Patent

Roche vs NATCO: India’s First "Doha Style" Compulsory License?


Most of you may have heard of the first “Doha” style compulsory license for export of GSK’s ARV drug, TriAvir from Canada to Rwanda. For a great summary of this case, see this ASIL article.

Latha Jishnu of the Business Standard reports that a similar request is being made by Natco Pharma, an Indian generic company, to export Roche’s anti cancer drug, Tarceva (Erlotinib) from India to Nepal. The application is for the export of 30,000 tablets to Nepal and Natco has offered Roche a five per cent royalty. If this is succesful, it will be the second “Doha” license. But first some background:

The Doha Declaration of the TRIPS Agreement and Public Health was a major victory for developing countries that wished to make TRIPS more amenable to “public health” concerns. Amongst other things, this Declaration reiterated the flexibilities of a member state to avail of a compulsory license to manufacture cheaper versions of patented drugs. A compulsory license entails granting permission (without the consent of the patent owner) to a third party to manufacture cheaper versions of the drug in question.

In other words, Natco can manufacture Roche’s drug, without Roche’s consent (in most cases, under a royalty rate fixed by a government authority). And since Natco does not bear any R&D cost but only the manufacturing cost, the drug produced under the compulsory license will almost always be cheaper than the patented drug. It is important to note that TRIPS provides great flexibility for a member state to deploy “compulsory licensing” provisions. A number of these provisions were discussed in the context of the Tamiflu dispute in one of our earlier posts. Speaking of which, does anyone know what came of the WTO mailbox application for Tamiflu? In one of my articles, I had listed out the patent application particulars, which I reproduce below:

“There are no product patents covering Oseltamivir today because India did not grant any
pharmaceutical product patents prior to 2005. However, Gilead availed of the ‘mailbox’
facility offered by India’s patent regime to file two applications claiming this product.

One of them, titled ‘Carbocyclic Compounds’, was filed in 1996. (396/DEL/1996. The claims are directed at compositions comprising Oseltamivir, methods of treatment (i.e., method of inhibiting the activity of neuraminidase) and use claims (use in the preparation of another compound). More specifically, claims 1 to 37 and claims 40 and 71 claim a composition. Claims 41 through to 68, which are dependent on claim 40, claim various compounds of the composition recited in claim 40. Claims 38, 39 and 72 recite methods of inhibiting the activity of neuraminidase. Claims 69 and 70 recite use of compound for preparation of another compound).

The other titled ‘Novel Compounds and Methods for Synthesis and Therapy’, was filed in 1999 (8 1132/DEL/1998. This was published for opposition on 1 July 2005).

Although it is widely acknowledged that the bird flu scare was hyped (fear of the virus mutating to a form freely transmissible between humans), one still cannot rule out the possibility. A news report recently mentions a bird flu outbreak in West Bengal. One would have thought the Bengalis to be more prone to “fish flu” type diseases, but anyway….

India is home to some of the widest compulsory licensing provisions in the world. Illustratively, the patent regime provides that compulsory licenses can be issued, if:

1. The drug is not available in adequate quantities in India

2. The drug is not reasonably priced (each tablet of Tarceva costs around Rs 4,800 (USD 120). This means that a lung cancer patient could pay close to Rs 1.5 lakh (USD 4000) a month for treatment. Cipla plans to sell the drug for a third of this cost (Rs 1,600 a tablet) while Natco will price it at about Rs 1,000).

3. The drug is not manufactured in India. This is a highly controversial ground, and if this is invoked, I’m sure that at least 80% of all patented drugs by MNC’s [including Tarceva and the highly controversial Gleevec] would be subjected to a compulsory license. (As of today, this can certainly kick in for a number of pharmaceutical process patents that were granted more than 3 years back).

4. The drug was being manufactured prior to 2005 by a generic company.

The above grounds can be invoked by private players such as NATCO and CIPLA. However, they kick-in only three years after the patent is granted. Clearly, neither CIPLA nor NATCO can avail of these grounds for Tarceva, which has just been patented (2007). Also, they cannot invoke ground (3) above, since the drug has never, till date, been manufactured by either of them.

However, the patent act also contains some broad based ‘public’ interest based compulsory licensing grounds (such as those encapsulated in Section 92) that can be availed of within the 3 years. These are mainly invokable by the government and not directly by private players.

I would argue that all of the above grounds are TRIPS compatible. Particularly since TRIPS does not really spell out any limitations on the kinds of compulsory licensing “grounds” that a member state can incorporate in its regime. In fact, the Doha Declaration clearly states that “each Member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted”. We will visit this issue in detail in a future post.

Back to the Doha Declaration and compulsory licenses to export to countries with inadequate manufacturing capacity.

India has some outstanding generic companies that can exploit compulsory licensing provisions. However, in countries like Nepal or Bhutan with no adequate manufacturing capacity, such compulsory licensing provisions may be of no use, since there is no company that has the expertise to produce such drug.

