This article is written by Janvi Kashyap, 6th Semester, B.Com. LL.B., Maharishi Markandeshwar (Deemed to be University), Mullana, Ambala, during her internship at LeDroit India.
Scope of the Article
1. The article is going to talk about what compulsory licensing means under the patent law.
2. It will look at what happened in the case of Natco Pharma Ltd. Versus Bayer Corporation and the problems with the law that came up.
3. The article will see how Section 84 of the Patents Act of 1970 was used.
4. We need to think about the medicines that have patents. Are these patented medicines affordable, for people? Can people actually get the patented medicines they need?
5. The article will talk about how to balance the rights of people who have patents and the health of the public.
6. It will examine the findings and observations made by the Controller General of Patents and the IPAB in the said matter.
7. The role of licensing in making sure people have access to medicines that can save their lives will be looked at.
8. The article will see if the TRIPS Agreement and the Doha Declaration are still important.
9. We will think about how the decision will affect the creation of medicines and the health of people.
10. The article will show why the case is a deal and an important example, in Indian patent law.
Abstract
Patent law is supposed to reward people who come up with ideas but what if that reward gets in the way of people being able to stay alive. The case of Natco Pharma Ltd. Versus Bayer Corporation is an example of this problem. Bayer Corporation owned a patent for a cancer drug that is called Nexavar. This drug is used to treat cancer and Bayer Corporation had the patent, for it. The problem is related to Natco Pharma Ltd. And Bayer Corporation and the cancer drug Nexavar.
They were selling it for a lot of money that most people in India could not afford.Natco Pharma Ltd. So I wanted to come up with a variation of this drug Nexavar, to make something much more affordable. They used a part of the Patents Act from 1970 to apply for a licence to make this version. This article will go through what happened in the case of what the Controller General of Patents and the Intellectual Property Appellate Board decided and what this means for people who need life-saving medicine like Nexavar.
The article will also look at how other countries saw this decision and if India’s approach to patent law’s a good way to balance helping people who need medicine with rewarding companies like Bayer Corporation for coming up with new ideas. Natco Pharma Ltd. And Bayer Corporation are the companies involved in this case and the decision they made will affect how patent law works in the future. Natco Pharma Ltd. V. Bayer Corporation case is very important for people who need medicine like Nexavar and for companies like Bayer Corporation that make these medicines.
Keywords: Compulsory Licensing; Patents Act 1970; Section 84; Natco Pharma v. Bayer Corporation; Access to Medicines; Pharmaceutical Patents; Public Health; TRIPS Agreement; Nexavar; Generic Drugs
INTRODUCTION: The Conflict Between Patent Monopoly and Public Health in India
Every patent is basically a deal. The government gives an inventor a monopoly for a time, usually twenty years, in exchange for the inventor telling everyone how the invention works. The idea is that this will encourage research and eventually help everyone once the patent ends. For products this deal is not a deal. Nobody really complains that a patented kitchen gadget is expensive for twenty years; it is not an issue.
Medicine is a story. When the patented product is a life saving drug, things change. The monopoly is not about money, it is about people’s lives. If people cannot afford the drug it can cost them their lives. This problem of balancing the need to reward research and the need to make medicine available is a very old and disputed issue in patent law. This issue became very real in India in 2012.
The case of Natco Pharma Ltd. V. Bayer Corporation tested this problem under law for the first time. The medicine I am talking about is Nexavar. Nexavar is used to treat cancer of the kidney and the liver. The company Bayer sold Nexavar for a lot of money around ₹2,84,000. That is the price, for just one month of Nexavar. Natco Pharma, a company that makes generic drugs wanted to make and sell a generic version of Nexavar at a much lower price.
The argument that followed led to India’s compulsory licence under the Patents Act, 1970. Natco Pharma Ltd. The V. Bayer Corporation case is still the cited example on this topic today. The Patents Act, 1970. The Natco Pharma Ltd. V. Bayer Corporation cases are very important in the debate about patent rights and public health, in India.
What Is Compulsory Licensing?
Before we start, let us understand what a compulsory license is. A compulsory license is a permission given by the government not the person who owns the patent. This permission allows another company to make, use or sell a product that is patented without the patent owner’s permission. The patent owner still has rights they still own the patent. Usually get some money from it but they do not have complete control over who makes the product.
In India the Patents Act of 1970 Section 84 says how this works. Any person can ask the Controller General of Patents for a license but they have to wait three years after the patent is given. They have to show one of three things: the public does not have enough of the product, the product is too expensive for the public or the product is not made in India.
This is not just in India. The TRIPS Agreement, which many countries follow including India says that compulsory licensing is allowed under conditions. This is because the rights of the person who owns the patent have to balance with the needs of the public especially when it comes to health. The Natco case was important because compulsory licensing was already a law in India. It had never been used before.
The case of Natco versus Bayer was the time this law was actually used and it set a precedent for the future. Compulsory licensing of patents like the one in the Natco case is a way for the government to allow other companies to make a product like the one Natco made. Compulsory licensing is a part of the patent system and it helps to make sure that the public has access to important products, like medicines.
