INTRODUCTION

“There’s this thing called compulsory licensing law that allows artists through the record
companies to take your music at will without your permission”– Prince

The patient versus patent issue is one of the most important problems now in the modern
healthcare system. Compulsory licensing comes under The Patent Act, 1970. Patents are granted
to promote new inventions which is a product or a process that provides a new way of doing
something or offers a new technical solution to a problem. To get a patent, technical information
about the invention must be disclosed to the public in a patent application.

COMPULSORY LICENSE

Compulsory licenses are authorizations given to a third-party by the Controller General to make,
use or sell a particular product or use a particular process which has been patented, without the
need of the permission of the patent owner. This concept is recognized at both national as well as
international levels, with express mention in both (Indian) Patent Act, 1970 and TRIPS
Agreement. There are certain pre-requisite conditions, given under sections 84-92, which need to
be fulfilled if a compulsory license is to be granted in favour of someone.

As per Section 84, any person, regardless of whether he is the holder of the license of that Patent,
can make a request to the Controller for grant of compulsory license on expiry of three years,
when any of the following conditions is fulfilled –

• the reasonable requirements of the public with respect to the patented invention have not
been satisfied
• the patented invention is not available to the public at a reasonably affordable price
• the patented invention is not worked in the territory of India

Further, compulsory licenses can also be issued suo motu by the Controller under section 92,
pursuant to a notification issued by the Central Government if there is either a "national
emergency" or "extreme urgency" or in cases of "public non-commercial use".
CASES
India’s first ever compulsory license was granted by the Patent Office on March 9, 2012, to
Hyderabad-based Natco Pharma for the production of generic version of Bayer’s Nexavar, an
anti-cancer agent used in the treatment of liver and kidney cancer. It was established in the Bayer
vs Natco case that only 2% of the cancer patient population had an easy access to the drug and
that the drug was being sold by Bayer at an exorbitant price of 2.8 lakh INR for a month’s
treatment.. Further, on the ground that Nexavar was being imported within the territory of India,
the Indian Patent Office issued a compulsory license to Natco Pharma, which assured that the
tablets would be sold for Rs. 8,880/- per month. It was settled that 6% of the net sales of the drug
would be paid to Bayer by Natco Pharma as royalty.

In the most recent case of compulsory licensing in India, Lee Pharma, a Hyderabad based Indian
pharma company, filed an application for compulsory license (dated 29.06.2015) for the patent
covering AstraZeneca’s diabetes management drug Saxagliptin. In order to make a prima facie
case, Lee Pharma strived to show that their negotiations for a voluntary license with the patent
owner were not rewarding as they did not receive any response from the Patent owner within a
reasonable period. The grounds alleged by Lee Pharma were that:

• the patentee has failed to meet the reasonable requirements of the public,
• the patented invention is not available to the public at a reasonably affordable price, and
• the patented invention is not worked in India.

However, all the three grounds of Lee Pharma were rejected by the Controller General and the
Compulsory license application was refused. The application was rejected on the basis that Lee
Pharma failed to demonstrate what the reasonable requirement of the public was with respect to
Saxagliptin and further failed to demonstrate the comparative requirement of the drug
Saxagliptin vis-a-vis other drugs which are also DPP-4 inhibitors. Further, Controller General
held that all the DPP-4 inhibitors were in the same price bracket and the allegation that
Saxagliptin alone was being sold at an unaffordable price was unjustified. The Controller
General also stated that Lee Pharma failed to show the exact number of patients being prescribed
the patented drug and how many of them were unable to obtain it due to its non-availability and
consequently it was difficult to hold whether manufacturing in India was necessary or not.

Zimbabwe, Mozambique & Zambia

Zimbabwe was one of the first low-income countries that granted a compulsory license for the
local production of ‘any’ HIV/AIDS related drugs and the import of generic substitutes in May
2003 , after declaring a period of emergency on the infectious disease according to its national
patent law. The declaration of emergency enables the government to authorize the use of
patented inventions by any government department or third party, including “to make, use,
exercise and vend the invention for any purpose which appears to the Minister necessary or
expedient” (Section 34 Patents Act) . The authorization was grated to a Zimbabwe-registered
pharmaceutical company that agreed to provide the generic pharmaceutical product at a price
reduced by more than 50% . Drugs manufactured under the authorization are subject to price
controls, according to the conditions set out in the license. The local manufacturer provided the
first generic substitutes in October 2003 (of a combination drug comprising zidovudine and
lamivudine), and continues to supply the domestic public and private sector with several other
ARVs. In addition, two further companies have been authorized to procure generic HIV/AIDS
drugs under the emergency declaration from Indian manufacturers  Detailed information on the
procurement and concerned products are not readily available.

