Bridges Weekly Trade News DigestVolume 16Number 10 • 14th March 2012

India Grants First Compulsory License to Generic Drug Producer


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In a landmark move, the Indian Patent Office announced on Monday that it has issued its first compulsory license to a domestic generic drug-maker. The decision effectively ends German pharmaceutical company Bayer AG’s monopoly over an anti-cancer drug and authorises the production of a low-cost version for the Indian market.

Compulsory licensing is when a government authorises a party other than the patent owner to produce the patented product or process, without the patent owner’s consent.

New Delhi’s decision may pave the way for other Indian generic producers to ask for compulsory licenses on patent-protected medicines if the right-holders fail to supply the products at affordable prices and in sufficient quantities. It could also potentially encourage other developing countries to use compulsory licensing for drugs for non-communicable diseases, which has until now mostly been limited to HIV drugs in these countries, experts say.

India is the world’s third-largest pharmaceutical drug producer by volume; in 2011 the domestic pharmaceutical market reached a record of US$12.2 billion in sales. Patents on pharmaceutical products in India have been under the spotlight recently as Swiss drug manufacturer Novartis fights the rejection of a patent on another cancer drug on the grounds that it is not sufficiently innovative.

India only began issuing patents for drugs in 2005 in order to comply with the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The TRIPS Agreement explicitly allows compulsory licensing as long as procedures and conditions set out in Article 31 of TRIPS are fulfilled.

Drug now poised to enter Indian market, patent office says

Under Section 84 (1) of the Indian Patent Act, any person may request a compulsory license if,  after three years from the date of the grant of a patent, the needs of the public to be covered by the invention have not been satisfied; the invention is not available to the public at an affordable price; or the patented invention is not “worked in,” or manufactured in the country, to the fullest extent possible.

Bayer acquired an importing license for  Nexavar - the company’s brand name for the drug sorafenib tosylate -  in 2007; the patent on the drug was granted one year later.  The company has claimed that Nexavar’s sales in India were undermined by the marketing of a similar drug by another domestic generic producer, CIPLA, which it had sued for infringement.

According to the Indian Patent Office’s decision, the German drug-maker did not begin importing the drug to India in 2008 and only small quantities were available during the following two years.

Bayer “took no adequate or reasonable steps to start the working of the invention in the territory of India on a commercial scale and to an adequate extent,” the decision notes.

“The drug is exorbitantly priced and out of reach of most of the people,” the patent authority wrote in its 62-page decision. “The product in question is not a luxury item but a lifesaving drug and it is highly important that a substantial part of the demand be met strictly. In the present case, even 1 percent of the public doesn’t derive benefit of the patented drug.”

In its compulsory license request, Indian generic manufacturer Natco proposed selling sorafenib tosylate at Rs. 8,800 per patient per month - approximately US $175 - resulting in a 97 percent price cut compared to Nexavar.

The compulsory license has been granted until 2020. Natco is not entitled to export the drug or to outsource its production.

The Indian Patent Office also said that Natco must pay royalties to Bayer on a quarterly basis at the rate of 6 percent of the net sales of the medicine, in accordance with remuneration guidelines set forth by the United Nations Development Programme.

Mixed response

Tido von Schoen-Angerer, Director of Médecins Sans Frontières’ (MSF) Access Campaign, welcomed the announcement.  “The decision marks a precedent that offers hope: it shows that new drugs under patent can also be produced by generic makers at a fraction of the price, while royalties are paid to the patent holder.”

“This decision serves as a warning that when drug companies are price gouging and limiting availability, there is a consequence,” added Michelle Childs, Director of Policy/Advocacy at the MSF Access Campaign.

For his part, Tapan Ray of the Organisation of Pharmaceutical Producers of India - an industry group of multi-national drug-makers - opposed the decision, saying that “the solution to helping patients with innovative medicines does not lie in breaking patents or denying patent rights to the innovators.”

Bayer has the option of appealing the decision; the case could potentially reach the Indian Supreme Court.

ICTSD reporting; “Bayer mulls challenge to India cancer drug ruling,” AFP, 13 March 2012; “India Grants First Compulsory Licence, For Bayer Cancer Drug,” IP WATCH, 12 March 2012; “India’s Supreme Court to Hear Dispute on Drug Patents,” NEW YORK TIMES, 6 March 2012; “Analysis: India cancer ruling opens door for cheaper drugs,” REUTERS, 13 March 2012.

One response to “India Grants First Compulsory License to Generic Drug Producer”

  1. Asia Unbound » The Compulsory Licensing of Pharmaceuticals: Will China Follow in India’s Footsteps?

    [...] authorizing a domestic generic drug-maker (Netco) to produce a low-cost version of the drug. This move is significant for three reasons. First, it would lead to a generic drug that is 97 percent less than the patented [...]

  2. Anonymous

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