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March 15, 2012


There is a controversy with respect to third aspect in the compoulsory license provisions. The patentee need to manufacture the patented invention in India. Most of the companies do not have manufacturing facilites in India. In such scenario, this provision can be invoked to grant compulsory license to the generic industry. Therefore, the most of the patents are prone and succesptible to the compoulsory license based on the aforesaid criteria. This provision needs interpretation or judicial review by the courts.

This is extremely useful and timely.

Just to note, you allude to a "Catch 22" but don't really flesh it out later. Your prescription to be sure to have access plans in place and to either mfgr or license mfgr in India is really good to know.

Dear Bob:

To be clear, I think the "Catch 22" is that the Western drug companies are required to "work" the patented invention under circumstances where the return on the investment is mandated to be low or non-existent, in view of the Controller's continued characterization of the drug price as being "exorbitant." In the Indian national context he is correct, but that won't sit very well with many corporate boards of directors.

I was also struck (but don't think an n=1 is enough to generalize) at the number of patients in need of the drug (around 8,000/yr) and the small proportion of them that Natco is required to supply free or nearly free of charge (600). It seems like this would be a number that, even if doubled or tripled would not impact the bottom line too much, but that might go a long way towards immunizing the next Western drug company from the same outcome.

Thanks for the comment.

A huge problem with construing "working the invention" is the prohibition of method of treatment claims in India. The patentee is forced to use "Swiss style" claims, which typically are directed to "the use of [drug X] in the manufacture of a medicament..." This locates the patented activity at the patentee's manufacturing plant, rather than in India where the drug is prescribed and administered. In many countries with a "working" requirement, this problem is solved by statutes specifying that sales, or even offers for sale, are sufficient to satisfy the "working" requirement. I don't think this is the case in India.

The law has the effect of forcing innovator companies to sell patented drugs at cost, or at minimal profit, so as to render it an unattractive target for an Indian generic company. This should certainly be possible, given the economies of scale available to a global manufacturer, and at first glance you might think the only downside is a low profit margin on sales in India.

The problem is that any national law that severely restricts profits on patented drugs foists the costs of pharmaceutical R&D onto consumers in other countries, where prices can be raised to compensate for the low profits in regulated markets. U.S. consumers are already subsidizing low prices elsewhere, which is why they're flocking to Canadian (and pseudo-Canadian) on-line pharmacies.

Dear James:

Agreed - but the point is that if “you can’t win” in India if you are a branded Western drug company under WTO/TRIPS any more than you could under earlier international patent regimes, then Western drug companies need to come up with other strategies.

One answer is to coopt – partner with a generic in India with an exclusive license that provides a token amount of the drug to the poor, and make a deal with Indian health care and insurance companies so that there is a graduated increase in the cost of a drug with income – so the rich and super-rich pay Western prices, the middle class pay something akin to what Natco will charge under its compulsory license and include some token number of the poor who pay nothing. By “working” the invention in India, and having a local partner, and providing drug free of charge to (some of) the poor, many if not most of the grounds of granting the compulsory license here would be avoided.

Here, besides the compulsory license it is likely that Natco will try to get out from under the 6% royalty in 2 years by invoking the provisions in Indian law that permit the patent to be revoked.

The advantages of partnering, besides avoiding decisions like the Controller’s here, is that you can prevent your partner from selling API to generic companies abroad – notice that this compulsory license prohibits importing and says it is limited to sales in India but I can think of ways an Indian court could construe this language that would permit export. The goal should be keeping the Indian genie in the bottle, if possible.

The other approach is through the WTO or by erecting barriers to Indian generics in Western countries – which is politically unwise and won’t work.

Thanks for the comment.

My statement, including a link to my Affidavit in the case is available here: http://www.keionline.org/node/1384 I make a few comments that may add some perspective to the case. Not only was the Bayer price ($69k/year) un-affordable in India, Bayer wasn't making much of an effort to supply the market. Bayer said it only sold 493 packages of the drug in 2011, enough for 49 patients to take a yearly dose. India is a country of 1.2 billion people. In terms of R&D, Bayer refused to provide any details of its outlays on the development of Nexavar, despite having been asked to do so. This was a product developed with Onyx Pharmaceuticals, with a fair amount of information on the record about R&D costs from independent sources. I think the days of claiming R&D costs are the main issue in the case, and then refusing to provide any relevant evidence about the outlays on the drug on question, are over. The Bayer PR agents are quoting from Forbes articles about drug development costs, as if this had any real relevance to the Nexavar case, and as if Bayer was somehow pricing its products according to its R&D costs, which is clearly not the case. At the end of the day, who expects developing countries to accept that their citizens will be priced out of the market for cancer drugs for the life of patents? Any system to support R&D that does not work for 80 percent of the global population is flawed, and needs to be changed.

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