India’s government on Monday authorized a drug manufacturer to make and sell a generic copy of a patented Bayer cancer drug, saying that Bayer charged a price that was unaffordable to most of the nation.
The decision by the official in charge — the controller general of patents, designs and trademarks — marked the first granting of a so-called compulsory license of a patented drug in India. Legal experts and patient advocates said it could open the door to a flood of other compulsory licenses in India and possibly in other developing countries, ushering in a new supply of cheap generic pharmaceuticals.
According to the decision, Bayer must license the drug Nexavar, or sorafenib, to Natco Pharma, an Indian company. In exchange, Natco must pay Bayer a 6 percent royalty on its net sales and has to sell the drug for 8,800 rupees ($176) a month, about 3 percent of the 280,000 rupees that Bayer charges for it in India. Natco’s drug is for use only in India, the decision said.
Nexavar, a tablet, is used to treat advanced kidney cancer and liver cancer and has been shown to extend lives by a median of about three months. It was used to treat fewer than 200 Indians in 2011.
Oliver Renner, a spokesman for Bayer at its headquarters in Germany, said the company was disappointed by the decision and was “evaluating our legal options to continue to defend our intellectual property.”
Advocates for cheaper generic medicines cheered the decision, which they said could provide a model in developing countries, where most people cannot afford to pay retail prices for many important medicines and do not have access to insurance plans that would pay for them.
“I think it’s the way forward,” said Shamnad Basheer, a professor at the West Bengal National University of Juridical Sciences, who has written about the case extensively. “In the entire debate about patents, this is the middle path.”
But Western pharmaceutical companies are likely to see the decision as an example of how India does not provide companies adequate intellectual property protection, which they say is necessary to recoup the costs of developing new drugs, especially medicines like Nexavar that are used by relatively few people.
Though multilateral agreements on patents allow compulsory licenses for drugs for public health reasons, only a handful of countries, including Brazil and Thailand, have issued such licenses, said Jamie Love, director of Knowledge Ecology International, a Washington group involved with patents and human rights. And usually they were only for drugs for AIDS, where there has been huge international pressure on drug companies not to enforce patents.
India is only the second country, after Thailand, to grant a compulsory license to a cancer drug, he said.
“The companies have really tried to draw the line very aggressively against cancer and other diseases being included,” Mr. Love said. The United States government, through trade pressure and trade agreements, has also tried to limit use of compulsory licensing.
Monday’s decision activates a provision of Indian law that has not been tested since the country started granting patent protection for drugs in 2005 after not granting them for more than three decades.
In this case, the controller of patents ruled that Natco should be granted a license in part because Bayer had priced the drug far above what ordinary cancer patients could afford. Bayer supplied the drug to no more than 200 Indians in 2011, or about 2 percent of the people afflicted with the kind of cancers that it is meant to treat. The official, P.H. Kurian, noted that Nexavar was often out of stock in India and Bayer made little effort to import it to or manufacture it in India.
Nexavar was developed jointly by Bayer and Onyx Pharmaceuticals, a biotechnology company in South San Francisco, Calif., and the two companies share profits and losses from the drug equally in countries other than Japan. Global sales in 2011 were 725 million euros, or about $950 million.
Bayer argued that it would be willing to increase the supply of the drug through its charity program at lower costs in India, though it would still sell the drug at far higher prices than Natco.
The drug is also made and sold in India by the generic drug maker Cipla, which claims not to recognize Bayer’s patent on the medicine. Bayer has sued Cipla for patent infringement in a separate case that is still pending.
But in its arguments against the compulsory license, Bayer argued that since Cipla was already selling an inexpensive version of the drug, there was no need to grant a compulsory license to Natco.
Mr. Kurian rejected this argument, writing that Bayer was engaged in “two-facedness” by trying to fight Cipla’s drug in the courts while also using it to as a defense against Natco.
India’s patent law says compulsory licenses can be granted if the invention is not “reasonably affordable” to people in India. Bayer had argued that reasonableness must take into account the costs of research and development.
Advocates for generic drugs said the Indian decision on Nexavar could open the door for the compulsory licensing of drugs used to treat AIDS and HIV infection, along with other diseases like diabetes and cancer.
“This has kick-started the entire mechanism,” said Leena Menghaney, a manager with Doctors Without Borders based in New Delhi.
Compulsory licenses could help significantly reduce the $1,800 her organization spends per patient per year to provide the AIDS drug Raltegravir to a group of patients in Mumbai.
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