bayer vs natco case

04/10/2023Indian Institute of Management Raipur 1

Bayer vs. Natco First Case of Compulsory

Licensing in India

LEGAL ASPECTS OF BUSINESS

Presented by:

Anand Sivakumar J (12PGP007)

Gagandeep Singh (12PGP015)

Manu Dhunna (12PGP027)

Pousali Chakrabarti (12PGP032)

Shweta Mallick (12PGP041)


* Compulsory Licensing (CL) and TRIPS

*The Intellectual Property Rights across the world abide by a common agreement named Trade Related Aspects of Intellectual Property or TRIP which is a part of the WTO agreement

*TRIP covers Compulsory License in detail. Compulsory License or CL is referred to as non-voluntary license, which is pertinent to various intricacies of IPR.


*The concept of CL originated in the UK in 1623 with the purpose of making the local application possible for a patented invention.

*Later, in 19th century France, a law was passed to forfeit a patent in case it is not used for a stipulated time frame. In 1883, the UK law included three important provisions regarding when to grant a CL under Patent Act:

1. If the patent was not being utilized in the UK

2. If the basic necessities of the public were hindered

3. If a person was prevented from using or working on an invention.


*TRIP requires that CL be used primarily for the benefit of local markets, a requirement that puts restriction on Governments for importing drugs manufactured overseas.


* Indian provisions relating to Compulsory Licensing

*Chapter XVI (Section 82-98) of the amended Indian Patent Act, 1970 is devoted to Compulsory Licensing. Section 84 of Indian Patent Act provides for grant of CL. The grounds on which a compulsory licence can be granted under the Act can be sub‐divided into the following categories:

*(i) Abuse of patent rights (dealt with broadly under Section 84);

*(ii) ‘Public Interest’ (dealt with broadly under Section 92).


*Following is the brief mention of the provisions of section 84 and 92 of the Act.

*Section 84 of Compulsory licenses:

*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 license 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.


*Under Section 84(1) a person has to make an application to the Controller of Patents for grant of CL. This application for CL can be made only after 3 years of grant of patents. Thus, even in case of CL a rightful patent holder has clear three years period to exploit the invention. Section 84(1) (a) further provides three grounds on which CL can be issued the patented invention has failed to satisfy reasonable requirements of public. This means that:

*If patented invention is unable to meet the needs of public for which it is invented then the Controller of patents may grant CL for the patented invention

*The Second ground for grant of CL is that the patented invention is not available to public at a reasonably affordable price


*This sub-section Section 84 (1) (b) is at the crux of grant of patent for Nexavar in Bayer v/s Natco case.

*Section 84 (2) provides that a person even if he already having license from the rightful patent holder still s/he/it can make an application under Section 84 (1) to the controller for grant of CL if the three exigencies mentioned in Section 84 (1) arises.

*Further Section 84 (2) provides that while opposing CL the patent holder has right to plea that the three mentioned exigencies and that the patent is not working in India.


*Section 84(4) gives huge discretionary powers to the Controller to grant CL if he is satisfied that any of the three exigencies mention in Section 84(1) are met i.e. interests of public is not satisfied vis-à-vis patented invention or that the patented invention is not working in India and it is not available at affordable price.

*Section 84(7) provides various circumstances under which it shall be deemed that the ‘reasonable requirements of the public’ are not met. It provides that if the rightful patent holder has refused to grant license and such refusal is detrimental to trading or manufacturing in India then the reasonable requirements of the public are not met. Hence it opens up case for CL


*Sections 92 (1) and 92 (3)—Circumstances of national emergency or extreme urgency

*Section 92 A—For exports of pharmaceutical products to foreign countries with public health problems


*Introduction

*Natco v/s Bayer was the first case of compulsory licensing being obtained in India in pharmaceutical field of discipline

*International drug manufacturing firm Bayer Corporation and Indian pharmaceutical company Natco Pharma Limited

*Bayer obtained a patent on Nexavar

*A pack of 120 cost Rs. 2.8 lakh INR


*Facts

*The players of this case are:Bayer Corp – The PatenteeNATCO - The ApplicantNEXAVAR


*Bayer Corp

*Ms Bayer Corp is an innovative drug multinational giant based at Germany.

*Invented a drug named ‘SORAFENIB' - Carboxyl Substituted Diphenyl Urea

*Life extending drug to be used in liver and kidney cancer treatment

*Brand name 'NEXAVAR'


*Natco

*Indian generic pharmaceutical company

*Natco filed an application with the Bayer Corporation for the Voluntary license of the drug Nexavar (Sorafenib) with reasonable commercial terms and conditions.

