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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 WTOs 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.
1 World Trade Organization Handbook -Intellectual Property Rights
2 Section 84, Indian Patents Act, 1970

Section 92(2) of the Indian patents Act states that the patentee would have the right to oppose
the application for the compulsory license before the controller of patents. But there are
certain provisions

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%

3 Section 92(3), Indian Patents Act, 1970

Bottles per Bottles


month
imported

Bottles
imported

Bottles
imported

Liver

~20,000

Cancer
Kidney

~8900

of the
patients
~16,000
~7120

(Required) in 2008

in 2009

in 2010

~16,000

Nil

~200

Not

Nil

Bottles
~200

Known
Not

Bottles

Known

~7120

Cancer
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.

Worldwide

2006
$165 Mn

2007
$371.7 Mn

2008
$677.8 Mn

2009
$843.5 Mn

2010
$934 Mn

Sales
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>>
Cipla

Q1A
532

4 Annexure 4, Notice of Opposition

Q2A
1071

Q3A
1358

Q4A
1725

4686

Number

of

Boxes
Growth %
Bayer Boxes

119

101%
179

27%
138.5

27%
157

593

THE DECISION
The Decision was given by Mr. P. H, Kurien 5, 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
Bayers drug were not accepted by the authorities. Cipla was an infringer, as per Bayers 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
5 Controller of Patents
6 International Intellectual Property Expert, who has been invited too various conferences organized
by WHO, WIPO and UNICTAD.

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