NATCO PHARMA V BAYER CORPORATION: AN UNSEEN PRECEDENT IN PATENT LAW

“Compulsory licensing is when a government allows someone else to produce the patented

product or process without the consent of the patent owner. It is one of the flexibilities on

patent protection included in the WTO’s agreement on intellectual property — the TRIPS

(Trade-Related Aspects of Intellectual Property Rights) Agreement”.1

Article 31 of the Trade Related Intellectual Property Rights Agreement (TRIPS) gives a state

leeway to grant compulsory licenses in case of acute national emergency. The TRIPS

Agreement does not give a list of requisites of a compulsory license, but the same can be

gauged from the Doha Declaration on TRIPS and Public Health.

The essentials are-

The entity applying for a compulsory license must, on viable commercial terms

negotiate with the patent holder for grant of license; only if such negotiations fail,

would the applicant be allowed to go in for a compulsory license.

Even after a compulsory license has been issued by the competent authority, the right

holder has a right to receive adequate payment, the determination of which must take

into account the economic value of such licensing.

INDIAN PERSPECTIVE

The Indian Government has since then taken a number of steps to make the Indian Patent

System TRIPS compliant.

In India, Section 92 of the Indian Patents Act, 1970 was amended to incorporate the provision

of the Thirtieth August Agreement. The Indian Patent regime already had a provision for

compulsory licensing.2 Section 92(2) of the Indian Patents Act states that for obtaining

compulsory licensing the procedure under section 84 of the patents act would apply. The

person seeking a compulsory license must make an application to the controller of patents.

Section 92(2) of the Indian patents Act states that the patentee would have the right to oppose

1 World Trade Organization Handbook -Intellectual Property Rights2 Section 84, Indian Patents Act, 1970

the application for the compulsory license before the controller of patents. But there are

certain provisions 3 within the ambit of the current legal system which revoke the idea of

“audi altarem partem”, in cases of a situation of a public health crisis with respect to specific

diseases

THE ISSUE AND THE ARGUMENTS

The first compulsory licensing application was filed by Natco Pharma Ltd to export a drug

patented by Bayer Corporation. The drug in question here, a compound of Sorafenib

Tosylate, a compound covered under patent number 215758 and sold under the brand name

“Nexavar” as a drug for enhancing the lifetime of patients suffering from Kidney and Liver

Cancer. It would be very pertinent to mention here that Nexavar was not a life-saving but a

life extending drug, which could enhance the lifetime of cancer patients by 4-7 years. The

cost of the therapy was is Rs. 2.80,428/-.a month and Rs.33,65,136/- a year. Natco Pharma,

being one of the leading pharmaceutics manufacturers in India, approached Bayer

Corporation for a licensing deal, which could not materialize. Since the necessary period of

three years had passed, Natco applied for a compulsory license.

The court referred to reports by GLOBOCAN, which stated that there are 20,000 liver cancer

patients and 8900 kidney cancer patients in India. The drug Nexavar was available only at

some of the leading hospitals of Metropolitan Cities like Delhi, Chennai, Mumbai. According

to the reports, less than 1% of the patients derived any tangible benefit from the drug. The

drug received FDA approval in 2005 and began production in 2006. In India, the sale of the

drug for the first 3 years were negligible and in 2009 the sales were Rs. 16 Crores. At the

same time, the worldwide sale of NEXAVAR was close to $ 850 Mn , ie Rs, 4000 Crores.

These stats show that the availability of the drug has always remained a point of issue in

India. The patent in India was granted in 2008, but the patentee has put in little labour to

ensure availability of the drug, when at the same time, it has ensured healthy sales of the

same drug around the world

Total Patients

Demand for 80% of the patients

Bottles per month (Required)

Bottles imported in 2008

Bottles imported in 2009

Bottles imported in 2010

Liver ~20,000 ~16,000 ~16,000 Nil ~200 Not 3 Section 92(3), Indian Patents Act, 1970

Cancer Bottles Known

Kidney

Cancer

~8900 ~7120 ~7120 Nil ~200

Bottles

Not

Known

The submission of the applicant were-

The requirements of the public have not been fulfilled by Bayer Corporation as can

also be seem by the reports published by GLOBOCAN.

The patentee imports and sells the drugs and has not taken appropriate steps to

manufacture drugs in India.

