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Natco win: Deterrent for FDI?

Published on Tue, Mar 20,2012 | 12:09, Updated at Tue, Mar 20 at 12:39Source : 

By: Rahul Dhote & Mita Sheikh, Krishna & Saurastri Associates

A compulsory licence was granted by the Controller General of Patents Designs and Trademarks in his order dated March 9th 2012, in the matter of NATCO Vs. BAYER. The Controller of Patents granted compulsory licence to Natco Pharma, an Indian pharma company to make and sell a cancer drug Sorafenib tosylate patented by Bayer Corporation, a German healthcare company. Sorafenib, marketed under the brand name Nexavar, is a drug used for the treatment of advanced stages of kidney and liver cancer.

This is the first Compulsory Licence granted under Section 84 of Indian Patents Act, 1970. A Compulsory Licence is an involuntary contract imposed on a Patentee to unwillingly allow the other party to manufacture and sell its patented article. As per Section 84 (1) of the Patents Act, 1970, any person interested may make an application to the Controller for grant of compulsory license after the expiration of three years from the date of grant of a patent. A Compulsory Licence can be sought on any of the following grounds:

  • The reasonable requirements of the public with respect to the patented invention are not met, or
  • The patented invention is not available to the public  at a reasonably affordable price, or
  • The patented invention is not worked in the territory of India.

Even if any one of the grounds is fulfilled, the Controller may grant the Compulsory License. In this case the Controller found all the three grounds to have been fulfilled and has granted the Compulsory License to Natco Pharma.

With respect to the first ground, the Applicant that is Natco Pharma relied on the statistics of the World Health Organization publication, projecting about 30,000 patients to be affected by kidney and liver cancer for elucidating the requirement of the Nexavar. Patentee gave their own estimate of advanced stage patients who may be actually requiring the patented drug. Patentee also relied on the figures of sale by Cipla to show the availability of drug in the market. The reliance of the Patentee on the sale figure of Cipla who is an alleged infringer of their patent did not go well with the Controller. In principle the Controller accepted the statics of WHO publication and also relied on Form 27 filed by Patentee to evaluate the quantum of drug made available to the public and held that the reasonable requirement of the public was not being met by the Patentee.

With respect to the second ground of reasonable affordability, one of the methods Applicant relied upon was, if a lowest paid government employee is taken as a standard, he will have to work three and a half years to be able to purchase the monthly dose of Nexavar at price of Rs. 2,80,000/-. The Patentee elaborately explained the complete process of drug discovery and that the marketed product cost is not only for the money spent on one specific drug but also on failed R&D as well as further research of the existing drug. The Controller did not agree with the pleadings of Patentee that the reasonableness has to be judged with respect to public as well as Patentee in view of all the investment made by Patentee. The Controller found price of Rs. 2,80,000/- per month’s treatment was not reasonably affordable to Indian public.

With respect to the third ground, the Controller drew an analogy between Section 84 (1) (c) and Section 83 (b) of the Patents Act, 1970. Section 83 deals with the general principles applicable for working of patentable inventions in India. Section 83 (b) states that the patents are not granted merely to enable patentees to enjoy a monopoly for the importation of a patented article. The drug Nexavar is not manufactured in India and is imported and marketed in Indian market.  Patentee submitted that the expression “working” includes commercial working and not that the patented product is to be compulsorily manufactured in India. On the aforesaid submissions, Controller concluded that the intention of the Parliament while enacting Section 83(b) was that the patented invention should be manufactured in India for satisfying the “working” requirement.

According to Article 27 of TRIPS, right of the Patentee should not be affected only because he is importing the patented article. Unlike Ireland and U.K., India seems to take a stand against the intent of Article 27. Keeping the object of Patent Law in mind i.e. transfer and dissemination of technology, nationally and internationally, can be achieved either by manufacturing the patented article in India or abroad. The term “working” may be interpreted in a broad and reasonable sense and not in a strict sense.

A number of issues will need to be dealt with if an appeal is preferred before IPAB and ultimately to Apex Court. The first issue will be whether the evidences and statistical data were sufficient for the Controller to arrive at this decision. Another issue will be what is a reasonable or unreasonable price when it comes to deciding affordability of a drug for Indian public?  Whether the price suggested by the Applicant can be considered reasonable. The pricing of Rs. 8880/- proposed by the applicant may also be evaluated. One more crucial issue would be that when it comes to working of a patented invention, should Section 83(b) be applied in a strict sense or should be reviewed in accordance with TRIPS? These are some among several issues that will be required to be scrutinized at appeal stage.

Patent law has been enacted to balance the rights and obligations of a Patentee. Also, it has been enacted to encourage innovation, sustainable development, technological progress and transfer of technology. Innovative drug has a cost over generic medicines. Only after failure of several molecules and after extensive and highly expensive clinical trials, a molecule reaches a market and ultimately to the patient. This process involves billions of dollars, perseverance and time. Diseases are not static, nor are inventions. But continuous research and development requires sustainable funds to effectively deal with the challenges in the healthcare sector. Grant of Compulsory licence should not affect future investment in innovative pharmaceuticals depriving Indian people of the benefit of the same. These factors need to be looked into.

After India signed the TRIPS agreement and made its Patents Act TRIPS compliant, it augmented FDI in healthcare sector, the clinical research industry has grown leaps and bound, boosted innovation in the domestic sectors and collaboration of foreign companies with the Indian companies have risen considerably. If this trend of grant of compulsory licence continues, its may have a bearing on FDI.

This decision is likely to have an impact not only on Indian as well as international innovator pharma companies but also other industries as well. The issuance of a compulsory license may be good for a short-term, but a long term implication may be detrimental for innovators and health care sector at large. With a successful stint of Natco Pharma, there may be rise in Compulsory Licensing applications and create a feeling of uncertainty in patentees about effective patent rights.


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