Recognising this problem, the Doha Declaration (and more specifically, the Decision of 30 August 2003 on the Implementation of Paragraph 6 of the said Declaration) provides that a country like Nepal with inadequate manufacturing capacity can import drugs from India. In other words, NATCO or CIPLA can manufacture patented drugs in India and export to Nepal. And this is exactly what NATCO wishes to do in respect of Tarceva. This drug, though patented in India by Roche is being opposed (under the post grant opposition mechanism) and at this stage, one is not certain what the outcome of such opposition is likely to be.

Also a couple of days back, SpicyIP touched upon a potential infringement by CIPLA, which issued press statements that it will manufacture generic copies of Tarceva, notwithstanding the patent. If Roche sues, CIPLA is likely to file a counterclaim challenging the validity of the patent. My guess is that the court will grant a temporary injunction in favour of Roche, since the patent is in force. As for the invalidity attack, the court might have stayed proceedings, had a post grant opposition been filed. However, as of now, there is no post grant. Therefore, it is likely that the court will decide this issue on merits (unless someone files a post grant before Roche sues CIPLA).

It is interesting to compare and contrast the approaches of CIPLA and NATCO in this regard. While CIPLA is overly aggressive and shows scant regard for patents, NATCO is respectful of patents (at least till they are knocked off as bad ones) and likes to play the game within the parameters of the law. Anyway, we will consider the CIPLA “infringement” strategy later.

For the moment, it is important to understand that the “Doha” license cannot be operated that easily, but comes with a number of preconditions. In fact, it is widely thought that owing to the various preconditions, it is onerous to apply for and operate such a license. This may help explain why it was that despite the Doha implementation decision coming into force in 2003-2004, it wasn’t until October 2007, that Rwanda first availed of it. The Doha preconditions are below:

1. The importing Member (Nepal) must notify the WTO’s Council for TRIPS of the name and expected quantity of the product, confirm that it has established that it has insufficient or no manufacturing capacity for the product in question, and confirm that it has granted or intends to grant a compulsory license if the product is patented in its territory.

Since Nepal is an LDC, under WTO Rules, it does not need to establish that it has insufficient manufacturing capacity. Further, Nepal does not have a product patent regime for pharmaceuticals as yet. Under TRIPS and Doha, it has time till 2016 to introduce product patents in pharmaceuticals. Therefore, it does not need to grant a license to NATCO/its partners to import the drug into Nepal.

2. If the above condition is fulfilled, then the exporting Member (India) can issue a compulsory license to Natco (such license is necessary in our case, since Roche has a patent covering Tarceva in India). Under the Doha terms, a license by India ought to be limited to the quantity of the drug necessary for Nepal. India must require Natco to identify the drugs so exported (by special colour, packaging etc) in order to prevent re-imports. It will be interesting to see the “license” terms, if and when they finally issue in India.

3. India has to notify the Council for TRIPS of the grant of the license and its conditions. Although the notifications by importing and exporting Members do not need approval by the WTO, the mechanism is subject to an annual review by the Council for TRIPS. Till date, India has not made any such notification regarding the Natco license. Not surprising, since India has not granted this license as yet.

4. Before shipment begins, NATCO (the licensee) shall post on a website information such as the quantities being supplied to Nepal, and the various distinguishing features to ensure that the product reaches the desired destination only and is not diverted.

5. Nepal ought to take steps (within its means, proportionate to its administrative capacity and to the risk of trade diversion) to prevent re-exportation of the products that have actually been imported. This is a serious concern for pharma companies, as amply illustrated in the Glaxo vs Dowelhurst case (where low cost AIDS drugs meant for Africa allegedly found their way back to the UK).

In order to implement the Doha Declaration, India introduced a section into her patent regime in 2005. Section 92A reads as below:

“(1) Compulsory licence shall be available for manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems, provided compulsory licence has been granted by such country or such country has, by notification or otherwise, allowed importation of the patented pharmaceutical products from India.

(2) The Controller, shall on receipt of an application in the prescribed manner, grant a compulsory license solely for the manufacture and export of the concerned pharmaceutical product to such country under such terms and conditions as may be specified and published by him.”

Interestingly, the above section does not speak of royalties, but leaves it upto the Controller to fix “terms and conditions”. Can the Controller issue such a license without any royalties to Roche? Clearly not, since Clause 3 of the 2003 Decision states that “adequate” remuneration (pursuant to Art 31 [h] of TRIPS) has to be paid to the patentee.

A tricky legal issue in the context of the Doha Declaration (and 2003 Decision) is in determining the proper ambit of “public health”. The 2003 Decision is limited to the import/export of “pharmaceutical products”, which has been defined as:

“any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address the public health problems as recognized in paragraph 1 of the Declaration.”

Para 1 of the Doha Declaration states: “We recognize the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics”.

Although this leaves some flexibility for Nepal to decide what constitutes a “public health “problem, there are limits. Illustratively, Nepal may cut a sorry figure if it tries importing “Viagra” under the rubric of Doha!! But for an anti-cancer drug that is priced quite high, a WTO panel is likely to be convinced that such lack of an affordable cancer drug constitutes a serious public health issue. (I’m not sure how Roche has priced the drug in Nepal, but am guessing that is similar to the Indian rate of USD 4000 a month).

