Bayer vs.

Natco
First Case of Compulsory Licensing in India
Presented by: Anand Sivakumar J (12PGP007) Gagandeep Singh (12PGP015) Manu Dhunna (12PGP027) Pousali Chakrabarti (12PGP032) Shweta Mallick (12PGP041)
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*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 Compulsory License or CL is referred to as nonvoluntary license, which is pertinent to various intricacies of IPR.

*TRIP covers Compulsory License in detail.

*
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*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. 2.

3.

If the patent was not being utilized in the UK If the basic necessities of the public were hindered If a person was prevented from using or working on an invention.
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*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.

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* 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 subdivided into the following categories: 84);

* (i) Abuse of patent rights (dealt with broadly under Section * (ii) Public Interest (dealt with broadly under Section 92).

*
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*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.

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* 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

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*This sub-section Section 84 (1) (b) is at the crux of

grant of patent for Nexavar in Bayer v/s Natco case. 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. the patent holder has right to plea that the three mentioned exigencies and that the patent is not working in India.

*Section 84 (2) provides that a person even if he already

*Further Section 84 (2) provides that while opposing CL

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* 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--vis patented invention or that the patented invention is not working in India and it is not available at affordable price. 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

* Section 84(7) provides various circumstances under which it

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* Sections 92 (1) and 92 (3)Circumstances of national

emergency or extreme urgency

* Section 92 AFor exports of pharmaceutical products to

foreign countries with public health problems

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*Natco v/s Bayer was the first case of compulsory

licensing being obtained in India in pharmaceutical field of discipline Corporation and Indian pharmaceutical company Natco Pharma Limited

*International drug manufacturing firm Bayer

*Bayer obtained a patent on Nexavar *A pack of 120 cost Rs. 2.8 lakh INR

*
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*The players of this case are: Bayer Corp The Patentee NATCO - The Applicant NEXAVAR

*
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*Ms Bayer Corp is an innovative drug

Substituted Diphenyl Urea kidney cancer treatment

multinational giant based at Germany.

*Invented a drug named SORAFENIB' - Carboxyl

*Life extending drug to be used in liver and *Brand name 'NEXAVAR'

*
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*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.

*
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*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.

*
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*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.
provided Onyx with $26.1 million

*As per Onyx SEC fillings from 1994-1999 Bayer

*
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*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. $275 million.

*SEC filings reported a combined Bayer/Onyx outlay of *Total R&D for development of Nexavar was
$ 275 million.

*Deduction of Orphan Tax credit from the same further

lowers the R&D cost.

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*2006- $165 million. *2007- $371.7 million. *2008- $678 million. *Total- $1.2 billion within three years of
approval as an orphan drug.

*
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*
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*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.

*
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Preface:
*Huge patient base for drugs and pharma
companies

*Indias per capita income-considerably lower

compared to other developed and emerging market economies considerably low

*Indias spending on healthcare (as % of GDP)-

*
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*Nexavar cost - The cost of cancer drug Sorafenib

in 200mg tablet varies vastly in branded and generic category. month.

*Branded Category- Rs 280,428 per patient per

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

*Cost of Bayers Nexavar PP/Year in 2011 $69,000/$2,120/-

*Cost of Natcos Sorafenib PP/Year in 2011 *Bayer was charging almost 45 times the Per
Capita Income of India of India.

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*Natco, a generic drug manufacturing company

*The request was denied and so Natco filed an

requested Bayer for giving it a voluntary license.

application in the Controller of Patents Court for grant of a compulsory license.

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).

*In accordance with the provision of Indian Laws

*
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*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.

*
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* 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 drugs price of Rs. 8,800/- per month from Natco. throughout the country was only available in major metropolitan cities like Chennai, Delhi, Kolkata and Mumbai. 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.

* The Controller also added that the drug was not available

* The Controller also cited that the supply of Nexavar was short

*
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* Finally the Controller noted that in the year 2010, Bayers

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 months 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 WHOs 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.

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*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. result of compulsory license should not be of benefit to the rich and the middle class who could afford Bayers price of Nexavar.

*Bayer also argued that the reduced cost as a

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Thank You
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