The granting of a compulsory licence to market a generic version of a cancer drug in India is set to open a Pandora's box that could change the dynamics of the pharmaceutical industry, particularly for brand name drug makers.
IHS Global Insight Perspective | |
Significance | The Indian Patent Office has granted a licence to domestic generic firm Natco Pharma for sorafenib, allowing the firm to sell the product until Bayer AG (Germany)'s Nexavar patent expires in 2021. |
Implications | The move is a direct attack on the drug's surrounding intellectual property rights, and was justified on grounds that the brand name drug maker failed to address issues such as high price, low imports and lack of availability of the drug. The decision will put Big Pharma on the back foot. |
Outlook | In the short term, Bayer is expected to appeal against the decision at the country's highest court. The ruling sets a precedent that could allow other generic firms to apply for licences for high-value patented drugs, once again putting generic firms in the ascendant, despite the introduction of product patents in India since 2005. |
In a first-of-its-kind landmark decision, India's Office of the Controller General of Patents, Designs and Trade Marks (CGPDTM) has granted a compulsory licence under Section 84 (1) of the Patents Act (1970) to Natco Pharma (India). The grant relates to the drug sorafenib tosylate, a generic version of Bayer AG (Germany)'s Nexavar. The product is indicated for the treatment of advanced stages of kidney and liver cancer.
Main Contentions of the Dispute
Natco Pharma's application relates to Nexavar's original main patent number 215758 and follows the rejection of a voluntary licence application made to Bayer early last year. The compulsory licence application was initiated three years after the grant of the main patent for Nexavar, in accordance with Indian patent laws. The generic pharma firm's main contentions in its application were as follows:
- The reasonable requirements of the public with respect to the patented drug were not satisfied. Natco argued that given the requirement that a drug satisfy 80% of patients in need (kidney cancer: 7,120; liver cancer: 16,000), Bayer did not show an adequate inventory during the three years of patent grant. In 2008, there were no imports of the drug; in 2009, 200 bottles were imported; and 2010 figures were unknown.
- The patented drug is not available to the public at a reasonably affordable price. At the time of the application, the product price by the patentee was 280,000 Indian rupees (USD5,580) per month, while Natco has proposed to sell it at INR8,900 per month.
- The patented drug is not manufactured in India.
- The presence of another generic firm, Cipla (India), which infringed the patent of Nexavar and is marketing its generic version of Nexavar at INR30,000 per month was mentioned as one of the reasons behind Bayer's limited drug access in India. However, Natco Pharma was able to successfully contend that the presence of Cipla should not be a criteria to dismiss its petition for a compulsory licence primarily since a patent infringement litigation is ongoing. Besides, the demand for sorafenib in India should be met by the patentee and not by third parties such as Cipla, Natco contended.
- Interestingly, the CGPDTM made the observation in its decision that, while Bayer had submitted that Cipla's lower price is a relevant factor in the case, the patentee did not offer differential pricing to make the drug available to all sections of the Indian public.
- The grant will also see Natco Pharma paying royalties to Bayer from the sale of the generic sorafenib.
The following is the cost breakdown as submitted by Natco Pharma:
Cost Breakdown | |
Particulars | Amount in INR |
Maximum retail price (MRP; inclusive of sales tax) | 8,900 |
Margin to distributor, stockist and retailer (approximately 30% of MRP) | 2,670 |
Cost of manufacture of the product | 4,856 |
Billing price of company to distributors | 6,105 |
Margin to the company | 1,250 |
Source: India Patent Office | |
The full decision by the Patent Controller's office can be accessed here.
Outlook and Implications
The CGPDTM's grant of a compulsory licence to Natco Pharma is expected to have a profound effect on the dynamics of the pharmaceutical industry in India. The decision itself looks at three main points: affordability, accessibility and what is described as "worked in the territory of India", indicating domestic production. Bayer was found wanting in all the three categories, and it was also concluded that the firm had not optimised its invention to the fullest. The brand name drug maker did lay some of the blame at Cipla's door for its infringement in selling the generic version at one-tenth of Nexavar's price, thereby undercutting the market. This argument did not help Bayer's case and the licence was granted.
It is now expected that the price of sorafenib will be even lower than Cipla's version, according to Natco Pharma's price-structure and assuming a 97% drop. The development is also significant as the licence will be relevant until the brand-name drug's patent expires in India in 2021. Further, Natco Pharma will pay a potential 6% royalty to Bayer.
In the immediate aftermath, while Natco Pharma's arrival in the sorafenib market will see the price of the drug crash down, Bayer is expected to move to appeal against the decision at the Indian Supreme Court. In the pharmaceutical industry context, the grant will have even more significance, and has already been billed as a potential game changer. This is because the decision puts India alongside countries such as Thailand, Brazil and Indonesia which have not only considered such a grant for HIV/AIDS drugs but also for other therapy areas, such as cardiovascular and oncology. In the Indian industry, the move will bolster confidence among generic drug makers such as Cipla which are likely to pursue compulsory licensing for other brand name drugs as well.
Related Articles
- India: 4 August 2011: Natco Pharma Tests Waters with India's First Compulsory Licence Plea
- India: 25 May 2009: Compulsory Licensing, an Untapped Potential for Generic Firms in India
- India - United States: 8 July 2008: Pfizer, Roche to Explain Opposition to Natco's Compulsory Licence Application in India