CASE ANALYSIS Natco Pharma Ltd. Vs Bayer Corporation BY - RAUNAK MAHESHWARI

CASE ANALYSIS

Natco Pharma Ltd. Vs Bayer Corporation

AUTHORED BY - RAUNAK MAHESHWARI

 

For a long time, there has been a heated debate about the pharmaceutical sector and intellectual property rights and no country is immune to this including India. However, India's increasingly apparent pro-access attitude has gained fresh teeth in recent years. Also, the Indian judiciary has made it clear in a slew of patent cases that the public interest is paramount, and that the country will not accept drug companies exploiting its people for financial gain. For such decisions, Natco Pharma Ltd. v/s Bayer Corporation is a landmark case.

 

Introduction

The issue of pharmaceutical compulsory licensing has raged on for a long time. So it was a watershed moment in Indian pharmaceutical patent history when the Intellectual Property Appellate Board (IPAB) dismissed Bayer Corporation's appeal and confirmed Natco Pharma Ltd.'s compulsory license to manufacture Bayer's patented kidney cancer drug Nexavar. In this context, the judgment in Bayer Corporation vs Natco Pharma Ltd. (Natco vs Bayer) provides new light on concerns raised by this discussion, providing a glimpse of what compulsory licensing in India might look like in the future.

Even though the historic judgment addresses concerns in the specific facts of the case, but it fails to answer numerous important matters that will form the contours of India's compulsory licensing regime in the long run. The decision successfully sidesteps the responsibility for propounding wider scopes of principles of pharmaceutical patent provisions that could have far-reaching repercussions by limiting itself to the narrow factual matrix before it.[1]

 

Timeline Of the Case

1990: Bayer Corp. invented a drug named Sofraneib Tosylate.

1999: Bayer had originally applied for the patent in the United States.

2000: Bayer filed a PCT International Application. (Patent Cooperation Treaty).

2005: Bayer launched the drug, with the brand name Nexavar.

2008 (9th March): For Bayer, the patent was granted in India for the drug.

2010: M/S Cipla, another drug manufacturer, starts selling a generic version of Nexavar.

2011 (July): Natco applied for a compulsory license to the Controller of Patents to manufacture and sell a generic version of Nexavar under Section 84(1) of the Indian Patent Act, 1970 (amended in 2005).

2012 (9th March): First compulsory license granted in India permitting Natco to produce and sell a generic version of Nexavar.

2012: Bayer appealed against the Controller’s decision to the Intellectual Property Appellate Board (IPAB) in the Bombay High court with the contention that the order weakens the international patent system and endangers research.

 

Background Case: Drug Giant vs the Third Party

The inevitable squabble between profit-driven pharmaceutical companies and welfare-oriented governments aiming to provide affordable access to essential medicines has dominated the headlines on numerous occasions. According to World Health Organization statistics, the average availability of necessary medicines in public sector health facilities worldwide is an appalling 51.8 percent.

 

Bayer Corporation, an American subsidiary of a German multinational chemical and pharmaceutical company, Bayer AG. patented "Sorafenib," an active pharmaceutical ingredient used to treat liver and kidney cancer, in India (Patent No. IN 215758). Nexavar is the brand name for sorafenib, which is sold all over the world.[2]

 

Entry of infringer (The Third Party)

In 2008, the Indian generic company CIPLA began producing and marketing Sorafenib tablets with the brand name ‘Soranib' and the description ‘Sorafenib Tablets 200mg.' Bayer launched an infringement lawsuit against CIPLA in Indian courts.

 

Bayer was charging 280,438 INR (US $ 5280) a month at the time of the lawsuit, while CIPLA's generic version was selling for 27,960 INR (US $ 525) for the same number of tablets.

Natco’s arrival

During the ongoing litigation between CIPLA and Bayer, Natco Pharma Limited, a Hyderabad-based generic producer, filed a compulsory licensing request against Bayer's patent on Sorafenib with the Controller of Patents. The compulsory license was requested by Natco under Section 84 (1) of the Indian Patent Act of 1970, as revised in 2005.

 

Controller’s prima facie decision

The Controller analyzed that Because Bayer had not met the conditions of Section 84 of the Patents Act, 1970, and Natco Pharma deserved a compulsory license. The terms and conditions of the forced license were created by the Controller, who awarded Bayer initially a 6% royalty on profits. Bayer appealed the Controller’s decision before the Indian Intellectual Property Appellate Board (IPAB).[3]

 

Legal Events & Provisions

The decision was based upon the test laid down under section 84 (1) of the Patent (Amendment) Act, 2005. Section 84 of the act lays down the conditions under which compulsory license can be granted in India.

 

Section 84 (1), Indian Patents Act, 1970

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:

 

1. that the reasonable requirements of the public concerning the patented invention have not been satisfied, or
2. that the patented invention is not available to the public at a reasonably affordable price, or
3. that the patented invention is not worked in the territory of India.