It is interesting to note that the Doha Declaration gives a member state much more flexibility to determine what is a situation of “national emergency” or “urgency”, as opposed to what constitutes a “public health” problem. It states, in relevant part, that: “Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.”

It is not clear whether Nepal has already made a “notification” as required under section 92A. More importantly, we’re not sure how long it will be before India grants the license under 92A to Natco. And how long it will be before the requisite notifications are made by India and Nepal to the TRIPS Council. But if all the procedural pre-requisites are fulfilled and the license is implemented, it will the pave the way for future Doha applications by Indian companies. Yet another revenue stream opens up for them!!

Interestingly, when I interviewed some of them during the course of writing a paper, not many seemed to think that the section 92A compulsory licensing model was an economically viable one. Clearly, times have changed!!

Shamnad Basheer

Shamnad Basheer

Prof. (Dr.) Shamnad Basheer founded SpicyIP in 2005. He's also the Founder of IDIA, a project to train underprivileged students for admissions to the leading law schools. He served for two years as an expert on the IP global advisory council (GAC) of the World Economic Forum (WEF). In 2015, he received the Infosys Prize in Humanities in 2015 for his work on legal education and on democratising the discourse around intellectual property law and policy. The jury was headed by Nobel laureate, Prof. Amartya Sen. Professional History: After graduating from the NLS, Bangalore Prof. Basheer joined Anand and Anand, one of India’s leading IP firms. He went on to head their telecommunication and technology practice and was rated by the IFLR as a leading technology lawyer. He left for the University of Oxford to pursue post-graduate studies, completing the BCL, MPhil and DPhil as a Wellcome Trust scholar. His first academic appointment was at the George Washington University Law School, where he served as the Frank H Marks Visiting Associate Professor of IP Law. He then relocated to India in 2008 to take up the MHRD Chaired Professorship in IP Law at WB NUJS, a leading Indian law school. Later, he was the Honorary Research Chair of IP Law at Nirma University and also a visiting professor of law at the National Law School (NLS), Bangalore. Prof. Basheer has published widely and his articles have won awards, including those instituted by ATRIP, the Stanford Technology Law Review and CREATe. He was consulted widely by the government, industry, international organisations and civil society on a variety of IP issues. He also served on several government committees.

6 comments.

  1. AvatarTahir

    Thanks for the update Shamnad.

    Couple of comments:

    1). 396/DEL/1996 is still going through examination having been opposed by parties. I understand the pre-grant hearings have finished so we can expect a decision soon (not that we’ll see it publicly !!) Interestingly, I heard from a source involved that Gilead sought to amend the preamble to their main claims at the last minute i.e from the wording “a composition comprising of a compound” to “A compound of Formula (I) etc”. Indeed, this a point we mention in our skeleton argument against the application see (http://www.i-mak.org/oseltamivir-/).

    It will be interesting to see if the patent office allows the amendment or considers it to be a case of broadening the claim.

    2. On the point re the different strategies adopted by Natco and Cipla, at a WHO meeting on Avian Flu in Feb 2006 between generic suppliers in the South Asia and South East Asia region, I spoke with the Natco representative. Their approach to the Tamiflu patent issue was the same – to wait and get a CL or see if it gets refused.

    Cheers

    Tahir (www.i-mak.org)

    Reply
  2. AvatarCornelius

    In your article India’s new patent regime: aiding “access” or abetting “genericide”?’,you quoted Section 92 of the Patent Act, 1970, as providing for compulsory licensing to be issued on grounds of national and extreme emergency. I have an online copy of the Act, together with the Amendment. Section 92 does not say anyhting like that. Can you explain where I am wrong?

    Reply
  3. AvatarShamnad Basheer

    Dear Cornelius,

    I’m not entirely sure that you have the correct copy of the Patents Act. I reproduce parts of section 92 for your benefit:

    “If the Central Government is satisfied, in respect of any patent in force in circumstances of national emergency or in circumstances of extreme urgency or in case of public non commercial use that it is necessary that compulsory licenses should be granted…”

    Reply
  4. AvatarCornelius

    Dear Basheer

    Yes, there appears to be a problem here. Can you tell me where I will get the TRUE copy of the Patent Act. For example, if you follow this link, http://www.patentoffice.nic.in/ipr/patent/patAct1970-3-99.html
    you will notice that section 92 is as reproduced below:

    92.—(1) Where the Controller is satisfied upon consideration of an application under
    section 84, section 86 or section 89, that a prima facie case has been made out for the making
    of an order, he shall direct the applicant to serve copies of the application upon the patentee
    and any other person appearing from the register to be interested in the patent in respect of
    which the application is made, and shall advertise the application in the Official Gazette.
    (2) The patentee or any other person desiring to oppose the application may, within
    such time as may be prescribed or within such further time as the Controller may on
    application (made either before or after the expiration of the prescribed time) allow, give to
    the Controller notice of opposition.
    (3) Any such notice of opposition shall contain a statement setting out the grounds on
    which the application is opposed.
    (4) Where any such notice of opposition is duly given, the Controller shall notify the
    applicant, and shall give to the applicant and the opponent an opportunity to be heard before
    deciding the case.

    So is this not a true version of the India Patent Act?

    Reply

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