[Ip-health] SpicyIP: Roche vs NATCO: India's First "Doha Style" Compulsory License?

[Judit Rius Sanjuan]

http://spicyipindia.blogspot.com/2008/01/roche-vs-natco-indias-first-doha-s=
tyle.html

Roche vs NATCO: India's First "Doha Style" Compulsory License?
By Shamnad Basheer
Wednesday, January 16, 2008

Most of you may have heard of the first "Doha" style compulsory
license for export of GSK's ARV drug, TriAvir from Canada to Rwanda.
For a great summary of this case, see this ASIL article.

Latha Jishnu of the Business Standard reports that a similar request
is being made by Natco Pharma, an Indian generic company, to export
Roche's anti cancer drug, Tarceva (Erlotinib) from India to Nepal. The
application is for the export of 30,000 tablets to Nepal and Natco has
offered Roche a five per cent royalty. If this is succesful, it will
be the second "Doha" license. But first some background:

The Doha Declaration of the TRIPS Agreement and Public Health was a
major victory for developing countries that wished to make TRIPS more
amenable to "public health" concerns. Amongst other things, this
Declaration reiterated the flexibilities of a member state to avail of
a compulsory license to manufacture cheaper versions of patented
drugs. A compulsory license entails granting permission (without the
consent of the patent owner) to a third party to manufacture cheaper
versions of the drug in question.

In other words, Natco can manufacture Roche's drug, without Roche's
consent (in most cases, under a royalty rate fixed by a government
authority). And since Natco does not bear any R&D cost but only the
manufacturing cost, the drug produced under the compulsory license
will almost always be cheaper than the patented drug. It is important
to note that TRIPS provides great flexibility for a member state to
deploy "compulsory licensing" provisions. A number of these provisions
were discussed in the context of the Tamiflu dispute in one of our
earlier posts. Speaking of which, does anyone know what came of the
WTO mailbox application for Tamiflu? In one of my articles, I had
listed out the patent application particulars, which I reproduce below:

"There are no product patents covering Oseltamivir today because India
did not grant any pharmaceutical product patents prior to 2005.
However, Gilead availed of the =91mailbox=92 facility offered by India=92s
patent regime to file two applications claiming this product.

One of them, titled =91Carbocyclic Compounds=92, was filed in 1996. (396/
DEL/1996. The claims are directed at compositions comprising
Oseltamivir, methods of treatment (i.e., method of inhibiting the
activity of neuraminidase) and use claims (use in the preparation of
another compound). More specifically, claims 1 to 37 and claims 40 and
71 claim a composition. Claims 41 through to 68, which are dependent
on claim 40, claim various compounds of the composition recited in
claim 40. Claims 38, 39 and 72 recite methods of inhibiting the
activity of neuraminidase. Claims 69 and 70 recite use of compound for
preparation of another compound).

The other titled =91Novel Compounds and Methods for Synthesis and
Therapy=92, was filed in 1999 (8 1132/DEL/1998. This was published for
opposition on 1 July 2005).

Although it is widely acknowledged that the bird flu scare was hyped
(fear of the virus mutating to a form freely transmissible between
humans), one still cannot rule out the possibility. A news report
recently mentions a bird flu outbreak in West Bengal. One would have
thought the Bengalis to be more prone to "fish flu" type diseases, but
anyway....

India is home to some of the widest compulsory licensing provisions in
the world. Illustratively, the patent regime provides that compulsory
licenses can be issued, if:

1. The drug is not available in adequate quantities in India

2. The drug is not reasonably priced (each tablet of Tarceva costs
around Rs 4,800 (USD 120). This means that a lung cancer patient could
pay close to Rs 1.5 lakh (USD 4000) a month for treatment. Cipla plans
to sell the drug for a third of this cost (Rs 1,600 a tablet) while
Natco will price it at about Rs 1,000).

3. The drug is not manufactured in India. This is a highly
controversial ground, and if this is invoked, I'm sure that at least
80% of all patented drugs by MNC's [including Tarceva and the highly
controversial Gleevec] would be subjected to a compulsory license. (As
of today, this can certainly kick in for a number of pharmaceutical
process patents that were granted more than 3 years back).

