In an email to our readers last week, I’d announced that we’d be releasing a report soon on the “working” of Bayers’ controversial patented cancer drug, “Nexavar”. This drug was at the centre of controversial compulsory licensing dispute between Bayer and Natco.
For those interested, here is the full text of the report. In this report, we highlight the various information gaps and discrepancies in the Form 27 declarations filed each year by Bayer before the Indian Patent Office. As many of you know, Form 27 is a form that is unique to India and is to be mandatorily submitted by each patentee to demonstrate the full extent of working of its patent. Unfortunately, most patentees take this obligation rather lightly, and so did Bayer!
Despite several attempts to engage with them, Bayer refused to answer our queries or clarify the many discrepancies in their patent working data. We are not sure what to make of this, save drawing an adverse inference.
The summary of our report (co-authored by me and Rupali Samuel, one of the brightest student sparks in the upcoming IP firmament) is extracted below and the full report can be found here. Needless to state, this report is part of our endeavour to foster transparency in the IP debates, a theme that lies at the very heart of this blogs’ mission. It is also aimed at generating more “data” around IP issues, so that we effectively move away from “Faith” based IP to “Fact” Based IP. A theme I’ve touched on several times in the past (see here and here), and a theme that Swaraj wrote about to commemorate World IP day yesterday.
I really want to thank the following people for helping out with the report: Swaraj Barooah, Aabhas Kshetarpal, Sai Vinod, Murali Neelakantan, Prashant Reddy and Hersh Sewak.
SUMMARY OF REPORT (For Full Text of Report, see here).
Patent Working and Compulsory Licensing
Section 146 of the Indian Patents Act mandates that every patentee discloses the extent to which she has commercially “worked” her patent. The rationale for this statutory mandate is that it helps evaluate if the patentee has satisfied the reasonable requirements of the public, and thereby fulfilled her part of the social bargain whilst securing a twenty year monopoly from the state. Should she fail in this important intellectual property “duty”, her patent is susceptible to a compulsory licence, wherein a third party can produce and sell a competing product expected to be more accessible and available to the general public.
Such a compulsory license was issued three years ago over Bayer’s patented anticancer drug Sorefanib Tosylate (sold as “Nexavar”) on the ground that it was exorbitantly priced at Rs 2.8 lakhs (about USD 4500 a month) and hardly available to 2% of the patient population. The license was issued in favour of Natco, an Indian generic company, which then sold the drug (as “Sorafenat”) at Rs 8,800 (about USD 150) a month.
While making its argument for a compulsory license over Bayer’s highly priced drug, Natco relied heavily on the patent “working” figures submitted by Bayer as part of its Form 27 declarations to the Indian Patent Office. These figures more than amply demonstrated that Bayer was hardly satisfying 2% of the patient population through its sales/disbursements of the drug. To this extent, Form 27 disclosures constitute an important edifice of the patent regime, and gauge the existence and extent to which a patentee translates a government secured monopoly into public benefit. But for a full and complete patent working disclosure, the compulsory licensing provisions will come to naught.
Defects in Bayer’s Form 27 Declarations
Unfortunately, the Form 27 declarations submitted by Bayer are incomplete in several particulars and raise several questions; questions that go to the heart of patent working and public interest. This report points to these various informational gaps and discrepancies, some of which are highlighted below:
1. Bayer did not file any Form 27 for the year 2008, despite its patent having been granted in April 2008.
2. Bayer submitted two separate Form 27s for the year 2009. However, till date, Bayer has refused to clarify as to which of the forms is the accurate one. Both forms contain significant inaccuracies/gaps.
3. It is not clear if Bayer submitted a Form 27 declaration for the year 2010. While our RTI request for such a form met with a negative response from the Indian Patent Office (indicating that no form had been filed), both the Controller as well as the IPAB refer to such a form in their respective decisions. It is to be noted that the figures mentioned by the IPO and the IPAB for the year 2010 include only “sample” and “support” packs. As such, there are no commercial sales/disbursements in this year. One wonders how the demand for the drug was met in that year. How did patients get their supplies? As with other queries, Bayer refused to answer this query, as also our query on what the terms “support” and “sample” pack meant and entailed. Were these packs distributed with conditions attached to ensure that they were not sold further by the recipients? Were they doled out to doctors in a bid to convert them to loyal customers?
4. Bayer’s per unit price for the drug in the Form 27 submissions is way below the figure quoted in the compulsory licensing decision. While the Form 27 data indicates that the per unit price is an average of Rs 96,000/-, the compulsory licensing decision indicates that the price is Rs 2.8 lakhs (approximately USD 4500) per month. Here again, Bayer refused to explain this discrepancy to us. It is also noteworthy that despite a compulsory licensing decision that was issued owing primarily to Bayer’s exorbitant price for the drug, it continues to sell in the open market at the same rate.
5. While Bayer discloses the various import and distribution figures for its patient assistance programme (PAP) programme in its Form 27 submissions, nowhere does it indicate the amount of revenues that it makes through this programme. This is an important figure to track, given that the PAP is not completely free, but has to be paid for partly by the patient.
