2013: India Battles For Right To Use Compulsory Licences To Make Medicines Affordable

India has started the New Year on a volatile note. With general elections looming in 2014, there is turbulence and not just in the political world. In India’s pharmaceutical industry, there is sparring over the prickly issue of ‘compulsory licenses’, a mechanism by which a government allows a domestic company to manufacture and sell a generic version of a patented drug without the consent of the patent-holder, who receives compensation.

Compulsory licensing (CL) is one of the major flexibilities allowed under World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Multinational pharmaceutical companies see great potential in selling drugs in India but once again are faced with the bald truth that there are challenges. Once again, there is a polarising discourse pitting patients against patents.

Two recent developments in two different Indian cities – Delhi and Chennai – have brought the sensitivities surrounding CL to the fore.

Last week, the Indian media reported that the Union Health Ministry had recommended three anti-cancer drugs for compulsory licensing. The recommendation is the outcome of suggestions by an expert committee, and was sent to the Department of Industrial Policy and Promotion (DIPP) which comes under the Union Ministry of Commerce and Industry.

Though it is not known exactly when the CL will be notified, the move signals that the Indian government has started the process of issuing compulsory licences for the three commonly used anti-cancer drugs: trastuzumab (or Herceptin, used for breast cancer), ixabepilone (used for chemotherapy), and dasatinib (used to treat leukemia).

In a country where the vast majority of citizens pay for their medical treatment from their pocket, the move has been predictably cheered by public health advocates and cancer patients. For a month’s treatment, drugs like trastuzumab, ixabepilone and dasatinib are reported to cost on an average of US$ 3,000 to 4,500, or Rs 1.64 to 2.45 lakh for each patient in India.

Meanwhile, a recent development in another Indian city, also involving CL, has also been drawing national and international attention. This month, in the southern Indian city of Chennai, the final hearing began on the appeal filed by German drug major Bayer against India’s first-ever compulsory licence (IPW, Public Health, 20 May 2012).

The case involves Bayer’s Nexavar (sorafenib tosylate), a drug for liver cancer. The patent on the cancer drug sorafenib tosylate was granted to Bayer in March 2008. Indian generic company Natco applied for a CL on the drug in July 2011 and it was granted by the Indian Patent Controller in March 2012. The CL allows a more affordable version of sorafenib tosylate to be produced and marketed. This brought the price of the patented drug down from over $5,500 per month to $175 per month – a reduction of 97 percent. Under the terms, Bayer is being paid a 6 percent royalty on sales by Natco.

From 16-18 January, India’s Intellectual Property Appellate Board (IPAB) heard arguments from lawyers for Bayer and Natco. The Natco/Bayer compulsory licence hearing is expected to conclude on 23 January.

Adi Narayana, company secretary at Natco, told Intellectual Property Watch that he expects the final judgment in the Bayer-Natco case at IPAB to come after six to eight weeks. Narayana also said Natco welcomes the government’s latest step to recommend CL for three more cancer drugs.

What do the recent developments related to CL portend? The reactions are mixed.

“This step by the government is long overdue,” Shamnad Basheer, professor of IP law at National University Juridical Sciences in Kolkata, told Intellectual Property Watch. “The prices of cancer drugs remain exorbitant even after the Natco compulsory licensing decision and a number of Indian patients are unable to access the drug. Further, even from a WTO dispute standpoint, terms such as “national emergency” and urgency have not been defined under TRIPS and a WTO dispute resolution panel is likely to accord India plenty of flexibility in interpreting these terms.”

“Given that India is the most privatised healthcare market, it is high time the government began playing a more active role in promoting public health. It cannot simply rely on generic companies to fill the gap, particularly since generic prices of cancer drugs are also unaffordable to a vast majority of Indians,” Basheer continued, adding that a recent petition filed by him and research associate Sai Vinod under the Right to Information Act (RTI) showed that after the Natco CL, “not a single generic company applied for compulsory licenses under Section 84 of the Patents (Amendment) Act 2005.”

“Perhaps generics are averse to pursuing this risky legal route, as evidenced by the fact that Natco is spending considerable sums of money defending the license before the intellectual property appellate tribunal (IPAB),” he said. “The government’s initiative to therefore assume the legal risk itself by issuing a notification under Section 92 is therefore a very welcome move.”

The Organization of Pharmaceutical Producers of India (OPPI), which describes itself as a “premier association of research and innovation driven pharmaceutical companies in India, and a scientific and professional body” is anxious about the emerging CL scenario in India.

In an emailed response to questions from Intellectual Property Watch, OPPI Director General Tapan Ray said, “The grant of compulsory license for Bayer’s Nexavar to Natco by the Indian Patent Office last year had already raised serious concerns across the world on the robustness IPR ecosystem in India. Recent news reports on the same issue will vindicate those concerns.”

“It is rather impractical to envisage that routine grant of compulsory licenses by the Indian Patent Office will be able to resolve the critical issue of improving access to patented medicines on a long term basis,” he said.

Ray argued that “there is a greater urgency to attend to basic healthcare infrastructural and delivery issues, besides providing universal healthcare coverage as recommended by the High Level Experts Group (HLEG) constituted for this purpose by the government. Far encompassing critical decisions like grant of compulsory licenses should be taken only after exhausting all other access improvement measures.

Thus, said Ray, “the previous grant of a compulsory licence and recent news reports on the possibility of further grant of three more compulsory licenses coupled with several instances of product patent infringements, have made the pharmaceutical business environment for the innovator companies in India extremely uncertain. Predictability of an innovation-friendly environment is critical for the economic growth of India, which the government should not lose sight of.”