Background and Facts of the Case
Bayer Corporation, a company that makes medicine in Germany got a patent in India in 2008 for Sorafenib Tosylate, which is sold under the name Nexavar. Nexavar is used to treat kidney and liver cancer that’s very bad and for many people with these diseases Nexavar was a very important medicine.
The problem was that Nexavar was too expensive. Bayer Corporation sold Nexavar in India for about ₹2,84,000 for 120 tablets, which’s what you need for one month. This is a lot of money for people in India and cancer treatment is not something you do just one time you have to keep taking the medicine for a long time.
In 2011 Natco Pharma, a company in India that makes medicine asked Bayer Corporation if they could make and sell a generic version of Nexavar for a lower price. Bayer Corporation said no. So Natco Pharma went to the Controller General of Patents and asked for a licence to make the medicine saying that Bayer Corporation was not making it available to people in India it was too expensive and Bayer Corporation was not doing enough to make the medicine in India.
On 9 March 2012 the Controller General of Patents said that Natco Pharma could make the medicine and this was the time in India that something like this happened. Bayer Corporation was not happy. Appealed to the Intellectual Property Appellate Board. On 4 March 2013 the Intellectual Property Appellate Board said that Natco Pharma was right and Bayer Corporation could not stop them from making the medicine. Bayer Corporation kept trying to stop Natco Pharma. The Bombay High Court also said that Natco Pharma was right in 2014 and that was the end of it. Bayer Corporation and Nexavar were still a problem for people and Natco Pharma and the generic version of Nexavar were a solution for them.
The Three Grounds: How the Authorities Reasoned Through Section 84
The Controllers decision, which was later agreed upon by the IPAB, went through each of the three grounds under Section 84(1) carefully. It is worth looking at each one of these grounds because when we look at them together we can see how the law applies to real life situations.
4.1 Reasonable Requirements of the Public Not Satisfied
This ground is asking if enough of the product in this case Nexavar is available to the people who need it. The evidence, for this was clear. Bayers sales numbers showed that a few patients who needed Nexavar actually got it. Most people who needed Nexavar couldn’t get it. Bayers own numbers proved this. The sales figures were not disputed by anyone. Bayer said that this was partly because they were still increasing their supply.
The Controller did not agree that this was a good enough reason for the drug being unavailable for so long. If a drug is meant to treat an illness and most patients who need it cannot get it then the standard of meeting the reasonable requirements of the public is not being met, no matter what the patent holder says.
4.2 Not Available at a Reasonably Affordable Price
This was an important part of the case. The Indian Patent Appeal Board said that when we talk about a price that people can afford we have to think about it from the point of view of the people who actually need the Nexavar drug, not from the point of view of what a big pharmaceutical company like Bayers thinks is a price for Nexavar.
Bayers price, for Nexavar was really high it was ten times the cost of the version of Nexavar that Natco wanted to sell to people who need Nexavar. The IPAB thought that this difference in price was too big and that the drug was not reasonably affordable no matter how good it was. This is a simple idea: if a drug is too expensive for most people who need it to buy then it is not really doing its job no matter how well it works in a laboratory.
4.3 The Patented Invention Was Not ‘Worked’ in India
This third ground is a bit more complicated. When we say that a patent is being ‘worked’ we mean that the invention is actually being used in the country. It is being made locally or at least imported and distributed in enough quantities to meet the demand. The IPAB did not say that the patent holder always has to make the drug in India. In this specific case they said that Bayer was not importing enough of the drug to meet the demand in India. Whether the drug is made in India or imported it was not getting to the patients, in the quantities that were needed. That was enough to meet this ground.
The Royalty Adjustment: A Small but Important Thing
One thing that people often miss is what the IPAB did with the royalty rate. The Controller had originally said that Natco had to pay Bayer a royalty of 6 percent of the money they made from selling the drug. This was similar to what the United Nations Development Programme suggested was a royalty rate for compulsory licenses. The IPAB actually made this rate a little higher to 7 percent after they looked at how much profit Bayer and the people who sold Nexavar were making. Bayer made around 14 percent profit while the people who sold Nexavar made around 30 percent.
This small change is worth thinking about because it shows that the IPAB was not just trying to be tough on Bayer or make it easy for Natco. The point of licenses is not to take away the rights of the company that made the drug. It is to make sure that people can get the drug while the company that made it still gets some money.
The IPAB made the royalty rate a little higher because they were trying to be fair to both sides, not just because they wanted to rule against Bayer. The royalty adjustment is a deal because it shows that the IPAB cared about the royalty rate and wanted to get it just right. The IPAB and the royalty rate are important because they affect how money Natco and Bayer make from the drug.
The Broader Picture: Innovation Incentives vs. Access to Medicine
If we look at the picture the Natco case is right in the middle of a very old debate about intellectual property law.. To be honest there is no easy answer to this debate, which is what makes the Natco case so interesting to learn about.
