Guest post : Why the compulsory licence to Natco is a bad idea

I’d like to introduce a guest post from Ranga Iyer, former MD of Wyeth Limited and a drug industry veteran. He is currently an independent advisor to Indian and foreign drug companies on strategy, policy, as also mergers and acquisitions.  In 2009, Ranga, then president of the Organisation of Pharmaceutical Producers of India,  was ranked the 33rd most influential pharma leader in the world by UK’s World Pharmaceutical Frontiers. While this blog has welcomed the compulsory licence issued by the Patent Office to Natco, Ranga has raised some strong arguments against. The views expressed are personal and do not reflect those of any organisation that he has professional relationships with.

Media and civil society have hailed the Indian Patent Office’s decision to grant a compulsory licence to Natco to make a generic of Bayer’s liver and kidney cancer drug Nexavar.  But there is more than one reason why this licence will hurt innovation while doing little to enhance affordability.  Let me enumerate the reasons :

-An important ground for the grant of the licence is the price. Natco has said it will make the drug available at a fraction of the price at which Bayer sells it. But consider also that Natco’s price of therapy (at Rs 8800 per month) is still a lot more than many Indians such as the working poor can afford. For instance, a driver who earns Rs 10,000 a month or a domestic help who makes half as much will either have to rely on charity or go without. How does Natco’s generic help them?

-What if a different generic company decides to seek a compulsory licence by offering to price lower than Natco?  All else remaining equal, on what grounds will a compulsory licence be denied to this new applicant and to others that might follow at even lower prices? And if one or more such companies are given licences too what then is the sanctity of a patent? At what point does the juggernaut that the patent office has unleashed, stop?

-There’s also another element of unfairness in this entire deal. Natco gets to rely on clinical literature that Bayer has generated over several years after expending millions of dollars. Shouldn’t the licence come with a rider that Natco will generate its own statistically significant data on safety and efficacy on Indian patients?

There is a better solution. What if the government should enter into negotiations with the patent-holder, in this case Bayer, to purchase the drug in quantities for its own hospitals with the understanding that Bayer will make these supplies available at cost? These drugs should be available either free or at reduced prices through government institutions. Bayer should, in exchange, get the right to price its product at a premium in the private market without fear of retaliatory measures such as the compulsory licence. That would serve innovation as well as public health needs much better in the long term.


One thought on “Guest post : Why the compulsory licence to Natco is a bad idea

  1. I am surprised by Ranga’s views, especially his first argument. The fact is at Rs. 8800, Natco’s product is substantially cheaper than Bayer’s making it affordable to a much larger population, can that fact be denied.

    I think ARV’s are the best example of how certain actions of the Government have benefitted population at large. While this step from Government may not be a complete solution, it is certaiinly a step in the right direction.


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