Apart from queries seeking to clarify the various informational gaps/discrepancies in their Form 27 submissions, we also noted a very puzzling practice: Bayer routinely imports Nexavar well in excess of its needed supplies, year after year. Given that it sells an average of 1500-2200 drug units each year, one would expect it to import at numbers close to (or slightly higher) than this figure. However, it imports well in excess (up to 700% more!) of these sales figures year after year. Illustratively, it imported a whooping 11,536 units in the year 2012! And this is despite the fact that it had a leftover stock of 4644 from the previous year.
As to why it would import such disproportionate numbers year after year and presumably suffer losses is unclear. Needless to add, Bayer refused to answer our query on this front as well (our queries to Bayer are listed out in Annexure A and our email correspondence is annexed as Annexure B). This illogical import pattern and its possible nexus with potential tax avoidance strategies etc needs to be investigated.
From Faith Based to Fact Based IP: Government Apathy in Enforcement
At a broader policy level, our report suggests that one must take the business of numbers more seriously. In an ecosystem charged with emotional rhetoric, one needs more empirical data (“facts”) rather than “faith” in order to arrive at more optimal policy solutions.
Fortunately, the Indian patent regime contains potent provisions calling for such factual numbers, at least on the patent working front. Unfortunately, its implementation leaves much to be desired. Despite an earlier report by us (SpicyIP) in 2011 on the sheer impunity with which pharmaceutical patentees routinely ignored the patent working disclosure mandate (under section 146), the Indian government is yet to take any action. Further, our RTI application querying the government specifically on whether or not they had initiated any action against errant patentees met with a negative response. This, despite the fact that section 122 of the Patents Act clearly empowers the government to penalise errant patentees.
Our report is also meant to foster more transparency within the IP firmament, a mission that lies at the very core of SpicyIP’s mission.
Revocation of Bayer’s Patent?
India has a fairly potent compulsory licensing regime. Its invocation generally depends on whether or not the patentee has worked the patent adequately; and this hinges significantly on the numbers i.e., the sales/distribution figures for the drug in question.
If it turns out that even after two years of operation of the compulsory licence, the reasonable requirements of the public have still not been satisfied, the patent can be revoked under section 85 of the Indian Patents Act.
It is worrying that despite the issuance of a compulsory licence on the ground that Bayer was selling at an excessive price and catering to hardly 2% of the patient population, Bayer has not made any amends. Our personal investigations with pharmacies revealed that Bayer continues to dole out the drug at the earlier price (Rs 2,80,000 per month). Further, the more recent Form 27 submissions of Bayer appear to indicate that the 2% (percentage of patients having access to the drug, assuming that the number of patients that need the drug have largely remained the same) has not increased significantly since the time of issuance of the compulsory licence.
Of course, this 2% is bound to go higher, if one takes into account the sales figures of Natco and Cipla. Natco sells under a compulsory license, while Cipla has been selling “at risk”. Unfortunately, at present, these sales figures of Natco and Cipla are not publicly available.
However, even assuming Cipla and Natco are servicing a much higher number of the patient pool than Bayer (lets say, 50% of patients), as per the Bombay High Court decision, Bayer’s patent is susceptible to revocation, for the court had held that if even a single patient does not have access to the drug, the reasonable requirements of the public cannot be said to be satisfied.
Natco’s Failure to Comply with Compulsory Licensing Mandate:
Despite a legal obligation to do so (under the terms of the compulsory licensing order issued by the IPO), Natco has failed to submit its sales figures to the Indian Patent Office. In response to our RTI application query, the IPO confirmed that even after three years of the compulsory license being issued, Natco is yet to submit any of its quarterly sales figures for sorefanib tosylate (sold as Sorefenat).
As for Cipla, it is under no legal obligation to submit or make available its sales figures. It is therefore imperative that the government put in place a mechanism to source this data with relative ease, so as to make for an effective invocation of the compulsory licensing and revocation provisions.
Conclusions: Key Suggestions
1. The government ought to immediately take action against errant patentees and licensees who fail to submit full and complete Form 27 information. It is worrying that even after evidence has been brought to their notice that patentees consistently and blatantly ignore this important statutory mandate, they have so far failed to take any action.
2. The IPO ought to initiate immediate action against Natco for failing to comply with the terms of the compulsory licensing order in terms of submitting its quarterly sales figures for their generic version of sorefanib tosylate (sold as Sorefanat).
3. The government ought to investigate the following:
i) Why does Bayer routinely import exponentially higher volumes of Nexavar than is necessary for its routine disbursements/demand. What does it do with the excess stock year after year? Is there a tax evasion angle here?
ii) How are Bayer’s “sample” and “support” packs ultimately disbursed. If they are “gifted” to doctors and then sold onwards by doctors to patients, does this not constitute a legal/ethical violation?
iii) What percentage of the patient population today is able to access Sorefanib Tosylate from all suppliers put together (namely, Bayer, Natco and Cipla)?
This last bit of information is absolutely critical for determining whether or not the patient requirements are being adequately satisfied. Under the terms of the Mumbai High Court order however, even a single patient not having access to the drug would render it susceptible to revocation.
5. In future, government agencies, quasi judicial bodies (such as the IPO), and judicial bodies (such as the IPAB and courts) ought to ensure that there is consistency across usage of metrics in compulsory licensing and other decisions that turn on numbers. The Bayer vs. Natco CL decision is replete with inconsistent usage of metrics, such as “boxes” and “support packs” which find no mention in the Form 27 submissions by Bayer.