By VIKAS BAJAJ and ANDREW POLLACK
Rafiq Maqbool/Associated Press
MUMBAI, India — India's government on Monday authorized a drug manufacturer to make and sell a generic copy of a patented Bayer cancer drug, saying that Bayer charged a price that was unaffordable to most of the nation.
The decision by the controller general of patents, designs and trademarks was the first time a so-called compulsory license of a patented drug had been granted in India.
Legal specialists and patient advocates said it could open the door to a flood of other compulsory licenses in India and possibly in other developing countries, creating a new supply of cheap generic drugs.
According to the decision, Bayer must license the drug Nexavar, or sorafenib, to Natco Pharma, an Indian company. In exchange, Natco must pay Bayer a 6 percent royalty on its net sales and must sell the drug for 8,800 rupees ($176) a month, about 3 percent of the 280,000 rupees ($5,600) that Bayer charges for it in India. Natco's drug will be for use only in India, the decision said.
Nexavar, which Bayer developed with Onyx Pharmaceuticals, a California biotechnology company, is used to treat advanced kidney cancer and liver cancer and has been shown to extend lives by a median of about three months. Fewer than 200 Indians used the drug, a tablet, in 2011. Advocates for cheaper generic medicines cheered the decision, which they said could provide a model for developing countries.
"I think it's the way forward," said Shamnad Basheer, a professor at West Bengal National University of Juridical Sciences, who has written extensively about the case. "In the entire debate about patents, this is the middle path."
But Western drug companies are likely to see the decision as another example of how India does not provide the intellectual property protection necessary to recoup the cost of developing medicines. India did not grant patents on drugs at all for 35 years until 2005, helping its manufacturers become the world's leading exporters of inexpensive generic pills.
In another closely watched case, India's Supreme Court is expected late this month to hear an appeal by Novartis over the denial of a patent for the cancer drug Gleevec, a patent the company says has been granted by more than 40 countries. That case concerns eligibility for a patent, not the compulsory licensing of an already granted patent, as in the Bayer case.
Oliver Renner, a spokesman for Bayer at its headquarters in Leverkusen, Germany, said the company was disappointed by the decision and was "evaluating our legal options to continue to defend our intellectual property."
Though multilateral agreements on patents allow compulsory licenses for drugs for public health reasons, only a handful of countries, including Brazil and Thailand, have issued such licenses, said Jamie Love, director of Knowledge Ecology International, a Washington group involved with patents and human rights. Most were for AIDS drugs, an area where drug companies have been pressed not to enforce patents.
India is only the second country, after Thailand, to grant a compulsory license to a cancer drug, Mr. Love said.
"The companies have really tried to draw the line very aggressively against cancer and other diseases being included," he said. The United States government, through trade pressure and trade agreements, has also tried to limit use of compulsory licensing.
The decision on Monday activates a provision of Indian law that has not been tested since the country started granting patents for drugs in 2005. The provision states that a compulsory license may be granted if an invention is not available to the public at a "reasonably affordable price."
In his decision, the patent controller, P. H. Kurian, said the paltry use of Nexavar in India clearly showed that the drug was unaffordable. He said a compulsory license could be granted because Bayer had not manufactured the drug in India and was treating only a tiny portion of Indians with liver or kidney cancer.
Bayer argued that the reasonableness of the price should reflect the development costs, not only the public's buying power. It also said a compulsory license was not necessary because an inexpensive version of Nexavar was already being sold in India by another generic company that has said it does not need to recognize Bayer's patent. Bayer has sued that company, Cipla, which is based in Mumbai, claiming patent infringement in a separate case that is pending.
Mr. Kurian rejected that argument, writing that Bayer was engaged in "two-facedness" by trying to fight Cipla's drug while using it as a defense against Natco.
If Mr. Kurian's ruling survives what is likely to be an appeal to the courts, other Western drugs might become vulnerable to compulsory licenses, because they typically cost more than many people in India can afford.
Leena Menghaney, a manager with Doctors Without Borders based in New Delhi, said a compulsory license could help significantly reduce the $1,800 her organization spends per patient annually to provide the AIDS drug raltegravir, which Merck sells under the brand name Isentress, to a group of patients in Mumbai.
Monday's decision is likely to have little immediate financial impact on Bayer and Onyx, because so little Nexavar is being sold in India. Global sales of the drug in 2011 were 725 million euros, or about $950 million.
Still, with sales growth slowing in the United States and Western Europe, drug companies have been looking to emerging markets like India as sources of growth.