Lives before profits: India issues first compulsory license

Groundbreaking move sets precedent for overcoming drug price barriers

In a landmark case, the Indian Patent Office has issued the first-ever compulsory license in India to a generic drug manufacturer. This effectively ends German pharmaceutical company Bayer’s monopoly in India on the drug sorafenib tosylate used to treat kidney and liver cancer. The Patent Office acted on the basis that not only had Bayer failed to price the drug at a level that made it accessible and affordable, it also was unable to ensure that the medicine was available in sufficient and sustainable quantities within India.

“We have been following this case closely because newer drugs to treat HIV are patented in India, and as a result are priced out of reach,” said Dr Tido von Schoen-Angerer, Director of the Médecins Sans Frontières (MSF) Access Campaign. “But this decision marks a precedent that offers hope: it shows that new drugs under patent can also be produced by generic makers at a fraction of the price, while royalties are paid to the patent holder. This compensates patent holders while at the same time ensuring that competition can bring down prices.”

Competition from the generic version will bring the price of the drug in India down dramatically, from over US$5,500 per month to close to $175 per month – a price reduction of nearly 97 per cent.

“This decision serves as a warning that when drug companies are price gouging and limiting availability, there is a consequence: the Patent Office can and will end monopoly powers to ensure access to important medicines,” said Michelle Childs, Director of Policy/Advocacy at the MSF Access Campaign. “If this precedent is applied to other drugs and expanded to include exports, it would have a direct impact on affordability of medicines used by MSF and give a real boost to accessing the drugs that are critically needed in countries where we work.”

Under the World Trade Organization’s TRIPS Agreement which governs trade and intellectual property rules, compulsory licenses are a legally recognised means to overcome barriers in accessing affordable medicines. The Indian decision in fact mirrors similar moves made in other countries, including the US. In February 2011, the US Patent Office decided not to prevent a “generic” medical device used for skin grafts from being sold, but rather insisted that its manufacturer pay royalties to the patent holder.

“Behind this action is the idea that the public has a right to access innovative health products and they should not be blocked from benefiting from new products by excessive prices,” said Michelle Childs. “If more compulsory licences are granted in this vein, the answer to the question of how to ensure affordable access to new medicines could radically shift.”

Today’s system is one where new medicines are patented, and drug companies aggressively defend their monopolies, at the expense of patients who can’t afford the high prices charged. Instead, we could move to a more equitable system where new medicines have multiple producers, who each pay royalties to the patent holder, helping them not only to recoup their development costs but ensuring that people in developing countries have access.

This move marks the first time India’s patent law has been used to allow generic production when a drug is unaffordable.

“More generic companies should now come forward to apply for compulsory licences, including on HIV medicines, if they can’t get appropriate voluntary licences,” said Dr Tido von Schoen-Angerer.

The compulsory licence has been granted by India’s Controller of Patents (the highest authority of the Indian Patent Office) to the generic company Natco for the eight years sorafenib tosylate will remain patented in India (until 2020), and against the payment of a royalty rate fixed at 6%.

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