India's First Compulsory Licensing Order

India's first compulsory licensing order in the post TRIPS patent era garnered more attention than one might have expected.

The NY Times reported it, as did a host of other renowned papers, journals and periodicals.

KEI (Knowledge Ecology International) has a very useful web page documenting its take on the decision, as also all articles/pieces that have reviewed the decision so far. Jamie Love, the founder of KEI had filed a very potent affidavit before the Controller General of Patents poking several holes in Bayer's estimated cost of 1.8 billion dollars for its patented cancer drug (Nexavar).

The Hindu ran an excellent editorial on the issue by Ananthakrishnan, where he notes:

"Mere application of the test of reasonable price in a country with a weak social health insurance infrastructure provides a strong argument for compulsory licensing in the case of Nexavar, the patent for which is held by the German multi-national company, Bayer. At present a month's treatment regime of 120 tablets costs Rs.2.84 lakh, but manufacture under compulsory licensing will slash it to Rs.8,880. The Indian applicant has been granted the licence till the expiry of the patent in 2021.

The use of compulsory licensing is bound to raise the temperature in the pharmaceutical industry and be dubbed a move that will stifle innovation. But that would be ignoring the point that it is perfectly legal, and is in fact provided for in the patents regime to balance public interest and corporate profits."

I summarised the text of the 63 page order in this piece in the Indian Express and extract the key portions below:

"In August 2011, Natco, an Indian generic manufacturer, had applied for a compulsory licence in respect of Bayer’s patent covering an anticancer drug, sorafenib tosylate, meant for patients with advanced kidney and liver cancer.

A compulsory licence is a legal instrument designed to force intellectual property owners to license out their statutorily granted right to interested third parties capable of manufacturing the patented product at cheaper prices.

....Constituting what many regard as a textbook case for compulsory licensing, Controller General of Patents P.H. Kurian found that all the grounds prescribed in Section 84 of the Indian Patents Act for the issuance of a compulsory licence had been met:

One, Bayer supplied the drug to hardly 2 per cent of approximately 88,000 patients who required the drug. Therefore, the reasonable requirements of the public with respect to the patented drug (Nexavar) were clearly not met.

Two, Bayer’s pricing of the drug was excessive and did not constitute a “reasonably affordable” price. It charged Rs 2.8 lakh for a month’s supply of the drug, whereas Natco was willing to supply the same quantity at Rs 8,800 a month.

Three, since Bayer did not manufacture reasonable quantities of the drug in India, it could not be said to have complied with the “working” requirement under the Indian Patents Act.

...The order marks a watershed in the history of Indian patent law and in many ways represents a “middle path” in the debates surrounding pharmaceutical patents and access to affordable drugs. Patents may now be more palatable to critics, if their worst monopoly effects can be successfully moderated through instruments such as compulsory licensing.

....Although this order marks an important victory for patients and activists who are fighting on their behalf, it is only the beginning. Much more needs to be done, particularly by the Indian government.

For one, the government cannot simply sit back and let innovators and generics slug it out, hoping that lower generic prices would necessarily redress our public health concerns. Illustratively, one simply needs to turn to the fact that Natco’s version of Bayer’s patented drug will sell at Rs 8,800 per month. Given that a sizeable proportion of Indians live below poverty line, how many of our patients can afford even this lower generic price?

The government must step in and take proactive measures to ensure accessible healthcare for all. It should facilitate robust insurance schemes, where health coverage extends to the poorest of the poor. Only then will our right to good health translate from paper to practice for the aam admi."

Public Health Exclusions Under Patent Law

At the start of this year, WIPO (World IP Organisation) commissioned a group of us (under the stewardship of Professor Lionel Bently, the famed Cambridge IP don and co-author of the leading treatise: Bently and Sherman on IP) to do a report on exceptions, exclusions and limitations in patent law.

This report was prepared pursuant to the work at the SCP (Standing Committee on the Law of Patents) and will be tabled at the 15th SCP session this October.

The background to this report has been articulated thus:

"At its thirteenth session, held from March 23 to 27, 2009, the Standing Committee on theLaw of Patents (SCP) decided that the Secretariat would “commission external experts astudy on exclusions, exceptions and limitations focused on, but not limited to, issues suggested by members, such as public health, education, research and experimentation and patentability of life forms, including from a public policy, socio-economic development perspective, bearing in mind the level of economic development” (document SCP/13/7, paragraph 9(c)(i))."

