This article is written by Triveni Singal pursuing Diploma in Intellectual Property, Media, and Entertainment Laws from LawSikho.
Table of Contents
Introduction
A patent is a monopoly right granted by a specific country (in which the application is filed) to the inventor for a term of 20 years in respect of his invention. Thus, patent rights are territorial rights and exist within the boundaries of the granting State.
As per Section 48 of the Patents Act, 1970, the patentee has an exclusive right to preclude others from making, selling, or importing the patented product without his consent and from using the patented process or from using, offering for sale, selling, or importing any product obtained directly by that patented process. The invention must bear novelty, an inventive step, and be capable of industrial application for being eligible for a patent grant.
Licensing
A license given by the patentee is a legal document that authorizes the licensee to exploit the invention of the licensor (patentee). In return, the patentee is paid a license fee and royalty from the revenue generated. The license can be exclusively granted to only one entity, or non-exclusively granted to multiple third parties.
But what happens if the patentee neither exploits his invention himself nor grants a license to a third party for use of his invention?
The simple answer to this question is that a patentee can be compelled to grant a license for exploitation of his invention. Such a license is called a compulsory license.
The rationale behind such compulsion is that a patent is granted to encourage scientific research, new technology, and industrial progress. These objects stand defeated if the patentee abuses his rights by not working on them. Compulsory licenses provide a solution to stop this abuse of rights.
Compulsory license
According to the provisions laid down in Section 84 of the Patents Act, 1970, a compulsory license can be granted after the expiry of three years from the date of grant of a patent on any one of the following grounds;
- The reasonable requirements of the public concerning the patented invention are not being satisfied
- The patented invention is not available to the public at reasonably affordable prices
- The patented invention is not worked in the territory of India
Any person interested can apply to the Controller for grant of compulsory license, however, the Controller will consider factors such as the ability of the applicant to work the invention to public advantage, the capacity of the applicant to undertake risk in providing capital for the same, whether the applicant tried to obtain a voluntary license from the patentee on reasonable terms, etc.
In circumstances of national emergency, extreme urgency, or public non-commercial use, the central government, if satisfied that grant of a compulsory license is necessary, has been empowered to make a declaration to that effect under Section 92 of the Patents Act, 1970.
Clause 3 of the same section empowers the Controller to skip the procedure relating to grant of compulsory license, if he is satisfied that it is necessary owing to the situation of national emergency, extreme urgency, or for public non-commercial use, including public health crisis.
Bayer Corporation vs. Union Of India
This was the first case on compulsory license in India. Bayer Corporation, a US based company was granted a patent in India for its drug Sorafenib Tosylate (sold under the brand name Nexavar), which was to be used to treat kidney cancer. Natco, an Indian company, had failed to acquire a voluntary license from Bayer for the purpose of manufacturing and selling the patented drug in India at a much lesser price than what was currently charged by the corporation. Following this, Natco applied for a compulsory license under Section 84 of the Patents Act, 1970, and was subsequently granted the same by the Controller.
Natco Pharma applies for compulsory license
Background of the company and the application
Headquartered in Hyderabad, Natco Pharma is an Indian pharmaceutical company with the mission of “making specialty medicines accessible to all”. It is in the business of research, development, manufacture, and marketing of pharmaceutical substances and finished formulations for the Indian and international markets.
The company has applied for a compulsory license under Section 92(1) read with Section 92(3) of the Patents Act, 1970 for the drug Baricitinib at the Patent Office in Mumbai. (see here)
The reason for the present application, as cited by the company itself, is the grave life-threatening public health emergency currently prevailing in India due to the resurgence of the COVID-19 virus through a second wave since at least early February 2021. Furthermore, they pointed out that the cause for such high fatalities as well as the prolonged treatment regimen has been the lack of access to essential medicines for the treatment of COVID-19 partly due to lack of supply and also partly due to lack of affordability.
