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Bombay HC Upholds Natco's Compulsory License

Published on Sat, Jul 19,2014 | 16:08, Updated at Mon, Jul 21 at 17:55Source : Moneycontrol.com |   Watch Video :

Last week, the Bombay High Court upheld the compulsory license granted to Indian pharma company Natco for the sale of a generic version of Bayer’s anti-cancer drug Nexavar. Here’s a look back at the first legal challenge against a compulsory license in India.

In March 2012 the Indian patent office granted Natco a compulsory license for the generic version of Bayer’s anti-cancer drug Nexavar. The compulsory license allowed Natco pharma to sell a generic version of Bayer’s Nexavar at Rs 8,800 per month as against Bayer’s price of Rs 2,80,000 per month. The US based pharma giant Bayer challenged this compulsory license at the Intellectual Property Appellate Board.

NATCO vs BAYER
March 2012

Indian Patent Office grants compulsory license to Natco
For generic version of Nexavar – Bayer’s anti-cancer drug
PRICE
Natco: Rs 8800
Bayer: Rs 280000

In March last year, the IPAB rejected Bayer’s plea on 3 grounds.

- One, Bayer supplied the drug to only 2 percent of the patient population and that the reasonable requirements of the public were not met
- Two, Bayer’s pricing of the drug was excessive and did not constitute a “reasonably affordable” price.
- And three, Bayer did not sufficiently “work” the patent in India. The order interpreted ‘worked in the territory of India” under Section 84 of the Patents Act to mean manufactured to a reasonable extent in India.”

NATCO vs BAYER
March 2013

IPAB uphold the compulsory license grant because
-    ‘Reasonable requirements’ of public not met
-    Price not ‘reasonably affordable’
-    Not sufficiently ‘worked in the territory of India’

The Bombay High Court has agreed with the IPAB on all counts. Will Bayer, the innovator company, find better luck in the Supreme Court? CNBC-TV18’s Menaka Doshi speaks to well-known patent lawyer and Senior Counsel Prathibha Singh.

Doshi: I want to bring up the very first test- have the reasonable requirements of the public been satisfied by the patent holder or by this drug? The Bombay High Court ruled no because Bayer supplied to just about 200 of over the 8800 patients suffering from such cancers. More interestingly the Bombay High Court has ruled on two very interesting nuances in this case or on this test - where Cipla, considered to be an infringe, where Cipla’s supply can be counted towards reasonable requirements and the Bombay High Court said no even though Bayer had argued otherwise. The second nuance here was what constitutes adequate. Let me provide some context to that. Section 84 (7) of the Act says that reasonable requirement of the public is not satisfied if the demand for patented article is not met to an adequate extent. Here the court had said that as far as medicines are concerned, the adequate extent test has to be 100 percent i.e. to the fullest extent.

What do you make of that quantification of adequate and would you say that the bar has been set way too high?

NATCO vs BAYER
Bombay High Court: July 2014

REASONABLE REQUIREMENTS OF THE PUBLIC NOT SATISFIED
Number of patients needing the drug: 8842
Patients supplied by Bayer in 2011: 200

NATCO vs BAYER
Bombay High Court: July 2014

REASONABLE REQUIREMENTS OF THE PUBLIC NOT SATISFIED
‘Therefore infringer's quantity of goods cannot be taken into account only because it could stop on any day’

‘...the obligation to meet the reasonable requirement of the public is of the patent holder alone either by itself or through its licensees’

NATCO vs BAYER
Bombay High Court: July 2014

Patent Act, 1970
the reasonable requirements of the public shall be deemed not to have been satisfied..if

(ii) the demand for the patented article has not been met to an
adequate extent or on reasonable terms…

NATCO vs BAYER
Bombay High Court: July 2014

ADEQUATE EXTENT
‘In respect of medicines the adequate extent test has to be 100% i.e. to the fullest extent. Medicine has to be made available to every patient and this cannot be deprived/scarified at the altar of rights of patent holder’

Singh: First of all I would like to explain what 100 percent would mean because 100 percent would mean different connotations. Is it 100 percent of the patients should be given the drug, is it that 100 percent of the patients should have adequate quantity available for them to purchase it. I would think it is the latter.

