India's
long struggle to ensure access to affordable medicines
for its people recently took a positive and interesting
turn. In early March 2012, just before he demitted
office, Controller of Patents P. H. Kurien passed
an order on an application filed by Hyderabad headquartered
Natco Pharma requesting a license to produce a cancer
drug (Sorafenib Tosylate), the patent for which is
held by German pharmaceuticals and chemicals giant
Bayer. Bayer produces and markets the drug under the
brand name Nexavar, which is used in the treatment
of patients diagnosed as being in the advanced stages
of affliction with liver or kidney cancer. Having
failed to obtain a voluntary license for manufacture
from Bayer, Natco had filed an application under Section
84 of the Indian Patents Act, which specifies the
conditions under which a ''Compulsory License'' (CL)
may be issued to a producer other than the patentee.
Compulsory Licencing (CL) involves providing an agent,
other than the holder of the patent for a product
or process, the permission to produce or market that
product without the consent of the patent holder.
Before 2005, when India amended its Patents Act to
recognise product patents, Natco or any other Indian
pharmaceutical company would not have needed such
permission. All it needed to do was demonstrate that
it had access to a process technology different from
that used by Bayer to produce Sorafenib. This encouraged
the growth of an industry producing a large number
of on-patent (and off-patent) drugs and marketing
them at prices much lower than those charged by the
original patentees. The net result was the well-documented
facts that drug prices in India were among the lowest
in the world, and that despite these low prices there
was no shortage of essential drugs in the country.
However, once India signed into the Uruguay Round
world trade agreement, which included an agreement
on Intellectual Property Rights (IPR), India's Patent
Act, 1970 had to be amended thrice in 1999, 2002 and
2005, to bring it in line with the agreement on Trade-Related
Intellectual Property Rights (TRIPS). These changes
not only replaced the Chapter on CLs, but culminated
in the recognition of product patents. Inasmuch as
the latter prevented Indian firms from producing a
patented product (unless the technology was voluntarily
licensed by the patent holder) and gave the patent
holder a monopoly right to produce the product, there
was a danger that prices would rule high and if sought
to be regulated or controlled could lead to inadequate
availability.
The TRIPS agreement was to the disadvantage of less-industrialised
developing countries like India, which had registered
few patents, including in a crucial area like pharmaceuticals.
However, the TRIPs agreement did provide a few windows
of opportunity for governments to intervene to rein
in prices in support of needy patients in their countries.
Crucial among them was the right (subject to conditions)
that the agreement granted governments to resort to
''compulsory licensing'' on grounds such as public
interest, anti-competitive conduct, or need for non-commercial
government use. It was that right that the clauses
on CL in the revised Patent Act sought to interpret.
An issue of significance is what constitutes ''public
interest''. In principle, the right of the government
to resort to compulsory licencing can be invoked when
the patent holder does not work the patent or does
so in a manner that is inimical to the public interest,
leading to ''unreasonable prices'', inadequate technological
progress, or inability to deal with public health
or other emergencies. However, the TRIPs agreement
did require that the patentee should be notified about
possible violations and the prospect of issue of a
CL and that negotiations held with the patentee to
resolve the issue if possible.
In the case of pharmaceuticals this right to issue
a CL was strengthened under pressure from the developing
countries and civil society activists in the Doha
ministerial declaration of 2001. The Declaration on
the TRIPS Agreement and Public Health of 2001, affirmed
the power of WTO Members ''to grant compulsory licenses
and the freedom to determine the grounds upon which
such licenses are granted'' and held that agreement
''can and should be interpreted and implemented in
a manner supportive of WTO Members' rights to protect
public health and, in particular, to promote access
to medicines for all.''
In India these flexibilities became a matter for debate
before the revision of the Patents Act was legislated
to make it TRIPs compliant, leading to major advances.
One of those advances was the stipulation that CL
can be invoked also in instances were the patented
product is not just reasonably priced (say, relative
to costs), but reasonably priced and affordable. According
to section 84 of the Indian Patents Act: '' 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 compulsory licence 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.''
What was unclear was how the presence or absence of
such grounds for action was to be assessed. Remarkably,
after India amended its Patents Act to make it TRIPS
compliant and recognise product patents, the government
had not till now exercised the right to compulsory
licencing even once, which would have helped clarify
matters. This is despite the fact that in a crucial
public health-related area like drugs and pharmaceuticals
the transition to the new regime made a considerable
difference to both availability and affordability.
Being the first in itself makes the Nexavar judgement
historic. But there is more to the judgement than
its pioneering character. It is the grounds on which
the Controller of Patents accepted Natco's application
and rejected Bayer's opposition that are also pathbreaking.