Precedent-Setting Case

Meanwhile, James Love, director of Knowledge Ecology International (KEI), a non-governmental organisation with offices in Washington, DC and Geneva, told Intellectual Property Watch, “The IPAB hearing is for an appeal on the merits of the compulsory licence. Since this was the first compulsory licence, the appeal sets a precedent.”

“Bayer has been very aggressive, challenging just about everything you can imagine,” Love said.
Intellectual Property Watch emailed Bayer’s India office for its comments on the issue and also for the company’s reactions to the government’s latest move to start the process of issuing CL for three other cancer drugs. At the time of writing, Bayer had not responded.

Among the issues to be decided, said Love, who is in Chennai to follow the IPAB hearings, will be “how companies can claim R&D cost bear on the issue of an affordable price, and if they even have to provide evidence of what they actually spend on R&D for a particular product.”

“Bayer has not disclosed its outlays on Nexavar, but rather points to a number of general studies, or very aggregate figures from its overall R&D spending, most of which was completely unrelated to Nexavar,” he said. “Bayer claims you cannot issue a CL on the issue of a reasonably affordable price unless the Patent Office determines what that affordable price is. Bayer is asking for a 15 percent royalty on a price that is higher than the actual generic price, citing some out-of-context UK cases that are outliers in the case law.”

Love concluded: “Bayer claims its obligations to work the patent have been satisfied by CIPLA, because CIPLA made its invention available at a lower price. Bayer claims that India cannot require local manufacturing of the drug, under the TRIPS agreement. All of these and more issues will be decided by the IPAB, and all are matters of first impression. So yes, I think this is a pretty big deal.”

One big talking point during the IPAB hearings on the Bayer-Natco case was the interpretation of the term ‘reasonably affordable price’ in the CL provision (section 84) of the Indian Patents Act.

The Indian government’s latest moves on CL and the IPAB hearings this month are significant, especially seen in the backdrop of the evolving IPR scenario in India.

“I think the setting up of the expert committee signals the recognition within government that patents are a huge barrier to access to treatment,” Kalyani Menon-Sen, Delhi-based coordinator for the Campaign for Affordable Trastuzumab, told Intellectual Property Watch. “We are delighted that the government is showing the gumption to do something about it. The response from government indicates that we have been able to make a strong collective case for prioritising constitutional rights of citizens over markets and profits.”

“Now that the expert committee has made its recommendation, we look forward to a notification under Section 92 of India’s patent act inviting manufacturers to come forward to manufacture a biosimilar of trastuzumab,” she added.

The outcomes of the IPAB hearings will have huge implications for the campaign as well as for the overall drug patent scenario in India, said Menon-Sen.

However, activists and patients’ groups do not expect things to be all smooth sailing in the coming days. They point out that the story about the expert committee’s decision to recommend the CL route for the three cancer drugs was ‘leaked” to the media prematurely and could subject the government to pressure from within and outside.

“We are aware that there may be resistance to the CL option within the government. The influence exerted by big pharma in the process of policy-making on such issues should not be underestimated,” said Menon-Sen. “Our position is clear – with 100,000 new cases of breast cancer being recorded every year even by very conservative estimates, 25 percent cases being HER2 positive, breast cancer is a public health emergency that government cannot afford to ignore. The government must use every possible means at its disposal – including CL – to address patent barriers that lead to the loss of so many precious lives.”

Médecins Sans Frontières (MSF, Doctors without Borders), the international medical and humanitarian NGO, has welcomed the government’s recent moves. Leena Menghaney, India manager for the Access Campaign at MSF, told Intellectual Property Watch that the group welcomes the steps the Indian Ministry of Health is taking to identify patents on drugs that are exorbitantly priced and face no generic competition.

“Eight years after India amended its Patent law to implement the international trade rules enshrined in the TRIPS agreement, new medicines, including drugs to treat HIV and hepatitis, are now patented in the country and are too expensive and unavailable for those who need them most,” she said. “MSF’s Mumbai clinic pays as much as US$1,775 per person per year to access just one patented drug for HIV, raltegravir, for example. MSF hopes that India will continue to use all the means at its disposal – including compulsory licenses – to address patent barriers and bring down high prices on the medicines that are vital to many in India and the developing world.”

The recent developments on CL in India could potentially have international ramifications. “Other countries are waiting eagerly for India to produce cheaper versions of drugs like trastuzumab,” Menon-Sen said. “This could well be a huge boost for our domestic manufacturers, including public sector firms, who have outstanding technical capacity and manufacturing infrastructure, and who are looking for policy support to expand their operation.”

KEI’s Love concurs. “The international ramifications of the IPAB hearing are huge for the whole world, as India plays such an important role as the source of low-cost generic drugs,” he said.

Indeed, the unfolding events in India are being watched carefully in cities across the world. For instance, the Geneva-based International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) warned against overuse of compulsory licenses.

“The IFPMA recognises that developing countries may use compulsory licensing provisions in certain limited circumstances, but their use is clearly not a sustainable solution and should be seen as a last resort, Andrew Jenner, director of innovation, IP & trade at IFPMA, which represents research-based pharmaceutical industry, told Intellectual Property Watch.

“Systematic issuance of compulsory licenses sets a negative precedent and can reduce the incentive to invest in the research and development of new medicines that address unmet medical needs,” Jenner said. “We believe that negotiated approaches, such as tiered pricing or voluntary licensing, are generally more effective and sustainable, both medically and economically.”

Significantly, last year, China, India’s powerful neighbour, amended its intellectual property laws in order to allow the government to issue compulsory licenses for local generics makers to produce drugs which are still in patent.

It is difficult to predict what the future holds. But one thing is certain: India is now at the centre of the global debate pitting patents versus patients and is likely to remain that way for some time. The final verdict from India’s Supreme Court on a patent on Swiss drug major Novartis’ cancer drug, Glivec, also is expected early 2013 (IPW, Public Health, 18 September 2013).