The light was thrown on how the courts are evolving mechanisms by which the fundamental right to health of the residents of India is not just protected but also actively ensured with no discrimination based solely on lack of access inter alia, due to lack of availability of essential medicines or lack of affordability of such essential medicines. This ground was backed up by two cases namely, the interim judgement of Hon’ble Supreme Court of India in suo motu Writ Petition (C) 3/2021 dated 29.04.2021 and the order of Hon’ble Delhi High Court in Rakesh Malhotra vs Government of NCT of Delhi dated 20.04.2021. In the latter, the court recognized that there is a need to invoke provisions such as Section 92 in relation inter alia to Baricitinib, while in the former the court additionally recognized that the government should use the provisions under Section 100 of the Patents Act, 1970.
Lastly, the seriousness of the situation was highlighted in the application by citing the notification issued by the Drug Controller General of India last year by which if any drug had received Emergency Use Authorisation for COVID-19 treatment, similar approval could be granted in India through a Special Regulatory Pathway involving inter alia waiver of/abbreviation/limitation of clinical studies, etc.
Background of the drug Baricitinib and its relation with COVID-19 treatment
The drug is a selective and reversible Janus kinase inhibitor that works in respect of both JAK1 and JAK2 subtypes.
It has a significant anti-inflammatory effect as well as preservation of bone and cartilage and with little or no detectable adverse hematologic effect in the treatment of rheumatoid arthritis.
Therefore, the drug has been approved for rheumatoid arthritis treatment in the European Union in 2017 (sold under the name Olumiant) and in India in 2018.
The following sources have repeatedly linked Baricitinib with the treatment of COVID and have been used by Natco to substantiate their application;
- The Lancet, February 2020– Based on AI modeling the journal reported that Baricitinib could be trialed for use in COVID-19 treatment pending the development of a vaccine.
- The Lancet, April 2020– Another article in the same journal reiterated the potential use of Baricitinib in COVID-19 treatment using a combination of antiviral and antiinflammatory pathway regulation.
- EMBO Molecular Medicine Journal, August 2020– It supported the AI-predicted use of Baricitinib in COVID-19 treatment and also reported that in a series of patients with bilateral COVID-19 pneumonia, Baricitinib treatment was associated with clinical and radiologic recovery, a rapid decline in SARS-CoV-2 viral load, inflammatory markers, and IL-6 levels.
- New England Journal of Medicine, December 2020– They reported that Baricitinib plus Remdesivir was superior to Remdesivir alone in reducing recovery time and accelerating improvement in clinical status among patients with COVID-19, notably among those receiving high-flow oxygen or non-invasive ventilation. The combination was also reported as being associated with fewer serious adverse events.
The United States Food & Drug Administration granted Emergency Use Authorisation of Baricitinib in combination with Remdesivir for the treatment of COVID-19 on 19.11.2020.
The applicant thus supported the fact that Baricitinib is an essential medicine for COVID-19 treatment as an adjunct to Remdesivir prescription, particularly in patients requiring oxygen support and non-invasive ventilation. Further, the applicant highlighted that physicians regularly prescribe Baricitinib (1 tablet/day for a maximum of 14 days) as a stand-alone or in combination with Remdesivir for treatment in COVID-19 patients.
The patent for Barcitinib is owned by Incyte Holdings Corporation, with a license granted to Eli Lilly. The applicant had approached the patentee in December 2020 seeking a voluntary license and offering to pay a royalty of 7% on net profits. A copy was also marked to the purported licensee Eli Lilly. However, to date, there has been no response from the patentee.
Fulfillment of the conditions under Section 92
The first condition is the existence of a national public health emergency. In addition to the facts mentioned above, reliance was placed on the declaration of a pandemic by the NDMA which has not been withdrawn to highlight the existence of this condition. Furthermore, in November last year, the United States Food and Drug Administration (USFDA) notified and approved Baricitinib for Emergency Use Authorisation in the USA under Section 564 of the Federal Food, Drug and Cosmetics Act of the USA which is pari materia with Section 92 of The Patents Act, 1970. Lastly, the CDSCO/DCGI has recognized that there is a public health emergency due to COVID 19 pandemic and that there is an unmet medical need and has approved Emergency Use Authorisation for the manufacture of Baricitinib API and 1 mg, 2mg, and 4mg tablets for Emergency Use in COVID-19 pandemic.
