Tuesday, April 3, 2012

Game Changer In The Generic Industry

This article is written by Jasmine  Kaur

Pills Pink Medicine
The NATCO CASE: This case is the landmark judgment on the topic of compulsory licensing in the Indian history. Case was filed by the NATCO Pharma Limited against the Bayer Corporation invoking the section 84 of the Indian Patent Act, 1970 which deals with the subject of compulsory licensing. This order was in relation to the patented anti cancer drug Nexavar which was made for the treatment of Renal Cell Carcinoma-RCC (kidney cancer) and also for the treatment of Hepatocellular Carcinoma-HCC (liver cancer).

The patentee is granted an exclusive right under the patent laws for a limited period. This type of exclusive right prevents
the third party to make, use, or sell the patented product and that too without the consent of the patentee. Twenty years, this period gives the inventor the time to enrich its knowledge and utilize it further more to improve its patented product.

Under the Patent Laws, Compulsory License is a kind of involuntary contract between a willing buyer and an unwilling seller and this type of contract is imposed and enforced by the State. Article 30 and 31 of the TRIPS allows the member countries for granting compulsory license to prevent the abuse of patent rights. It is stated by the WTO that the state can grant anyone the right to produce and sell the patented product and that too without the consent of the patent owner.

 This case is the rare piece of judgment which was seeking the grant of a compulsory license and the tribunal didn’t have any precedent to guide them and it has successfully reached on a remarkable judgment of compulsory licensing that would open up the field for the generic industry and with this the there will be the availability of cheaper drugs for these kind of diseases.

  • Drug:-

“Sorafenib tosylate”, is a compound which is a patented drug under the Patent No. 215758 and it was sold under the brand name of “Nexavar”. This was for the treatment at the advanced stage of kidney and liver cancer. It stops the growth of new blood vessels and targets other important celluar growth factors. This particular drug is not a life saving drug but the life extending drug which means in the case of kidney cancer, the life of a patient will be extended by 4-5years and on the other hand in the case of liver cancer the life span would increase by 6-8 months. This drug has to be taken throughout the lifetime of the patient and Rs. 2.8 lakh per month is the cost of the therapy and Rs. 33,65,136 per year.

  • Patentee:-

Bayer office Logo
M/s. Bayer Corporation (Patentee) is an internationally recognized manufacturer of innovative drugs. This company invented a drug called “Sorafenib” (Carboxy Substitued Diphenyl Ureas) which is useful in the treatment of the advanced stage of liver and kidney cancer. The first patent was filed in the United States Patent and Trade Mark Office on 13. 01.1999 and then later on the patentee filed a PCT International Application in 12.01.2000. In India the patent was filed on 05.07.2001 and the patent was granted on 03.03.2008. during the filing of the patent applications in various countries the drug was developed and launched under the name “Nexavar” which will be used for the treatment of Renal Cell Carcinoma-RCC (kidney cancer) and also for the treatment of Hepatocellular Carcinoma-HCC (liver cancer). Bayer’s got the approval for importing and marketing the drug in Indian economy. Issues raised by the patentee are:-
Ø  Applicant has specifically raised on the ground mentioned in section 84(1)(a) of the Indian Patent Act and has failed to mention the grounds enumerated under the section 84(1)(b) and (c) of the Act.

Ø  Patentee contended that the applicant has failed to mention any terms and conditions that he was willing to accept.

Ø  Patentee contended that no prima facie case was made by the applicant to get the compulsory license as it was without any kind of evidence.

Ø  Patentee contended that the applicant failed to notice the fact that M/s. Cipla is also a generic drugs manufacturer which is dealing in the sale of the said product Sorafenib.
  • Applicant:-

Natco Logo
M/s. Natco Pharma Ltd. (Applicant) is a reputed Indian generic drug manufacturer. This pharmaceutical company filed an application for invoking the Section 84 of the Indian Patent Act, 1970 which deals with the subject matter of the compulsory licensing and they wanted to take the license on the following grounds:-
Ø  This drug was being supplied to only 2% of the patient population and due to the drug being expensive in nature.

Ø  The Bayer’s Corporations was charging 2.8 lakhs for a month’s supply of the drug which was excessive in nature and it was totally not affordable by the general public of India.

Ø  The Bayer’s Corporation was not working properly in Indian even after getting the permission to import and market their product.

  • The section in dispute:-

84. Compulsory licenses. – 
(1) At any time after the expiration of three years from the date of the grant of a patent, any person interested may make an application to the Controller for grant of a compulsory license on patent on any of the following grounds, namely –
(a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or.
(b) that the patented invention is not available to the public at a reasonably affordable price, or
            (c) that the patented invention is not worked in the territory of India.

  •          Reasonable requirements of the public:-

After looking into the sales figures for the year 2006-2011, the tribunal can clearly predict that there was a neglectful conduct on the behalf of the patentee in providing the drugs in the Indian market. The patent was granted in 2008 and till 2011 the patentee did not bother to fulfill the demand of the Indian population. It was seen that only 2 % of the total patients were able to access the drug.

This means that only 8842 patients had the eligibility to that expensive drug which was only to increase the life span by 4-5yrs in case of kidney cancer and 6-8 months in the case of liver cancer. This shows that the reasonable requirements of the public according the section 84 of the Indian Patent Act was not satisfied. Therefore the applicant should be given the compulsory license under the section 84 of the Indian Patent Act.

