Published by Frederick Noble on 24th May 2012
Patents which protect life-saving drugs are often the subject of fierce controversy. Drug companies argue that, without the monopoly rights provided by patents, funding the lengthy research which is required to develop new drugs would become unviable. Patent protection therefore drives innovation in the field by ensuring that those who invest in research continue to be incentivised to do so. On the other hand, many are uncomfortable with the idea that some drugs, which may be very cheap in terms of actual manufacturing cost, are beyond the means of many of those who suffer from the painful and possibly life-threatening illnesses which they cure or prevent.
In a recent case at the Indian Patent Office, a 'generics' manufacturer was granted a licence to manufacture sorafenib, a patented anti-cancer drug. German pharmaceutical giant Bayer®, which holds the patent and markets the drug as Nexavar®, had refused to grant a licence voluntarily and the generics manufacturer Natco had therefore applied to the Patent Office for a compulsory license.
Indian patent law provides that if an invention is not made available at a "reasonably affordable price", or is not "worked" in India, then a compulsory licence may be granted. The patent office found that Nexavar, which costs around US$5,500 for one month's supply and may have to be taken for the rest of a patient's life - was clearly unaffordable to many potential users. The patent office acknowledged the considerable - and increasing - research and development expenditure of Bayer, but held this to be irrelevant in deciding whether the drug was being offered at a reasonably affordable price. Furthermore, although Bayer had been selling Nexavar in India, supplies were being imported from abroad, and this was deemed insufficient to constitute "working the patent" in India. On those grounds, a compulsory licence was granted.
Compulsory licensing is a feature of patent law in most jurisdictions. But from a worldwide perspective, Indian patents appear to be more vulnerable than many. In the UK, for example, The Patents Act provides that a compulsory licence may be granted for an invention where there is a demand which is not being met "on reasonable terms". The Nexavar case shows that the difference between "reasonable terms" and "reasonably affordable price" can be a significant one: in the UK, Bayer's need to recover its R&D investment could be used to justify a high price. It is also worth noting that a demand in the UK does not in most cases have to be met by local manufacture - importation is enough as long as the holder of the patent is in a World Trade Organisation country.
Indian patent law has long been a thorn in the side of the global pharmaceutical industry. Until 2005, drugs as a product were not patentable at all - only the processes used in their manufacture were eligible for protection. The law was changed to bring India into line with the international TRIPS agreement - a requirement for WTO membership - but the Indian generics industry is still one of the largest in the world and, as the Nexavar case demonstrates, Indian law is still unsympathetic to holders of pharmaceutical patents.
Bayer is likely to appeal the decision but, for the time being at least, drugs will have to be sold at a lower price in India if compulsory licensing is to be avoided. On the face of it this is good news for the 40% of Indians living in poverty but, with one of the world's fastest growing economies, India as a whole is likely to come under severe international pressure in the coming years to pay its fair share towards pharmaceutical research.