The authors of the report are as below:

Annex I: Professor Lionel Bently, Center for Intellectual Property and Information Law,
Cambridge University, United Kingdom;

Annex II: Professor Brad Sherman, University of Queensland, Australia;

Annex III: Professor Denis Barbosa, Catholic University of Rio de Janeiro and
Rio Grande do Sul, Brazil;

Annex IV: Professor Shamnad Basheer, National University of Judicial Science, India;

Annex V: Professor Coenraad Visser, University of South Africa, South Africa; and

Annex VI: Professor Richard Gold, McGill University, Canada.

To download all the reports, click here.

Our report (marked as Annexure IV and authored by Prashant Reddy, Shashwat Purohit and me) deals with "public health" exclusions. I reproduce parts of our introduction here:

"There is much debate on whether or not patents foster a higher rate of new ideas, and if so, to what extent. More importantly, the issues are technology specific, and evidence that patents may help in an investment heavy industry such as pharmaceuticals may not be readily transposable to industries such as Information Technology and semiconductors. Further, there is also the issue of developing and least developed countries that are net importers of technology.

The question is whether patent regimes promote technology transfer to these countries or whether they effectively curb the potential growth that these countries might have experienced, had they had the freedom to imitate and learn; freedoms that many of the developed countries enjoyed in the pre TRIPS era. For these countries, the potential use of patent eligibility exclusions is far more significant in driving national policy.

A brief survey of case law from developed economies would suggest a restricted reading of eligibility exclusions. However, developing countries such as India opt for a wide reading of such eligibility exclusions, reflecting their specific national priorities. Although we’ve categorised section 3(d) of the Indian Patents Act as an “impure” patent eligibility exclusion later in this chapter, it may help to consider this section for the purpose of this argument.

Section 3(d) seeks to exclude a large number of similar chemical/pharmaceutical substances from patentability by providing that only those derivatives that demonstrate significantly enhanced efficacy would be patentable. This exclusion has been expensively interpreted by patent office and the courts: notably, the term ‘efficacy’ in the explanation to Section 3(d) of the Patents Act, 1970 has been interpreted in Novartis AG & Another v. Union of India & Others, 2007 4 MLJ 1153 at ¶ 13 to include only “therapeutic” efficacy, with the result that a number of derivatives that demonstrate non therapeutic advantages such as heat stability etc are likely to be excluded.

For developing countries, patent policies are not just about increasing the rate of innovation, but are to be calibrated to take into account concerns of “access” to technology goods. The question of access is most significant in the context of pharmaceuticals and public health. Therefore the patent regime cannot be hermetically sealed off from other public policy concerns such as health. Indeed, one often witnesses a conflict between patent rights on the one hand, and social values, public policies and fundamental rights on the other. The issue for most countries then is to balance out these competing and often conflicting concerns and devise a regime that would, while furthering innovation outcomes, also not erode important values such as health.

It is a truism that patents often cause price rises. A variety of tools exist to regulate such price rises and ensure affordable access to consumers, particularly in the context of drug patents and developing countries. Indeed most such measures revolve around ex-post regulatory mechanisms such as compulsory licensing that help limit the impact of patents and in the process promote public health goals. This chapter seeks to evaluate the patent and public health interface from the point of view of ex-ante mechanisms i.e. ways in which countries have sought to limit the grant of patents to certain categories of subject matter in a bid to promote access to public health goods."

Amongst the various exclusions that could potentially further public health objectives, we limit ourselves to two exclusions: the "method of medical treatment" exclusion and the "morality" exclusion.

In so far as our Indian section is concerned, we try and draw out propositions from opposition cases (from the patent office) as best as we can. As many of you know, courts are still relatively new to patent matters and it will be a matter of time before they begin to yield sound propositions on various statutory exclusions.

Before I sign off on this, I want to place on record my genuine admiration for two final year law students (Rohan Sahai and Medha Marathe) at NUJS that we roped in at the last minute. One of our co-authors on this report fell seriously ill towards the end of the report and I sos'ed these two students for help. Not only did they come up to speed on complicated patent concepts and extensive literature surveys in the shortest possible time, but managed to do a brilliant job of helping us finish the report and contributing significantly on the India section.