MUMBAI: Patent regulatory authority, the Intellectual Property Appellate Board (IPAB), on Monday upheld the country’s first compulsory licence issued to Hyderabad based Natco Pharma on Bayer’s cancer drug Nexavar, setting an important legal precedent and paving the way for more generic companies to challenge patents.

“Affordability” and “access” are said to be the major reasons for the patent regulator’s decision and should clear the decks for exorbitantly priced life-saving drugs to be made at a fraction of the price by generic companies.

German multinational Bayer, which had appealed with IPAB against the compulsory licence granted last year by the Indian Patent office, told TOI that it was planning to file a writ in the Bombay High Court soon.

Rejecting Bayer’s appeal on grounds of “affordability” , it is learnt that IPAB chairman Prabha Sridevan hiked the royalty to be paid to the German company to 7% from 6% announced last year. The final order on the case is expected next week.

Under the World Trade Organization TRIPS Agreement, compulsory licences are a legally recognized means to overcome barriers in accessing affordable medicines, where a government has the option to allow a company to manufacture a patented drug without the consent of the innovator company.

The company’s application seeking approval to manufacture generic Nexavar through a compulsory licence was also cleared on similar grounds last year, bringing down its price by 97%. In March 2012, the Indian Patent Office had cleared the application of Natco Pharma to sell generic drug Nexavar, used for renal and liver cancer, at Rs 8,880 (around $175) for a 120-capsule pack for a month’s therapy. Bayer offers it for over Rs 2.8 lakh (roughly $5,500) per 120 capsules. The patent office had asked Natco to pay a 6% royalty on sales to Bayer.

The IPAB decision on Monday provides a sound legal footing to the case, experts say, as it is an independent judicial body which looks at all matters pertaining to patents in the country. The order is not only significant in terms of making crucial drugs affordable to patients but also clears the ambiguity.

India’s first compulsory licence is seen as a prospective watershed for affordable access to patented medicines by potentially opening the way for other life-saving drugs – including latest HIV drugs – now patented in India and priced out of reach.

“The decision means that the way has been paved for compulsory licences to be issued on other drugs, now patented in India and priced out of affordable reach, to be produced by generic companies and sold at a fraction of the price. The decision confirms that the Indian patent office is able to use all the means legally at its disposal to check the abuse of patents and open up access to affordable versions of patented medicines ,” said Leena Menghaney of Medecins Sans Frontieres Access Campaign.

“It seems that the judgment has considered ‘affordability,'” says Shamnad Basheer , an intellectual property expert, adding “order today lends more weight now”.

The IPAB chairman is learnt to have rejected Bayer’s appeal as it had failed to price the drug at a level that made it accessible and affordable.

When contacted, a Bayer official said; “The order of the Intellectual Property Appellate Board weakens the international patent system and endangers pharmaceutical research” and the company will pursue the case in the Bombay High Court with a writ petition.