 The corporation submitted that the statistics provided by the applicant is false in nature and the total number of patients who require this are 4004, stage IV patients. Patentee has ensured that the drug must be available to the public through the distributors who supply to the hospitals, pharmacies, retailers and the patients. These distributors also supply the drug to the outstation towns, cities, where the drug is required. Patentee also contended that the purpose behind the section 84(1)(a) is to enhance access to the patented invention. This does not mean that it is identical to the affordability condition. This particular fact is becomes strong because section 84 (1)(a) [lack of accessibility] and section 84(1)(b) [lack of affordability] for the grant of compulsory licensing cannot be mixed and this has been done by the applicant.

It was held that both the applicant and the patentee relied on the GLOBOCAN 2008 for the incidence of liver and kidney cancer in India. The tribunal said that by its own the patentee has derived the figure of 8842.  This means that only 25 of the patients are eligible to buy the drug.

  •     Affordable price:-

Applicant submitted that the price quoted by the patentee is very high and it is unaffordable by the middle class people. From the last four years the sales of the drug is at Rs. 2.8 lakhs per month and this is the cost of the therapy. The pricing adopted by the patentee is exorbitant in nature and this life saving product is being used as an abuse of its monopolistic rights and this is unfair and anti competitive in nature. Therefore the compulsory license should be granted.

Girl Pill swallowing Capsule in mouth Lady animated
The patentee contended that it has high cost because it involves the Research and Development and this is the cost of the innovators but on the other hand the applicant has to copy the drug and sell it in the market. The patentee was adopting a “two faced” stand before the tribunal because in the High Court the Bayer has filed a suit against Cipla, challenging its right to sell that generic product. But on the other, before the tribunal, patentee is contending that the Cipla is selling the drug at the cheaper rates. Bayer’s said that keeping the rich class and the middle class on the same footing and that too the expense od the patentee is not reasonable at all.

Ø     Decision:-
The tribunal held that the patentee did not execute the concept of differential pricing for different classes. It was also said that the sales done by Cipla is none of the concern for these proceedings. The product was not being provided at the affordable price. Therefore the compulsory license should be issued to the applicant under section 84 of the Indian Patent Act.

  •      Non working of the patent:-

The product was imported in the territory of India but not to the fullest extent but only to the 2% of the eligible patients who are able to afford the drug. Importing of the drug in India does not mean that the patented product is successfully working for the public. It was said that the compulsory licensing should be provided because with this the manufacturing of the drug can be done to an extent.

Patentee contended that the working of the invention means that the product is being provided in the territory of India

Ø  Working of the patented product is not of the concern because the interpretation of this phrase has not been done in the act. It should be seen that the reasonable requirement of the public are being fulfilled. "Section 83 of the Act makes clear that patents are not granted only for the purpose of “importation” of the patented product. In fact, the Act uses the terms "working" and "importation" quite distinctly throughout the Act, making it evident that "working" as used in the Act cannot include "importation".

  • Royalty Rates:-

Article 31 (h) of TRIPS states:-

“ the right holder shall be paid adequate remuneration in the circumstances taking into account the economic value of the authorization….”

It was on the controller to decide on what basis the remuneration is to be provided to the patentee by the compulsory license holder.

Section 90:-
“In selling the terms and conditions of a license under section 84, the controller shall endeavour to secure-
(i)                 That the royalty and other remuneration, if any, reserved to the patentee or other person beneficially entitled to the patent, is reasonable, having regard to the nature of the invention, the expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force and the other relevant factors;….”

According to my perspective after looking into the arguments laid down by both the applicant and the patentee. I come to the decision that the tribunal has taken the perfect step in granting the license to Natco because the Bayer’s corporation was not doing anything good to the public at large. Patentee wanted to protect its right of monopolizing the product at the cost of the public who are suffering with the kidney and liver cancer. By granting the compulsory licensing to Natco, the tribunal has assured that now this drug will be available to the public at large and also at the cheaper rates. The big pharmaceutical companies should look into the differential pricing strategies for different class of people in India, so, that everyone has the opportunity to avail the drug. Due to this kind of decision, it is improving the access to the innovative drugs in India.  This will give a change to the other generic manufacturers to apply for the compulsory licensing  and with this there will never be a shortage of the imported drug which are whether life saving drugs or life span increasing drugs.

This judgment has opened the gates of compulsory licensing. This is for the corporations like Bayer’s who make the invent the product and involve the Research and Development cost in it and with this they make it so much expensive due to which it becomes impossible for the common public to afford the drug. This case of compulsory licensing will give exclusive rights to other pharmaceutical companies against the patentees who make the product just for their own welfare and not for the interest of the public at large. This interpretation of "working" to mean "local working" (local manufacture within India) may in fact prove the most controversial part of the order and may perhaps attract a TRIPS challenge as well.

In the end, I want to say that this is not the end of the story because the latest news is that the Bayer will appeal against this order. But I hope that it Court should stick with the decision taken by the tribunal because this will give all the generic industries a license to manufacture the drugs without even paying anything to the Bayer.

This article is written by Jasmine  Kaur

Jasmine is currently pursuing her third year of B.B.A.LL.B at the National Law University, Orissa.  Her aim is to become a successful lawyer specializing in Intellectual Property Rights especially in Patents. She loves reading about all areas of law, just to increase her knowledge .


  1. Sayoni ChaudhuriApril 4, 2012 at 1:38 PM

    Great work Jasmine.

  2. Excellent Analysis, i must say!

  3. Fine work Jasmine. I am sure you are gonna be an impressive patent lawyer in future. Good luck and God bless.

  4. Great Job . Seems someone did a nice research on the topic. Well Well written and Neatly Compiled.

  5. excellent work ........ seems that u r really hard working and confident person... keep it up........ ALL THE BEST for better future... :)

  6. excellent work....... it seems u r really hard working and confident girl.. ALL THE BEST for better future....