*Received a license from the Drug Controller General of India for manufacturing the drug in bulk and marketing in form of tablets in April 2011.


*Nexavar

*The drug Nexavar (Sorafenib) is the patented product of M/s Bayer Corporation

*R&D cost incurred was exorbitant and hence there should be no Compulsory Licensing.


*Cost of Nexavar

*Bayer did not disclose the cost of R&D involved in the invention of this drug.

*Bayer has time and again tried to conceal the R&D Expenditure for development of Nexavar, the relevant data has been mined from Annual reports of Onyx Pharmaceuticals.

*As per Onyx SEC fillings from 1994-1999 Bayer provided Onyx with $26.1 million


*October 8, 2004- Bayer received an orphan drug designation for Nexavar which makes the drug eligible for a 50 % orphan drug tax credit thus, lowering the net cost of the investments to both Bayer and Onyx.

*SEC filings reported a combined Bayer/Onyx outlay of $275 million.

*Total R&D for development of Nexavar was

$ 275 million.

*Deduction of Orphan Tax credit from the same further lowers the R&D cost.


*Sales

*2006- $165 million.

*2007- $371.7 million.

*2008- $678 million.

*Total- $1.2 billion within three years of approval as an “orphan” drug.


*Sales Figures of Various Years


*Cost and Sales of Nexavar in India

*When the world sales were $934 million in 2010 the Indian Sales was almost negligible. It is important to remember that India is one of the most populous countries.


* Cost In India

Preface:*Huge patient base for drugs and pharma companies

*India’s per capita income-considerably lower compared to other developed and emerging market economies

*India’s spending on healthcare (as % of GDP)- considerably low


*Nexavar cost - The cost of cancer drug Sorafenib in 200mg tablet varies vastly in branded and generic category.

*Branded Category- Rs 280,428 per patient per month.

*The generic drug:

1) Sorafenib was available from Cipla for Rs 27,960

2) Natco is providing the same at Rs 8,880/-. After the judgment for grant of compulsory license Cipla has slashed its price further and now it is available for Rs 6,600/- per patient per month.


*Per Capita Income of India (PCY) in 2011 - $1575/-

*Cost of Bayer’s Nexavar PP/Year in 2011 - $69,000/-

*Cost of Natco’s Sorafenib PP/Year in 2011 - $2,120/-

*Bayer was charging almost 45 times the Per Capita Income of India of India.


*Case

*Natco, a generic drug manufacturing company requested Bayer for giving it a voluntary license.

*The request was denied and so Natco filed an application in the Controller of Patents Court for grant of a compulsory license.

*In accordance with the provision of Indian Law’s Section 84 of the Patent Act, the Indian Controller of Patents started with competing claims of both the patentee (Bayer) and the compulsory license applicant (Natco).


* Reasonable Requirements of the Public – Section 84(1)(a)

*Requirement of about 23,000 bottles per month.

*No bottles of Nexavar were imported in India in the year 2008 and 200 bottles were imported in 2009. In the year 2010 there were no imports of Nexavar.

*The importance of the time period lies in the fact that the Government of India granted Bayer a patent on the drug Nexavar in the year 2008 after assessing that Bayer would fulfil the “Reasonable requirements of the Public” during that period. Also, Bayer did not manufacture the drug in India as it focused on imports of its bottles.


* Reasonably Affordable Price – Section 84(1)(b)

*The Controller cited that the drug was “Exorbitantly priced” and thus was out of reach of majority of the population.

*The price of the drug was at the time of decision Rs. 2,80,248/- per month compared to the generic drug’s price of Rs. 8,800/- per month from Natco.

*The Controller also added that the drug was not available throughout the country was only available in major metropolitan cities like Chennai, Delhi, Kolkata and Mumbai.

*The Controller also cited that the supply of Nexavar was short even in the previously mentioned cities and this was highly significant to the case as the drug was a “Life saving drug” and not a “Luxury Item”.


*Finally the Controller noted that in the year 2010, Bayer’s sales across the world had increase to 934 million dollars from 165 million dollars in 2006. He wrote, “These figures clearly demonstrate the neglectful conduct of the Patentee (Bayer) as far as India in concerned”.

*The Controller illustrated that it would take a common man in India while 3.5 years of his/her wage to afford just one month’s supply of the drug the drug Nexavar extends life for a kidney cancer patient by only about four to six years.

*The Controller also cited from WHO’s bulletin, a research article titled “Impoverishing effects” related to the affordability of medicines in the developing nations, along with an affidavit from James Packard Love, Director of Knowledge Ecology International and co-chairman of the Trans-Atlantic Consumer Dialog Policy Committee on Intellectual Property Rights.


