorbitant prices in India by multinational corporations. For instance, a 50 ml injection of Roche’s anti-cancer drug trastumuzab (brand name: Herceptin) costs Rs135,200 (about $2,585.76); Merck’s cetuximab (Erbitux) Rs87,920 (about $1,683.93); Bristol-Myers Squibb’s ixabepilone (Ixempra) Rs66,430 (about $1,271.18); Pfizer’s pegaptanib (Macugen) Rs45,350 (about $867.48); Sanofi-Aventis’ rasburicase (Fasturtec) Rs45,000 (about $861.27); and Roche’s bevicizumab (Avastin) Rs37,180 ($711.49).

These 33 medicines fall under the following disease categories: anti-cancer (10), cardiac (7), anti-infectives (5), neurological (4), analgesics (3), anti-diabetic (3) and ophthal/otologicals (1).

Public interest groups, industry and the market welcomed the CL order.

Dr Amit Sengupta of the People’s Health Movement said: “Extremely significant is that this is a rare instance where a general CL has been issued, not bound by government use provisions or those requiring to show ‘extreme urgency’ or ‘emergency’. Practically all CLs issued so far in other parts of the world have been of the latter kind. By using a CL that can be utilized by a generic company without encumbrances, means a possible opening of opportunities for using CL to promote competition.”

M R Santhosh of the Centre for Trade and Development, a New Delhi-based think-tank working on issues of access to medicines, welcomed the order but cautioned that “India is likely to face exceptional pressure from developed countries and multinational pharmaceutical companies in the coming weeks”.

Dr Gopakumar Nair, Chairperson of the Sub-Committee on Intellectual Property Rights, Indian Drug Manufacturers Association (IDMA), said: “This is a landmark judgement and is long awaited from the Indian Patent Office. Being acknowledged as the ‘pharmacy of the world’, India has to meet the aspirations of the developing and least developed countries.”

He also stated, “In achieving the balance of rights and obligations, access to affordable critical medicines is as much an obligation on the part of both the patentee and the government.”

Medecins Sans Frontieres (MSF) Access Campaign’s Director of Policy/Advocacy, Michelle Childs, said: “This decision serves as a warning that when drug companies are price gouging and limiting availability, there is a consequence: the Patent Office can and will end monopoly powers to ensure access to important medicines.”

The stock market also seemed to viscerally welcome the decision. The share price of Natco appreciated by about 7% and recorded a 52-week high after the announcement of the CL order. (SUNS7330)