Doshi: The Bombay HC decision very clearly says 100 percent that is to the fullest extent and then goes on to say, medicine has to be made available to every patient and this cannot be deprived/scarified at the altar of rights of patent holder. It says every patient, it says 100 percent, fullest extent- no drug can ever meet that test.

Singh: Yes; see the thing is the patentee has to only make sure that if there are three lakh patients, it is at least manufacturing three lakh bottles of that product. If it is manufacturing only 200 bottles, then it is obviously not met. This is not a debate about healthcare and whether patients are being supplied the drug. In the context of this, compulsory license application, Bayer has to only show that if there are 8000-10000 patients who have to be supplied the drug, then there should be at least that much import or manufacture in the country, isn’t it?

Doshi: I still find that a very difficult test for any drug or pharma company to meet because sometimes the very number of patients could be a disputed number. So it will be very difficult for somebody to meet that requirement.

Singh: I don't think so. Suppose there are 10 lakh patients in the country and the patentee is only manufacturing a 1000 bottles; this is in terms of quantity.

Doshi: I want to move on to the other point on reasonably affordable price. Bayer argued that the patent controller should determine what is reasonably affordable. The court said that is not the job of the patent controller and that the price should be arrived at based on the evidence led by parties and then it went on to say some very interesting stuff. It said ‘this reasonably affordable price has to be determined on the basis of the relative price being offered by the patent holder and the applicant after hearing other interested parties opposing the applications. In the present case, the price at which the petitioner is selling the patented drug is at about Rs 2,84,000/per month whereas the applicant is offering the same at Rs 8800/per month.  In such a case the reasonably affordable price has to necessarily be the price of the applicant as it by itself establishes the price of the petitioner is not a reasonably affordable price.

I thought that the Bombay HC did not emphasize on what the gap between prices should be and what render a price reasonably unaffordable and the other one reasonably affordable.

NATCO vs BAYER
Bombay High Court: July 2014

REASONABLY AFFORDABLE PRICE
‘This reasonably affordable price has to be determined on the basis of the relative price being offered by the patent holder and the applicant after hearing other interested parties opposing the application’

NATCO vs BAYER
Bombay High Court: July 2014

REASONABLY AFFORDABLE PRICE
‘Therefore, in the present case the price at which the petitioner is selling the patented drug is at about Rs.2,84,000/per month of therapy and the applicant was offering the same at Rs.8,800/per month of therapy. In such a case the reasonably affordable price has to necessarily be the price of the applicant as it by itself establishes that the price of the petitioner is not a reasonably affordable price’

Singh: The court has done the right thing. What it has said is that the reasonable affordable price for every drug could be different. So the court obviously cannot say that Rs 100 is right or Rs 1000 is right. So what the court is trying to say is please compare what the patentee is giving and what the proposed licensee has proposed.

If the proposed licensee has put up a price which is really different in terms of- here it could be Rs 3 lakhs versus Rs 8000- which is a huge difference.

Doshi: I get that the numbers reflect Bayer in a very poor light. The point what I am trying to make here is that every generic drug will be relatively cheaper to a patented or innovator drug and therefore it is always going to seem to be more reasonable affordable as opposed to the patented drug or the innovator drug. That means that no patented drug or innovator drug will ever win a challenge of this nature. The bar has been set rather high.

Sigh: You could say that to an extent. However what I believe is most generics are not so cheap, most generics are may be one forth or one third of the patented drug. But in this case the margin is too high.

Doshi: I agree but I think in both cases whether it is what amounts to adequate or what is reasonable affordable - in both cases the bar has been set relatively high and completely against the innovator drug or the patented drug community. Therefore my question is do you see the Supreme Court at all fiddling with this when the case goes to the Supreme Court or do you think that the Supreme Court will not want to venture into quantifying either one of these down to precise terms either?