Zambia  and Mozambique  are further DCs that issued their first government orders in the year
2004. The authorizations enabled the local manufacture of a triple fixed-dose ARV combination
of lamivudine, stavudine and nevirapine. The licensee was in both cases the same generic
producer. The government use order in Mozambique did not indicate the time frame for its
validity but stipulated that it remains valid until  “the conditions of national emergency and
extreme urgency created by the HIV/AIDS pandemic comes to an end” and the government has
informed the concerned parties about the expiration of the nonvoluntary license. The royalty rate
was limited to 2%. The government order was issued in reference to the gravity of the
HIV/AIDS pandemic affecting more than 1.5 million infected persons in Mozambique in 2002,
and the failure of the patent-holding companies to provide the medicines at an affordable price.
The order further states that the needed triple combination therapy has proven to be one of the
most effective and economic ARV treatment, but that “the three different international owners
of such single drugs failed to reach an agreement to produce this combination”. In contrast, the
Zambian license provided a validity of 5 years and set the royalty payments to the patent holders
at not higher than 2.5%. The Zambian compulsory license comprised similar language, referring
to the national HIV/AIDs statistics and the unserved needs of the triple ARV combination.
Zambia granted the nonvoluntary license after declaring a 5-year HIV/AIDS emergency. During
a period of emergency, the Zambian government or an authorized person has the possibility to
make, use, exercise and vend the invention “for any purpose which appears to the Minister
necessary or expedient”(Section 41 Patent Act) .

In both countries the patent status of the three ARV drugs was unclear making the need for
granting a compulsory license questionable. Patenting behavior of pharmaceutical companies is
inconsistent particularly in African DCs. Literature suggests that the patents on the three
compulsory license concerned ARVs were mostly issued before or at the moment of the
introduction of an IP legislation in Mozambique (1990), thus making the grant of patents on the
earlier inventions related to the three ARVs contained in the fixed-dose combination rather
unlikely . ARVs, such as efavirenz and ritonavir or even staduvine were not yet patent protected
in Mozambique or Zambia in 2000. Later issued patents on combinations and formulations of the
ARVs are possible, through the regional patent system of the African Regional IPO of which
both Zambia and Mozambique are members. The difficulties in obtaining relevant patent
information on pharmaceutical products may be a common problem existing in DCs with limited
IPO capacities to conduct comprehensive patent searches. This results in irregularities in the
patent information provided. Notably, both countries are least developed countries and as such,
are beneficiaries of the transition period until 2016 that allows them to refrain from
implementation of protection and enforcement of pharmaceutical patents. To avoid the
complexity of uncertain patent status both Mozambique and Zambia could have considered this
pathway. Making use of this TRIPS flexibility would have enabled them to locally produce the
ARV combination and without the obligation of remuneration to the patent-holding
pharmaceutical companies. This option, however, also depends on whether the countries already
provide patent protection for pharmaceutical products, although not required under the TRIPS
Agreement. In this case, they would have to suspend the operation of their patent legislation.1

IMPACT OF COMPULSORY LICENSING

1
Case study based on statistics through reliable sources
More than a decade after the Doha declaration, compulsory licensing instances continuously
increasing around the globe and these instances are reflecting the government of developing
countries favoring the compulsory licensing phenomena while government of developed
countries in order to limiting the same.

Due to the continuous increase in the compulsory licensing instances some expert from giamt
pharmaceutical asserts that compulsory licensing would affect innovation.Innovators would not
be able to recoups their amount invested ,as innovation required lot of investment and time and
there is always a risk of failure. While on the other hand NGO and other profitable organization
appreciated compulsory licensing phenomena by stating that this would maintain a good health
perspective.

Compulsory licensing now became the new hope for the financially challenged patients while
challenge for the innovators and last it turned out into the most concerns intellectual property
matter around the globe at the present scenario.