The Indian government will allow a local company to manufacture a generic version of the cancer drug Nexevar, which is currently patented by Bayer.

The government's ruling is based on a trade law that gives the government power to allow the manufacturing of generic versions of otherwise unaffordable drugs. It enables Natco Pharma to create a version of Nexevar that will cost $176 for 120 tablets. Bayer was charging about $5,600 for the same amount.

The government action is significant for many reasons, most notably in that it represents the first time in India a company has been granted a "compulsory license" to manufacture and sell a patented drug. Under the agreement, Bayer will receive 6 percent in royalties from Natco Pharma.

From a BBC report:

A spokesman for Natco Pharma said that the drug, used to treat kidney and liver cancer, was needed by about 8,800 cancer patients in India.

"This is a victory for Indian patients and for India's generic manufacturers, which are under attack,'' said Madineedi Adinarayana, general manager of Natco Pharma.

He said "many more such cases will follow".

Between 2011 and 2012, many drug makers will lose patent protection on their best-selling products, opening up the market to cheaper copy-cat drugs made in countries such as India and China.

They include drugs such as Lipitor, an anti-cholesterol pill manufactured by the world's largest drug maker, Pfizer.

Bayer, which generates about $40 billion in revenue annually, opposed the policy. ""We are disappointed about this decision,'' Bayer spokeswoman Sabina Cusimano told the the Associated Press. "We will see if we can further defend our intellectual property rights in India."

Reuters reported on the potential impact the ruling could have on the affordability of drugs used for HIV and AIDS.

India's move to strip German drugmaker Bayer of its exclusive rights to a cancer drug has set a precedent that could extend to other treatments, including modern HIV/AIDS drugs, in a major blow to global pharmaceutical firms, experts say.

On Monday, the Indian Patent Office effectively ended Bayer's monopoly for its Nexavar drug and issued its first-ever compulsory license allowing local generic maker Natco Pharma to make and sell the drug cheaply in India.

It is only the second time a nation has issued a compulsory license for a cancer drug after Thailand did so on four drugs between 2006 and 2008, also on affordability grounds. Thailand also issued licenses for HIV/AIDS and heart disease treatments.

"This could well be the first of many compulsory rulings here," said Gopakumar G. Nair, head of patent law firm Gopakumar Nair Associates and former president of the Indian Drug Manufacturers' Association.