India Issues First Compulsory License for Pharmaceutical Patent

On 9 March 2012, the Indian Patent Office issued its first compulsory license on patented pharmaceutical invention. The decision allows Indian drug maker Natco Pharma Ltd. to make and sell Bayer Corporation’s patented drug “Sorafenib” sold under the trade name of NEXAVAR, which is used for treatment of liver and kidney cancer at advanced stages.
According to the Indian Patent Act, if, upon the expiration of three years after the grant of a patent, the requirements of the public with respect to the patented invention have not been satisfied to an adequate extent or on reasonable terms, or the patented invention is unavailable at affordable prices or not worked in the territory of India, the invention is subject to compulsory licensing.
In this case, Bayer was granted the patent for Sorafenib in India in 2008, and got the license to make and sell the drug in August 2007. However, the patentee was found not importing the drug into India in 2008, and importing only a small quantity of it in 2009 and 2010. In addition, the drug was too highly priced to be accessible to most of the local population. Further, the invention was neither “worked” in the territory of India, nor licensed to another to do so. These were interpreted by the Indian Patent Office as not taking adequate steps to make full use of the invention on the part of the patentee.
In applying the granted license, Natco Pharma is required to observe some terms established by the Indian Patent Office. Among them, it has to sell the drug within India, at a price of Rupees 8,800 (approximately USD178) for a pack of 120 tablets (i.e. a month’s dose), with payment of royalty at a rate of 6%. It also needs to provide the drug for free to at least 600 needy and deserving patients per year.
It is noteworthy that the requirement of “working the invention” implies that patents granted in India carry with them an obligation to produce the patented invention locally. Following this criterion, as many as 90% of the drugs marketed by foreign companies in India, which are imported, will be potential targets of compulsory licensing.
Industry observers believe that the compulsory licensing decision is likely to inspire other developing countries to follow suit. As an aftermath, in countries/regions which adopt this practice, foreign drug companies affected may be forced to consider opting out of the markets, while local drug makers can be discouraged from investing in pharmaceutical R&D and innovating. Meanwhile, to meet the challenge, multinational drug makers may revise their strategies, such as varying their pricing schemes by country/region to sustain lower prices in developing economies.