 

 

ISSUES INVOLVED

1. Whether the reasonable requirements of the public concerning the patented invention have not been satisfied?
2. Whether the patented invention is not available to the public at a reasonably affordable price?
3. Whether the patented invention has not worked in the territory of India?

 

Arguments cultivated

1. Reasonable requirements of the public

Section 84(1)(a) of the Indian Patents Act stipulated that the "reasonable requirements of the public concerning the patented invention" must not have been met, for a compulsory license to be granted, etc. Natco supplied statistical data showing that Bayer did not make the drug readily available to the public and that excessive pricing of the drug partially contributed to a lack of demand by the public.

 

As stated by GLOBOCAN 2008 (World Health Organization, 2008), India had around 20,000 patients with liver cancer (HCC) and 8,900 patients with kidney cancer (RCC). According to the estimation by Bayer, there are only 8,842 people who were eligible for this drug. As the drug, Nexavar was required only for the patients in stage IV. The available statistics state that Bayer has sold 593 boxes in 2011 which is insignificant as compared to the requirement.[4]

In response to this, Bayer denied the claims and, in its arguments, stated the facts of sales of an alleged infringer (CIPLA). Bayer has previously sued Cipla for infringement of the patent. Bayer stated that the sale of Cipla should be taken into account when determining whether it meets the needs of patients.

The Controller, however, did not accept this argument, stating that Bayer's conduct and that of any licensee were of importance. He found the basis for this reasoning in Section 84(6)(i) of the Act, which stated that the measures taken by the patentee and licensee must be taken into account.

 

On the facts, the Controller found that Bayer did not discharge its obligation in satisfying the reasonable requirements of the public as an insignificant quantum of the drug had been made available to the public in the three years since the grant of the patent. Thus, the Controller held that Section 84(7)(a)(ii) had been invoked by the Patentee.[5]

Section 84(6)(i)

1. In considering the application filed under this section, the Controller shall take into account,

 

1. the nature of the invention, the time which has elapsed since the sealing of the patent, and the measures are already taken by the patentee or any licensee to make full use of the invention.

 

Section 84(7)(a)(ii)

1. For this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied—

 

(a) if, by reason of the refusal of the patentee to grant a license or licenses on reasonable terms,

 

1. the demand for the patented article has not been met to an adequate extent or on reasonable terms.

 

• • The controller also estimated that, if on average, every eligible cancer patient needs 3 packets (dosage for 3 months). As per the data, Bayer supplied 593 boxes which would fulfill the needs of less than 200 patients, which is only about 2% of the total requirement. The controller also reported that the number of eligible patients would be more than that estimated by Bayer, but even if that number is considered it is not even close to meeting the requirements. Also, as per the data Bayer imported 200 boxes in 2009, Bayer had no justification as to why it didn’t manufacture/import the drug during 2008-2010.

 

• • Interpretation:

In light of all the arguments and observations, it was clear that it didn’t meet the reasonable requirements of the patients.

 

 

1. Reasonably affordable price

The term "reasonably affordable pricing" has not been defined; it is determined based on the facts of each case, and it will vary from case to case. In this scenario, two things were taken into consideration while determining what a relatively inexpensive price would entail. These criteria included:

 

1. Bayer's R&D costs for developing the medicine,
2. The drug's affordability of the patients.

 

Acc. to Section 84(1)(b) of the Patents Act, 1970, i.e., for a compulsory license to be granted, the patented innovation must not be offered to the public at a reasonable cost.

 

Natco Pharma contended that the price was exorbitant and that it was not available to the general public at a reasonable cost. It also claimed that Bayer was eligible for a drug tax credit, which would have reduced Bayer's net cost of research investment; nevertheless, Bayer did not take advantage of this opportunity to cut the drug's price, demonstrating misuse of its monopolistic powers. Bayer stated that:

 

• • innovation-based products are more expensive, and that the Controller needed to consider the whole cost of R&D as well as the long-term viability of future research. It also stated that the public and the patentee should both be able to afford a "reasonably affordable price."
  • Bayer also has a Patient Assistance Program (PAP) and other insurance firms that can help with drug accessibility.

 

Access to Natco, the PAP, it contended, should not be taken into account because Bayer Corp. can cancel it at any time. Additionally, it claimed that the existence of the PAP was proof that Bayer was admitting the drug's unaffordability. The IPAB and the controller of the patents rights in India both were of the view that the price of the drug was to be decided by keeping in mind the patient's/consumers perspective. The fact that in India the patent rights were created in the interest of the national economy and not that of the inventor was taken into consideration.[6]

 

Interpretation:

Based on the circumstances of the case, the Controller again found that the patented invention was not available to the public at a reasonably affordable price.

 

1. Patented invention not worked in the territory of India

Section 84(1)(c) of the Indian Patents Act allows for a compulsory license if the patented invention is not worked in the territory of India, but the patent laws don’t define the term “worked in the territory of India” with a wider scope.