The patentee obtained FDA approval in 2005 and till date its sale in India has been

negligible.

2006 2007 2008 2009 2010

Worldwide

Sales

$165 Mn $371.7 Mn $677.8 Mn $843.5 Mn $934 Mn

India Sales Nil Nil Nil 16 Crores Unknown

The submissions of the patentee were-

Estimated number of kidney cancer patients is 8900 and mortality is 5733 patients.

Out of a total of 8900 patients, 8100 were RCC patients, which shrinks the market for

the drug.

The applicant Natco Pharma has provided misleading information regarding the

availability of the drugs and the patentee submitted a list of cities where the drug was

available.4

Further, the drug has to be administered in the supervision of an oncologist, and hence

the same drug has not been made available in villages. Bayer Corporation, has a duty

to make the drug available at Oncology Institutes and Hospitals only.

Bayer Corporation had submitted that CIPLA entered the market with an infringing

product which was priced at Rs 30,000/- only, which was very low as compared to the

price at which the product was offered by Bayer.

Sales>> Q1A Q2A Q3A Q4A

Cipla 532 1071 1358 1725 4686

4 Annexure 4, Notice of Opposition

Number of

Boxes

Growth % 101% 27% 27%

Bayer Boxes 119 179 138.5 157 593

THE DECISION

The Decision was given by Mr. P. H, Kurien5, on March 9 2012. The controller of patents

examined the method of calculation of the target population and found merit in the method

proposed by the applicant.

The claims of Bayer that the positioning of a rival product by Cipla hurt the prospects of

Bayer’s drug were not accepted by the authorities. Cipla was an infringer, as per Bayer’s own

submissions, and an infringer cannot discharge the responsibility of the patentee.

The controller of patents also calculated that Nexavar had in fact benefitted only 2% of the

total cancer patients that were its initial target population. And it further noted that even the

sales of 4686 boxes by Cipla was far below the requirement of the population.

The claims of the applicant were also supported by an affidavit from Mr. James Packard

Love.6

The controller of patents ruled in the favour of the Applicant, granthing Natco Pharma, a

compulsory license to manufacture Sorafenib Tosylate.

ANALYSIS

Patents in specific ensure that the credit of creation of any new brainchild is ascribed to the

inventor, apart from ensuring that the inventor gets the sole rights to manufacture the

invention or to license it to some third party. This system guarantees that the inventor gets to

monetise his invention in the best possible way. This novel system of allowing an inventor to

reap the benefits of their hard work has increasingly been come to be used as a means of

5 Controller of Patents6 International Intellectual Property Expert, who has been invited too various conferences organized by WHO, WIPO and UNICTAD.

monopolisation by gargantuan corporations Many humungous medical science corporations

around the world use the patent registration method to make sure that a certain medical

molecule that they develop remains within its own corridors so that they can sell the same

medicine at high prices. Since no other establishment can produce the same drugs, owing to

the strict patent regime in force, the patent holder becomes the sole manufacturer for that

time. This enables the patent holder to commoditize the drug and sell it at high prices, Prices

high enough to ensure that the people who are in dire need of the drug and cannot afford it,

are forced to make do with less effective remedies, which prolong the treatment, or are forced

to die without effective treatment.

Compulsory Licensing ensures that a patent does not ascribe any sort of “sole manufacturer

status” to the inventor of the invention, but makes a provision for different manufacturers to

produce the drug, in return for a small royalty payment by the manufacturer. This system

ensures that at any given point of time, there are multiple manufacturers of a given biological

molecule in the market, which increases the competition to sell between the different

manufacturers, this drives down prices at which the drug is available to the masses, thus

making it affordable for all.

CONCLUSION

A patent acquiesces the credit of the invention, modification or the biological molecule to its

creator.. We have discussed how patent rights, conferred upon pharmaceutics manufacturers,

in effect gives them the right to sell the drugs that they have developed at colossal prices

which helps these gargantuan corporations rake in more lucre. Patent rights, when given to

these companies leads to concentration of rights in the hands of one entity, which in turn is

misused by them to sell their drugs at high prices. We have discussed how the perverseness

of these high prices dissuades distribution of drugs, preventing many impoverished people in

actual need of these drugs from buying them.