The Intellectual Property Appellate Board (IPAB), an Appellate forum constituted under the provisions of the Patents Act 1970, delivered its verdict on the appeal by pharmaceutical giant Bayer HealthCare AG on March 4, 2013. The order is yet to be made available.  

The appeal was against the grant of Compulsory License (by erstwhile Controller of Patents, P. H. Kurien), India's first patent compulsory licensing order in the post TRIPS era, and based on Section-84 of Indian Patent Law, 1970. The decision allowed an Indian Pharmaceutical company, Natco pharmaceuticals to manufacture the generic version of Bayer‟s patented drug (Indian patent number 215758, issued in 2008), Nexavar, which goes by the generic name of Sorafenib Tosylate for use in the treatment of advanced renal cancer and is reported to extend lives by a median of about three months.  

The order which stipulated Natco to pay 6% in royalties to Bayer and provide free medication to 600 people every year till the expiry of the patent in 2021, was primarily based on the controllers‟ findings that,

  1. the reasonable requirements of the public with respect to the patented drug were not met as Bayer supplied the drug to only 2% of the patient population;
  2. pricing of the drug (2.8 lakhs for a months' supply of the drug against Natco‟s proposed price of Rs. 8800) was excessive and did not constitute a "reasonably affordable" price and
  3. Bayer did not sufficiently "work" the patent in India  

Aggrieved by the grant of license to Natco, Bayer had appealed the decision at IPAB and hearing between Bayer Healthcare AG and Natco pharmaceutical concluded on 4th September, 2012 in Chennai. The arguments were made before a panel of two members of IPAB, Justice Prabha Sridevan, Chairman and DPS Parmar, Technical Member (Patents).  

While reading the decision in an open court on March 4, 2013, Justice Prabha Sridevan, said, “…kidney and liver cancer drug should be available at an affordable price to everybody” and observed, „In three years, Bayer has not taken any steps in revising the marketing strategy and cut the price of the product”. Also, “…since 2010, Bayer has only been importing the drug for its philanthropic activities in India and not a single import was made for commercial use.”  

The decision reportedly also increased the royalty payable by Natco to Bayer to 7% from 6% though Bayer had sought 15 per cent royalty from Natco. However, the justification for the increase will be known only when the details of the order are available but it seems that the Controller took into account 30% margin being offered by Natco to its retailers. The board also fined Natco 50,000 rupees for presenting incorrect facts during the legal proceedings, amount which would be donated to a cancer treatment hospital

Overall the board seems to have upheld the Controller‟s views that the drug should be made “affordable and available” to the public. Regarding the working of patent, the Board seems to have differed slightly with the Controller who held that "working" under section 84 cannot include mere imports; given that Bayer was merely importing Nexavar capsules into the country, it could not be said to have "worked the patent". The IPAB took the view that “working” is a flexible term and can also admit of “imports” in some instances. This would depend on circumstances such as the technology in issue, whether the invention could be feasibly manufactured in India etc. However, it is not clear if “imports” in the present case had satisfied the working requirement, given that the patentee did not furnish any credible reasons for not manufacturing in India.

It is reported that Bayer is in disagreement with the order and will challenge the same by way of a writ petition at the Mumbai High court.  

The above order appears to follow the trend that drugs should be made affordable. It also is in line with the current stand taken by the Indian government to bring down the prices of essential drugs so the medicines can be made affordable as well as accessible to those who need them. However, the government‟s stand is being viewed by the patent owners as undermining of their patent rights which they argue will dissuade investment in research and be counterproductive to building innovation culture in India. After the grant of compulsory license to Natco, the pharmaceutical companies are looking at devising different strategies or suitable pricing methodologies in order to capture the market share. It seems the future lies in finding a mid-way to fill the gap between the current drug prices and what the public at large can pay.