Therefore, the first requirement, namely the recognition by the Central Government of the existence of a national emergency due to public health concerns as well as extreme urgency has been satisfied, particularly to Baricitinib.
The next condition is the unsatisfied need for the drug in India due to lack of supply and lack of affordability. This condition has been proved to exist by showing that:
- The per tablet cost of the drug is INR 3230.00 which totals INR 45220.00 per patient for a 14-day treatment regimen. This is more than the median average income of most families and more than the monthly income of even the most qualified professionals across India.
- The drug is not manufactured in India but is only imported as per Forms 27. The total number of COVID-19 patients currently undergoing treatment is almost 5600 times more than the number of tablets of Olumiant imported. Further, Eli Lilly itself has a very narrow distribution network and it is inconceivable that it will ever be able to service the needs of the Indian population for Baricitinib in times of COVID-19 pandemic.
Applicant’s ability concerning the launch of the drug
The applicant affirmed that it is prepared to manufacture and launch Baricitinib in three separate dosage forms 1 mg, 2 mg, and 4 mg tablets immediately for co-treatment in Remdesivir treatment as per approvals granted by the CDSCO/DCGI for Emergency Use Authorisation. They are also devoting existing facilities for production and its pan-India distribution network for this purpose.
The prices of these three forms have been demarcated at INR 30.00 per tablet (4 mg), INR 20.00 per tablet (2 mg), and INR 15.00 per tablet (1 mg). Thus, the pricing has been structured not for profit but to make it accessible to the public of India.
Additionally, the applicant affirms that it has performed bioequivalence studies that were submitted to the regulatory authorities, and subsequently their product is bioequivalent to the reference product Olumiant.
Lastly, it is undisputed that the applicant has the manufacturing capacity, the details of which are yet to be submitted, and a well-established distribution network to ensure supply of its Baricitinib product to hospitals, government facilities for treatment of COVID-19, etc.
To cover the situation from every angle, the applicant has also filed an intervention application before the Hon’ble Supreme Court of India seeking a direction that any application for a compulsory license is heard and disposed of expeditiously by the concerned authorities.
What Natco Pharma seeks from this application?
Natco prays that the Controller exercises his duty under Section 92(1) and (3), and grants the compulsory license as requested on the following terms and conditions:
- Legally recognize the right of the applicant to manufacture and market Baricitinib both as bulk API and 1 mg, 2 mg, and 4mg tablets as approved by the DCGI/CDSCO.
- The compulsory license will be for COVID-19 indication only.
- The compulsory license will be limited to the territory of India, and till the prevailing pandemic situation continues.
- Payment of 7% royalty on net profits.
- Preference be given to patients in the economically weaker sections, government welfare schemes, and in remoter areas of the country.
- In deserving cases, the product will be made available free of cost to patients.
Conclusion
The fact that Natco filed the current application under Section 92 of the Patents Act, 1970 rather than Section 84 might be considered a strategic move. This can be credited to the fact that rather than battling with the patentee (or the licensee), under section 92 the government is asked to dispose of the application based on the prevailing circumstances of national emergency, extreme urgency, or public non-commercial use, including in public health crises by answering whether the patent in question is necessary to fight the situation.
The government is already under pressure to use provisions under Section 92 of compulsory licensing, and so, an application of such a kind is a well-conceived idea.
References
- https://www.livelaw.in/news-updates/natco-pharma-files-application-seeking-compulsory-license-for-COVID-drug-baricitinib-173627
- https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO.WEB/elements/download_file_division.jsp?num_id=NTc2OQ==
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