Patent office contended that Nexavar’s high cost violated Indian law by not having a reasonably affordable price.

In a decision that is sending shivers through big biopharma, the Indian Patent Office has revoked the exclusive patent rights held by Bayer to market its cancer drug Nexavar and has awarded the nation’s first-ever compulsory license to a domestic generic drugmaker. As a result, Natco Pharma will be allowed to manufacture and sell the drug in India for Rs. 8,880 (about $178) per month.

The patent office contended that the high present cost of Nexavar—Rs. 2.8 lakhs (around $5,500 a month)— violated Indian law by being “not available to the public at a reasonably affordable price.” The argument holds sway with Indian patent officials since a sizeable percentage of India’s population lives below the poverty line. Estimates range from 32% (government) to 42% (World Bank).

“We will evaluate our options to further defend our intellectual property rights in India,” an unnamed Bayer spokesperson told The Economic Times of India.

In return for the license, the patent office required Natco to pay a royalty of 6% of net sales of Nexavar on a quarterly basis to Bayer. Natco, which is not allowed to outsource production, must manufacture the drug only at its own plant in Hyderabad and must sell the drug only for treatment of kidney cancer and liver cancer in India. In addition, Natco must supply Nexavar free to at least 600 needy and deserving patients per year.

India’s patent law allows for the issuing of compulsory licenses after three years from the awarding of patents on drugs that the patent office deems to be too costly. Officials paved the way for that compulsory licensing law to be used for the first time by recently changing it from requiring “reasonably priced” drugs to “reasonably affordable priced” drugs. The new wording is seen as a lower threshold for compulsory licenses, which authorize the local manufacture or importation of cheaper, generic versions of drugs under world trade rules by nations that deem major life-saving drugs to be too costly.

“This could well be the first of many compulsory rulings here,” Gopakumar G. Nair, head of patent law firm Gopakumar Nair Associates, told Reuters. Most at-risk, he predicted, were HIV/AIDS medicines since India has one of the fastest-growing rates of the disease worldwide, though the nation’s number-one killer is heart disease.

Nair is a former president of the Indian Drug Manufacturers Association (IDMA), a trade group representing domestic and largely generic pharma companies. “It is beneficial for patients, industry, as well as the whole country. Everyone will be benefited by this order,” IDMA secretary general Daara Patel told the Press Trust of India.

Not so, according to an Indian group representing multinational biopharma giants. The Organisation of Pharmaceutical Producers of India (OPPI) expressed disappointment over the decision, which it said would hurt the industry in the long run. “We believe compulsory licenses should be used only in exceptional circumstances such as in times of a national health crisis,” OPPI president Ranjit Shahani said, as reported in The Economic Times of India. “If used arbitrarily, compulsory licenses will serve to undermine the innovative pharmaceutical industry and will be to the long-term detriment of the patient.”

That could cut the heart out of India’s potential for rapid growth as an emerging market at a time when Bayer and other big biopharmas have increasingly relied on emerging nations to recoup sales and profits lost in the U.S. and Europe as patent protection ends for a generation of blockbuster drugs. Bayer finished 2011 with a near-doubling of net income year-over-year to €2.5 billion (about $3.3 billion), partly due to much lower special charges than a year earlier. Sales grew to €36.5 billion ($47.7 billion), a 4.1% increase, “partly on account of strong growth in the emerging markets,” the company said. India accounted last year for 36.4% of total sales, up 0.8% from 2010. Bayer’s 2011 sales in emerging markets as a whole were €13.29 billion (about $17.4 billion), up 9% from 2010.

“Growth continued in the emerging markets, where health services became available to more and more people, boosting the demand for prescription medicines,” Bayer stated, adding, “The pillars of global economic growth were the emerging markets, led by China and India. They continued to expand strongly despite negative effects from the global economy, with rates of growth that slowed only slightly during the course of the year.”

Early last year, Bayer joined the Indian company Zydus Cadila in forming a 50:50 joint venture Bayer Zydus Pharma: “The new company greatly strengthens our presence in India’s rapidly expanding pharmaceuticals market,” the company said. Bayer also signed an agreement with U.S. drug maker Trius Therapeutics in July for exclusive rights to Trius’ antibiotic tedizolid phosphate (tedizolid) in India and the rest of Asia, excluding North and South Korea, as well as Africa, Latin America, and the Middle East. Bayer reportedly recruited “about 750” university graduates for jobs in India last year, compared with “more than 250” in the U.S. and “nearly 1,900” in China.

To read the story from The Economic Times of India, click here.
To read the story from Reuters, click here.

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