 

• • Natco Pharma asserted that “working” here should not include “importing the drug”; instead, it must be created within India's borders, whereas Bayer refuted the allegation and pushed for a broader interpretation of the law.
  • Bayer said that the company's R&D costs for producing the drug were already quite high and that global demand for the treatment, along with its manufacturing, was very tiny. As a result, it was decided to produce the medicine in a single unit, with the production unit headquartered in Germany because of its superior infrastructure for supplying global markets. Because the words "worked in the territory of India" are not defined under the Act, Bayer argues that the interpretation should be permissive to the degree that it is made available in sufficient quantities to the Indian market.
  • The patent rights controller too asserted Natco pharma statement. However, IPAB believes that “working” here can be interpreted in a variety of ways and that it will be determined on a case-by-case basis. Despite the fact that Bayer has multiple manufacturing facilities in India for a variety of goods, the flexible definition was taken into consideration. Even taking into account Bayer's medicine imports, the drug did not come close to meeting the needs of Indian patients.[7]

 

Interpretation: As a result, Bayer's arguments were rejected since it was unable to meet the criteria of working in the territory of India.

 

 

 

 

Final Judgement

Under Section 84 of the Patent Act of 1970, as revised in 2005, the Controller of Patents opted to award a Compulsory License to Natco Pharma Ltd. The Controller, however, imposed certain restrictions and conditions on the License in light of Section 90 of the Act. Also using Article 5(A)(2) of the Paris Convention to fortify his reasoning, the Controller also said that a reasonable fetter in the form of a compulsory license was within the purview of the TRIPS and the Paris Convention. The following are some of the most important terms and conditions set forth by the Controller: -

 

• • The cost of a pack of 120 pills of the medicine "Sorafenib Tosylate" for a month's treatment shall not exceed Rs. 8880.

 

• • This is a non-exclusive and non-assignable license.

 

• • The licensee must pay a royalty of 7% of the medicine's net sales.

 

• • The right to license is limited to creating, using, and proposing to sell the drug for the treatment of Renal cell carcinoma (HCC) & Hepatocellular carcinoma (RCC) in India.

 

• • The licensee shall maintain accounts of sale etc. in a proper name and report it to the Controller and the Licensor.[8]

 

Conclusion

The grant of India's only and first compulsory license in the pharmaceutical sector has become a breakthrough in eyes of public welfare seekers and developing countries and at the same time has undoubtedly raised many eyebrows. The Natco vs Bayer decision has already resulted in an adverse perception of the Indian pharmaceutical industry and may adversely impact foreign investment in this sector.

There may be both type implications in the pharma world in the future-

Pros-

• • Increase in competition and eventual growth of a healthier environment.

 

• • Perfect guidance for pharmaceutical companies to step further in the market.

 

Cons-

• • Saturation of the market and patent ‘thickets’- a converse, negative effect of an increase in compulsory licensing could emerge from a parallel increase in the number of patents filed. patent ‘thickets’ are clusters of patents with overlapping claims.

 

• • The ‘local working’ requirement and international ramifications.

 

• • The recession of foreign direct investment.

 

The Natco vs Bayer decision sets the precedent for making expensive patented drugs available for compulsory licensing and makes India today stands at an important crossroads in determining its future, not just in the narrow context of IPR but also in terms of the place that India will occupy in the new world order.[9]

 

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[1] https://www.academia.edu/6744000/Natco_vs_Bayer_Controller_of_Patents_2012_Case_Analysis.

 

[2] http://docs.manupatra.in/newsline/articles/Upload/93092AEC-D7C8-4C1E-9219-3B4CB5DAE8F9.pdf

[3] https://unctad.org/ippcaselaw/sites/default/files/ippcaselaw/202012/Bayer%20Corporation%20Vs.%20Union

%20of%20India%20and%20Others%20IPAB%202013.pdf

 

[4] https://www.legalserviceindia.com/legal/article-5286-case-analysis-and-aftermath-of-natco-pharma-ltd-v-s- bayer-corporation.html

 

[5] https://www.academia.edu/6744000/Natco_vs_Bayer_Controller_of_Patents_2012_Case_Analysis.

 

[6] http://docs.manupatra.in/newsline/articles/Upload/93092AEC-D7C8-4C1E-9219-3B4CB5DAE8F9.pdf https://unctad.org/ippcasel

[7] https://www.academia.edu/6744000/Natco_vs_Bayer_Controller_of_Patents_2012_Case_Analysis.

[8] http://docs.manupatra.in/newsline/articles/Upload/93092AEC-D7C8-4C1E-9219-3B4CB5DAE8F9.pdf

[9] https://unctad.org/ippcaselaw/sites/default/files/ippcaselaw/202012/Bayer%20Corporation%20Vs.%20Union

%20of%20India%20and%20Others%20IPAB%202013.pdf