4. The drug was being manufactured prior to 2005 by a generic company.

The above grounds can be invoked by private players such as NATCO and
CIPLA. However, they kick-in only three years after the patent is
granted. Clearly, neither CIPLA nor NATCO can avail of these grounds
for Tarceva, which has just been patented (2007). Also, they cannot
invoke ground (3) above, since the drug has never, till date, been
manufactured by either of them.

However, the patent act also contains some broad based =91public=92
interest based compulsory licensing grounds (such as those
encapsulated in Section 92) that can be availed of within the 3 years.
These are mainly invokable by the government and not directly by
private players.

I would argue that all of the above grounds are TRIPS compatible.
Particularly since TRIPS does not really spell out any limitations on
the kinds of compulsory licensing "grounds" that a member state can
incorporate in its regime. In fact, the Doha Declaration clearly
states that "each Member has the right to grant compulsory licences
and the freedom to determine the grounds upon which such licences are
granted". We will visit this issue in detail in a future post.

Back to the Doha Declaration and compulsory licenses to export to
countries with inadequate manufacturing capacity.

India has some outstanding generic companies that can exploit
compulsory licensing provisions. However, in countries like Nepal or
Bhutan with no adequate manufacturing capacity, such compulsory
licensing provisions may be of no use, since there is no company that
has the expertise to produce such drug.

Recognising this problem, the Doha Declaration (and more specifically,
the Decision of 30 August 2003 on the Implementation of Paragraph 6 of
the said Declaration) provides that a country like Nepal with
inadequate manufacturing capacity can import drugs from India. In
other words, NATCO or CIPLA can manufacture patented drugs in India
and export to Nepal. And this is exactly what NATCO wishes to do in
respect of Tarceva. This drug, though patented in India by Roche is
being opposed (under the post grant opposition mechanism) and at this
stage, one is not certain what the outcome of such opposition is
likely to be.

Also a couple of days back, SpicyIP touched upon a potential
infringement by CIPLA, which issued press statements that it will
manufacture generic copies of Tarceva, notwithstanding the patent. If
Roche sues, CIPLA is likely to file a counterclaim challenging the
validity of the patent. My guess is that the court will grant a
temporary injunction in favour of Roche, since the patent is in force.
As for the invalidity attack, the court might have stayed proceedings,
had a post grant opposition been filed. However, as of now, there is
no post grant. Therefore, it is likely that the court will decide this
issue on merits (unless someone files a post grant before Roche sues
CIPLA).

It is interesting to compare and contrast the approaches of CIPLA and
NATCO in this regard. While CIPLA is overly aggressive and shows scant
regard for patents, NATCO is respectful of patents (at least till they
are knocked off as bad ones) and likes to play the game within the
parameters of the law. Anyway, we will consider the CIPLA
"infringement" strategy later.

For the moment, it is important to understand that the "Doha" license
cannot be operated that easily, but comes with a number of
preconditions. In fact, it is widely thought that owing to the various
preconditions, it is onerous to apply for and operate such a license.
This may help explain why it was that despite the Doha implementation
decision coming into force in 2003-2004, it wasn't until October 2007,
that Rwanda first availed of it. The Doha preconditions are below:

1. The importing Member (Nepal) must notify the WTO=92s Council for
TRIPS of the name and expected quantity of the product, confirm that
it has established that it has insufficient or no manufacturing
capacity for the product in question, and confirm that it has granted
or intends to grant a compulsory license if the product is patented in
its territory.

Since Nepal is an LDC, under WTO Rules, it does not need to establish
that it has insufficient manufacturing capacity. Further, Nepal does
not have a product patent regime for pharmaceuticals as yet. Under
TRIPS and Doha, it has time till 2016 to introduce product patents in
pharmaceuticals. Therefore, it does not need to grant a license to
NATCO/its partners to import the drug into Nepal.

2. If the above condition is fulfilled, then the exporting Member
(India) can issue a compulsory license to Natco (such license is
necessary in our case, since Roche has a patent covering Tarceva in
India). Under the Doha terms, a license by India ought to be limited
to the quantity of the drug necessary for Nepal. India must require
Natco to identify the drugs so exported (by special colour, packaging
etc) in order to prevent re-imports. It will be interesting to see the
"license" terms, if and when they finally issue in India.