*Bayer argued that the high cost of the drug Nexavar was to support the further research and development of Sorafenib, for curing other types of cancer, in public interest. And thus, granting Natco a compulsory license would harm the public interest.

*Bayer also argued that the reduced cost as a result of compulsory license should not be of benefit to the rich and the middle class who could afford Bayer’s price of Nexavar.


* Patented Invention not worked in India – Section 84(1)(c)

*The Controller also cited that the invention (Nexavar) was not “worked” in India. Natco argued that even though Bayer had manufacturing facilities in India, it did not manufacture the drug in India.

*Bayer said it did not do so because of economic reasons and argued that “worked in the territory” could not mean “manufactured in India”.

*Bayer added that the “strategic decision” of manufacturing the drug in Germany was valid as had the drug had “small global demand”.


*Verdict of the Case

*On 9th March, 2012, The Controller of Patents in his judgment awarded the first compulsory license in the pharmaceutical industry in India under new WTO rules. The Bayer has delayed to work on the patent in India and the drug is exorbitantly priced in India. The Compulsory License for the drug Sorafenib/ Nexavar is granted by the controller on the basis of the following terms:

*The applicant Natco has very limited rights to manufacture and commercially sell the drug.

*Natco cannot sublicense to another party. It is a non-assignable and non-exclusive license with no right to import the drug.


*The compulsory licensed drug can be sold only for the treatment of liver and renal cancer. Natco cannot use this license for alternate or subsequent use of the drug.

*Natco has to pay the royalty for the drug at a rate of 6% of net sales to the patent owner Bayer. This is in consonance with Article 31(h) of TRIPS Agreement read with Section 90(1) of the Act.

*The rate of royalty has been decided based on the royalty practices and guidelines recommended by United Nations Development Program (UNDP) depending upon the value of the product. For one month treatment, the controller has set the price of the Natco’s drug at Rs.8800/-.


*Natco, as committed before, has to provide the drug free of cost to at least 600 “needy and deserving” patients per year.

*Natco cannot or it has no right to “represent privately or publicly” that the product manufactured by it is the same as Bayer’s Nexavar.

*Bayer has no liability for the drug to be manufactured by Natco, which must be physically distinct from Nexavar dosage form.


*Following the grant of the CL to Natco, Bayer has filed a petition with the Intellectual Property Appellate Board (IPAB) to order a stay on the compulsory license.

*On Friday, 14 September 2012, IPAB issued Order (No. 223 of 2012) in the case between Bayer versus the Union of India, The Controller of Patents, and Natco dismissing Bayer's request for a stay on the compulsory license granted to Natco.

*Bayer, in its petition said that Indian Drug manufacturer Cipla was selling its product Soranib, at a maximum retail price of Rs.6,840 in India for one month’s treatment, lesser than Natco’s price.

*Bayer also argued that, its drug Nexavar was made available at Rs. 30,000 to patients on the recommendation of the oncologist.


*Bayer argued that as the drug is already available in the market at a reasonably affordable price and the patentee is not necessarily the supplier, then Section 84(1)(b ) of the Patents Act will not arise.

*As also some other company is supplying the drug and as the public requirement is met, even then Section 84(1)(a) will not arise.

*Additionally, there was no burden for Cipla in doing research and development, Cipla can sell the drug at any price. Therefore, Section 84(1)(c) could not arise either.

*The decision noted that "The patentee, Bayer has to prove that, the patentee by its own supply has satisfied the requirements of the public. The appellant cannot ride piggyback on Cipla’s sale, as Bayer has already filed a case against Cipla to stop the sale of Cipla’s drug soranib”. The decision also mentioned that “It is not the case of the appellant that the drug is available in the market in a reasonably affordable price and meets the demand of the public”.


* References

*Online Sources:1. http://legal-dictionary.thefreedictionary.com/estoppel

2. http://www.wto.org/english/tratop_e/trips_e/healthdeclexpln_e.htm

3. http://www.wto.org/english/tratop_e/trips_e/t_agm2_e.htm

4. http://www.elsevierbi.com/~/media/Supporting%20Documents/Pharmasia%20News/2012/September/IPAB%20Order%20Bayer%20Natco%20Sept%20%202012.pdf

5. http://www.ip-watch.org/2012/05/20/india%E2%80%99s-generics-big-pharma-battle-drops-drug-prices-raises-legal-debate/

6. http://articles.economictimes.indiatimes.com/2012-05-19/news/31778153_1_compulsory-licence-natco-pharma-compulsory-licensing


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bayer vs natco case

Documents

section section

provisions of section

patent o

vis patented invention

amended indian patent

thatthe patented invention

years of grant

clthe patent holder