Experts divided over compulsory drug licence dispute

By granting compulsory licence to Natco for Bayer's kidney cancer drug Nexavar, the Indian government has opened a legal can of worms, reports CNBC-TV18's Archana Shukla.

Innovators versus generics, cheaper drugs versus research spending - it is a never-ending legal battle that has gained a new lease of life in India, pitching the Indian patent controller against Germany-based Bayer.

The compulsory licence was granted under provisions of the World Trade Organisation's agreement called Trade-Related Aspects of Intellectual Property or TRIPS. Bayer argues that the grant is not in line with TRIPS.

Argument 1: Wrong interpretation of "Working of the Patent" clause.

The patent controller defends the compulsory licence by saying that Bayer does not manufacture Nexavar in India. It adds that in a Canadian dispute in 2001, the WTO held that countries were free to decide on local manufacturing. But Bayer maintains that local manufacturing is not a compulsion under TRIPS.

Even experts are divided on this aspect of the case.

Pravin Anand, managing partner, Anand and Anand, says, "The TRIPS standard is clear. You cannot distinguish between imported products and locally manufactured products."

Frederick M Abbott, professor, international law, Florida State University College of Law, says, "It clearly leaves open the ability of governments to grant compulsory licences for failure. For example, to work locally if there is a legitimate justification for doing so."

Argument 2: Accessibility.

The patent controller says Bayer did not ensure enough supply of the drug.  Bayer blames this onCipla's cheaper generics undercutting its market. Bayer also says that combined with Cipla's supplies, there was enough to meet demand. Again, legal experts differ in their reading of this argument.

Suja Subramaniam, managing partner, Idee IP Consultants, says, "When you have an infringer in the market, like Cipla, who is not restrained and is flooding the market with your product, even if you import you are not showing enough quantity, but the demand has been met."

Amy Kapczynski, associate professor, Yale Law School, says. "Even if Cipla is excluded from the market and Bayer's is the only drug in the market at the original price, then the issues that the controller of patents was addressing, will return."

Argument 3: Pricing.

The patent controller says that compulsory licence was granted because Nexavar was unaffordable. Bayer says it made the drug available at cheaper rates through its patient access program, and so was justified in selling at a higher price in the open market to recover R&D costs.

Bayer's biggest contention is that there was no need for a compulsory licence at all because kidney cancer, which Nexavar treats, is not a health emergency like HIV-AIDS. It is now up to the courts to decide whether Bayer's arguments hold water.

While the Indian legal system will take up the dispute on August 21, the resulting judgment is likely to reverberate across the globe.

Tomorrow, in the last part of this series, we will look at the international implications of this dispute.