3. India has to notify the Council for TRIPS of the grant of the
license and its conditions. Although the notifications by importing
and exporting Members do not need approval by the WTO, the mechanism
is subject to an annual review by the Council for TRIPS. Till date,
India has not made any such notification regarding the Natco license.
Not surprising, since India has not granted this license as yet.

4. Before shipment begins, NATCO (the licensee) shall post on a
website information such as the quantities being supplied to Nepal,
and the various distinguishing features to ensure that the product
reaches the desired destination only and is not diverted.

5. Nepal ought to take steps (within its means, proportionate to its
administrative capacity and to the risk of trade diversion) to prevent
re-exportation of the products that have actually been imported. This
is a serious concern for pharma companies, as amply illustrated in the
Glaxo vs Dowelhurst case (where low cost AIDS drugs meant for Africa
allegedly found their way back to the UK).

In order to implement the Doha Declaration, India introduced a section
into her patent regime in 2005. Section 92A reads as below:

=93(1) Compulsory licence shall be available for manufacture and export
of patented pharmaceutical products to any country having insufficient
or no manufacturing capacity in the pharmaceutical sector for the
concerned product to address public health problems, provided
compulsory licence has been granted by such country or such country
has, by notification or otherwise, allowed importation of the patented
pharmaceutical products from India.

(2) The Controller, shall on receipt of an application in the
prescribed manner, grant a compulsory license solely for the
manufacture and export of the concerned pharmaceutical product to such
country under such terms and conditions as may be specified and
published by him."

Interestingly, the above section does not speak of royalties, but
leaves it upto the Controller to fix "terms and conditions". Can the
Controller issue such a license without any royalties to Roche?
Clearly not, since Clause 3 of the 2003 Decision states that
"adequate" remuneration (pursuant to Art 31 [h] of TRIPS) has to be
paid to the patentee.

A tricky legal issue in the context of the Doha Declaration (and 2003
Decision) is in determining the proper ambit of "public health". The
2003 Decision is limited to the import/export of "pharmaceutical
products", which has been defined as:

"any patented product, or product manufactured through a patented
process, of the pharmaceutical sector needed to address the public
health problems as recognized in paragraph 1 of the Declaration."

Para 1 of the Doha Declaration states: "We recognize the gravity of
the public health problems afflicting many developing and least-
developed countries, especially those resulting from HIV/AIDS,
tuberculosis, malaria and other epidemics".

Although this leaves some flexibility for Nepal to decide what
constitutes a "public health "problem, there are limits.
Illustratively, Nepal may cut a sorry figure if it tries importing
"Viagra" under the rubric of Doha!! But for an anti-cancer drug that
is priced quite high, a WTO panel is likely to be convinced that such
lack of an affordable cancer drug constitutes a serious public health
issue. (I'm not sure how Roche has priced the drug in Nepal, but am
guessing that is similar to the Indian rate of USD 4000 a month).

It is interesting to note that the Doha Declaration gives a member
state much more flexibility to determine what is a situation of
"national emergency" or "urgency", as opposed to what constitutes a
"public health" problem. It states, in relevant part, that: "Each
Member has the right to determine what constitutes a national
emergency or other circumstances of extreme urgency, it being
understood that public health crises, including those relating to HIV/
AIDS, tuberculosis, malaria and other epidemics, can represent a
national emergency or other circumstances of extreme urgency."

It is not clear whether Nepal has already made a "notification" as
required under section 92A. More importantly, we're not sure how long
it will be before India grants the license under 92A to Natco. And how
long it will be before the requisite notifications are made by India
and Nepal to the TRIPS Council. But if all the procedural pre-
requisites are fulfilled and the license is implemented, it will the
pave the way for future Doha applications by Indian companies. Yet
another revenue stream opens up for them!!

Interestingly, when I interviewed some of them during the course of
writing a paper, not many seemed to think that the section 92A
compulsory licensing model was an economically viable one. Clearly,
times have changed!!


Judit Rius Sanjuan
Attorney at Knowledge Ecology International
www.keionline.org / www.cptech.org
Phone: +1.202.332.2670, x18
Email: judit.rius@keionline.org