In a landmark decision that will change the history of intellectual property rights in India, the Patents office today granted compulsory license to Natco Pharma under section 84 (1) (b) of the Patents Act, 1970. P H Kurian while giving his decision stated that the decision was given against Bayer as it was found during the investigation that the patented invention Nexavar by Bayer was not available to the public at a reasonably affordable price which was against the provision of Section 84 (1) (b) of the Patents Act.

In the 62 pages decision the controller general of patents, designs and trademarks at India’s intellectual property (IP) stated that the price of the drug covered by the patents sold by the company shall not exceed Rs 8880 for a pack of 120 tablets which is the requirement for one months treatment. It also demanded the company to pay royalty of 6 per cent of the net sales of the drug on a quarterly basis.

Most importantly the decision states that the company will have to supply the drug covered by the patent to atleast 600 needy patients per year free of cost.

While giving the decision against Bayer, Kurian noted that during the last four years the sales of the drug by Bayer at a price of about Rs 2,80,428 constitutes a fraction of the requirements of the public. It stands to the common logic that a patented article like Nexavar was not bought by the public because it was not affordable to them.

He further contended on why did not Bayer offer differential pricing for different classes and sessions of the public in the country so that it was affordable to all.

The drug is being sold by the German giant at a huge price of Rs.2,80,428 per month, whereas Natco has requested Bayer for licence to manufacture the generic version of the same at a more affordable price of 8,880 per month which Bayer had rejected.

Natco had also contended that even though Bayer used to import the patented drug into the country it was not utilised to its fullest extent as provided under section 83 (a) and (b) of the patents act due to its high pricing of Rs.2,80,428. As per the act the law expects the company to work the invention in the country to the fullest extent possible.

Patent office held that Bayer is found guilty of absolute neglect and delay as the company despite launching the product in the world in 2006 did not launch it in India till 2009 though the patent was granted in 2008 causing delay in the launch for no logical reason.

Under Section 84 of the patents act Bayer was given three years from the date of grant of patent as a reasonable period for the company to work the invention in spite of which the company did not do anything substantial on this front. “By failing to take any effective steps these four years Bayer showed neglect on part of the company making it liable to face consequences outlined under section 84," decision stated.

Under the World Trade Organization’s TRIPS Agreement which governs trade and intellectual property rules, compulsory licences 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.