The argument on one side is that strong patent protection is necessary for pharmaceutical research to happen. Creating a cancer drug is extremely expensive and takes many years of testing and most of the time these drugs do not even make it to the market. Companies use patents to get back the money they spent and to fund their research project. If it becomes too easy for other companies to make these drugs without permission then the original companies will not have money to invest in new treatments especially for countries like India where patents might not be valid for a long time.
Bayer made this point clearly in the Natco case saying that if the court ruled against them it would stop companies from investing in the Indian pharmaceutical market and would weaken the patent system worldwide.
On the side we have a more pressing issue: people who are dying from illnesses cannot wait for the market to fix itself. A patent system that works on paper but does not help most patients get the treatment they need is not doing its job. India has a population and many people pay for their own healthcare so the country has always believed that access to medicine is very important and should not be ignored.
This is reflected in India’s patent laws and health policies. What the Natco decision showed is that India’s rules about licensing are not just words on a piece of paper. These rules can actually be used to help people when a company’s prices and supply of a drug are not meeting the public’s needs. This is a message to companies in India and to the global pharmaceutical industry.
International Reaction and Criticism
The decision to issue a licence for a cancer drug did not go unnoticed outside India. People who work with medicines and some Western governments said they were worried that this decision would encourage developing countries to do the same thing, which could hurt the international rules that protect patents. Some people said that the way India decided what is reasonably affordable is not clear and could be different each time which would make it hard for companies that own patents in India.
On the other hand , people who care about public health and some international organisations thought this was a good decision because it shows that countries can use the rules to help people. The Doha Declaration, which was agreed upon by WTO members in 2001 says that countries should be able to protect health even if it means using compulsory licensing. So India was just using a tool that international law says countries can use. The Natco v. Bayer case was not an aggressive interpretation of the law. It was just India using a tool that it is allowed to use.
It is worth noting that even though some people were worried compulsory licensing is still not very common in India. Not many companies have tried to do the thing since this case and most of them did not succeed. This means that the decision was important. It did not change everything. It just showed when compulsory licensing can be used and it is not something that happens all the time. India is still careful about when it uses licensing for medicines, like the cancer drug.
Evaluating the Decision: Strengths and Open Questions
When we look at this case now some things really stand out as points about how the Controller and the IPAB handled it. They based their reasoning on the words of Section 84 not on vague ideas. They tested each point against evidence, including Bayer’s own sales and pricing information. The royalty adjustment also shows that they tried to be fair to both sides rather than just making a simple yes or no decision.
That being said, the decision did leave some questions not fully answered. For example the IPABs decision on the ‘working’ requirement did not make it clear if foreign patent holders in India should be expected to manufacture their products or if just importing them would be enough in some cases. This is something that academics have been debating. It is an interesting topic for people who want to study this area more.
There is also a question about how predictable this decision’s. Pharmaceutical companies that operate in countries need to know how their pricing decisions will be judged in different places. While the idea of prices being ‘reasonably affordable’ makes sense this case does not give a formula for what is too expensive. The price difference in this case was very big but it is not clear how courts would decide cases where the price difference is smaller. The Controller and the IPAB and the decision they made on the royalty adjustment and the ‘working’ requirement of the companies, like Bayer are still being discussed.
CONCLUSION
The case of Natco Pharma Ltd. V. Bayer Corporation is not about one medicine, one company or India’s patent law. It shows what happens when the rules of intellectual property law meet the reality of people who cannot afford to pay for medicine. The Controller and the IPAB looked at the details of Section 84. Decided that Bayer’s price for Nexavar and the way they supplied it did not meet the requirements of the law. This was the real test of India’s system for making companies share their patents.
This case does not solve the problem of how to balance the need for medicines with the need for people to be able to afford them. This is a problem that will not go away. What the case does show is that compulsory licensing can be a way to fix problems in the patent system as long as it is used carefully and based on facts. This balance is still very important for health policy, around the world and new expensive treatments keep raising the questions that Nexavar did many years ago. So the case of Natco Pharma Ltd. V. Bayer Corporation will likely remain important for India’s patent law for a time.
REFERENCES
¹ Natco Pharma Ltd. v. Bayer Corporation, Compulsory Licence Application No. 1 of 2011, Order of the Controller General of Patents, 9 March 2012.
² Bayer Corporation v. Union of India & Ors., Intellectual Property Appellate Board, Order (No. 45 of 2013), 4 March 2013 — appeal dismissed, compulsory licence upheld.
³ Bayer Corporation v. Natco Pharma Ltd. & Ors., Bombay High Court, 2014 — appeal against IPAB decision dismissed; compulsory licence further upheld.
⁴ The Patents Act, 1970, Section 84 — provisions governing the grant of compulsory licences in India.
⁵ Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), 1994 — international framework permitting compulsory licensing under specified conditions.
⁶ Doha Declaration on the TRIPS Agreement and Public Health, World Trade Organization, 2001 — affirms that TRIPS should not prevent member states from protecting public health, including through compulsory licensing.