Singh: I want to test it in the opposite. Suppose the court said meeting the requirement would mean you should at least reach 50 percent of the patients. Would that sound logical? I don't think so because in the case of medicines or food, it has to be available to everybody. So all that the court is saying there should be enough quantities to be available to the patient. After that, whether the access is available, access to medicines is there or not, there would be a lot of debate on whether the patentee has the entire obligation or do governments have these obligations to make sure that the patented drugs reach the patients, may be some kind of subsidies, may be some kind of fixation of prices. There is a lot of governmental role in this and I think that the next debate is going to be about how to make the quantity- once being made available by the patentee- how to make it available to all the patients. So the logic of 100 percent appeals to me in the sense that in the case of food and medicine anything less than 100 percent is not good.

Doshi: The irony is not lost on me. In a country where we cannot reach food to 100 percent people, we expect that MNC pharmaceutical companies will have to reach drugs to 100 percent of the patients- there is a big contradiction there. But I won't belabor the point because I am sure the Supreme Court will apply itself to that.

The final point I wanted to make has to do with the test on whether the drug has been worked in the territory of India? The court agreed with the IPAB on this that the manufacture of the drug in India is not necessary for it to meet that condition. But it hasn’t said so in exactly the same words. How would you read the Bombay HC’s position on what constitutes having worked in the territory of India?

NATCO vs BAYER
Bombay High Court: July 2014

WORKED IN THE TERRITORY OF INDIA
‘when a patent holder is faced with an application for Compulsory License, it is for the patent holder to show that the patented invention/ drug is worked in the territory of India by manufacture or otherwise. Manufacture in all cases may not be necessary to establish working in India as held by the Tribunal’

NATCO vs BAYER
Bombay High Court: July 2014

WORKED IN THE TERRITORY OF INDIA
‘However, the patent holder would nevertheless have to satisfy the authorities under the Act as to why the patented invention was not being manufactured in India keeping in
view Section 83 of the Act’

NATCO vs BAYER
Bombay High Court: July 2014

WORKED IN THE TERRITORY OF INDIA
‘…where a patent holder satisfies the authorities, the reason why the patented invention could not be manufactured in India then the patented invention can be considered as having been worked in the territory in India even by import’

Singh: In my view the Bombay HC has tilted towards manufacturing in India. IPAB’s view was that it could be manufacturing or import. The Bombay HC does tilt a little more in favour of manufacturing in India leaving the option open to the patentee to argue that if there is a valid reason not to manufacture in India, that would be justifiable.

However there is one point that I wish to add. If anyone reads Article 7 of Trade-Related Aspects of Intellectual Property Rights (TRIPS), it clearly says that the purpose of entering into TRIPS as a multilateral trade agreement was to ensure that there is enough technology transfer. But our experience in patented drugs in the last few years shows that most drugs are only imported.   

On the other hand if patented drugs are licensed out to Indian companies, or by the MNCs themselves are manufactured in India, it will solve two-three major problems for compulsory licensing. One is the quantity will be easily available; two the price will be much lower because the price of imported drugs is very high. So manufacturing in India or transfer of technology to India as prescribed in the Article 7 of TRIPS is the way to go.

Doshi: How do you expect this to turnout in the Supreme Court? The Bombay HC has agreed in toto with everything that the IPAB has put up.

Singh: In the Supreme Court- there are three concurrent judgments now- the Controller, the IPAB and the Bombay HC. As they say bad facts make bad law. The facts of this case are too gross. 200 bottles in three years, when there was a demand of almost 9000 patients a month. So the facts are too tilted and that is the whole problem in this case. I am sure there are compulsory licenses which have been rejected in India. If you balance it out with those, I think this was an exceptional case on the facts. There are other licenses which have been rejected and may be rightly so and therefore the Supreme Court, I would think, ought to entertain this petition definitely at least to lay down the different standards and the bars that are required under compulsory licensing and it would be again another landmark judgment, I think, of the Supreme Court.

 
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