One important ground was the assessment whether reasonable
public requirement was being met with regard to the
supply of Nexavar through importation. Noting that:
(i) over the years, Bayer had imported the drug in
volumes that could have treated only a small fraction
(a little above 2 per cent) of those who could be
credibly assessed as requiring the drug; (ii) that
there were years in which no imports were made; and,
(iii) that the company was relying only on the import
route and not on local production to work the patent,
the Controller General had concluded that in a physical
sense Bayer was not working the patent. It was not
meeting the condition that ''the reasonable requirements
of the public with respect to the patented invention''
were being satisfied.
He also rejected the argument that these circumstances
with respect to supply of Nexavar had to be judged
in the context of the fact that Cipla, another domestic
generic pharmaceuticals manufacturer, has without
licence been marketing Sorafenib in India at a price
much lower than that charged by Bayer. Bayer has filed
an infringement suit against Cipla which is pending
in the courts. In the circumstances, the Controller
General argued that this could not be an excuse for
Bayer not ensuring adequate supply of Nexavar.
A second important conclusion of the Controller is
that the failure to meet demand adequately was partly
because the product was priced such that it was unaffordable.
While Natco's counsel had referred to research findings
on reasonable estimates of R&D costs and the per
capita incomes of the poor in India to argue that
the product was unreasonably priced, the judgement
itself focuses on the issue of unaffordability. Even
when assessing this the fundamental issue was not
the fact that Nexavar was being priced at around Rs.
2.8 lakh for a month's dosage of 120 tablets, when
Cipla was supplying the drug at Rs. 30,000 for a month's
treatment and Natco was promising the same quantum
at Rs. 8,800 if granted a license. Rather, starting
from the fact that the sale of Nexavar over the previous
four years was only equivalent to a fraction of the
public's estimated requirement of this life-extending
treatment, Controller Kurian concluded that the drug
''was not bought by the public due to only one reason,
i.e. its price was not reasonably affordable to them.''
This is an important precedent, since it lays down
a condition for assessing affordability. If enough
of a patented drug that was crucial for the public
was not being actually consumed, it must reflect the
fact that a significant share of patients are not
able to afford the drug at the price at which it can
be sold. That does warrant invoking the right to issue
a CL.
Finally, the judgement examines the issue of whether
the patent was being fully worked in India, given
that it was only being imported and not manufactured
in the country. Counsel for Bayer referred to the
fact that the phrase ''manufactured in India' was
dropped from the Patents Act when it was amended in
2002, to argue that local manufacture was not required
to establish ''working of a patent''. Moreover, Bayer's
counsel argued, cost effective scales of production
of the drug were far above India's requirement. This
precluded local manufacture, in which quality control
was also difficult to ensure. Not accepting this argument
but recognising that the Act does not define the phrase
''worked in the territory of India'', the judgement
turns to international conventions and the fact that
the issue of local manufacture though removed from
one context when the Indian Patents Act was amended
was incorporate in another clause (84(1)(c)).
There are three points the judgement makes here. The
first is that while importation rather than local
manufacture is not a ground for forfeiture of a patent,
a country may use the discretionary powers it has
when framing patent legislation to make it a ground
for invoking the right to compulsory licensing. Second,
the understanding of working the patent in the relevant
conventions does not imply working the patent on a
''commercial scale''. And, finally but most importantly,
''mere importation cannot amount to working of a patented
innovation''. According to the judgement, ''a patentee
is obliged to contribute to the transfer and dissemination
of the technology, national and internationally, so
as to balance rights with obligations. A patentee
can achieve this by either manufacturing the product
in India or by granting a license to any other person
for manufacturing in India.'' This conclusion too,
if sustained, is a precedent with implications that
go far beyond this case and product.
On these grounds the Controller of Patents issued
an order giving Natco the right to manufacture and
sell a generic version of Sorafenib Tosylate, subject
to pricing it at Rs 8800 for a monthly dose of 120
tablets and paying Bayer a 6% royalty on net sales.
As noted earlier, this judgement does mark a whole
new phase in India's journey to fashion a patenting
regime that would ensure access to affordable medicines
to its people. It is bound to be a precedent that
would be quoted in a range of other cases and products.
This is not because this is the first instance of
grant of a CL, which itself is important. The failure
to resort to compulsory licensing thus far was not
because of lack of global precedent. In fact, developed
countries such as Canada, the United Kingdom and Italy
and developing countries such as Brazil, Thailand,
Malaysia, South Africa and Kenya have resorted to
such licencing in the case of drugs and pharmaceuticals.
Very clearly ideology and international pressure had
held back the system. Controller General Kurian has
initiated the process through which India can free
itself of such fears and exercise its legitimate rights
and options. The nation owes him much.
* This
article was originally published in Frontline, Volume
29 - Issue 08: Apr. 21-May 04, 2012 and is available
at
http://www.frontlineonnet.com/stories/2012050429
0801000.htm
