India’s Patent Office has ruled that Bayer must license the intellectual property behind its kidney and liver cancer drug Nexavar to Natco Pharma, which will make an inexpensive generic version of the drug for the Indian market.

The compulsory license is the first to be issued on a patented drug in India and raises the possibility that governments in other developing nations may begin to override other patents for costly but life-saving therapies they deem essential to national health. Such a trend could undercut the value of emerging markets for drugmakers even as they look to the same markets for growth.

“The drug is exorbitantly priced and out of reach of most of the people,” said India’s controller general of patents, designs, and trademarks in its ruling, which turned on provisions in multilateral international trade agreements to support its conclusions.

Natco said it was pleased with the ruling, which will allow it to sell the drug for no more than about $176 per month instead of the much higher price Bayer has charged in India, reported to be approximately $5,500 per month. Under the terms of the license, Natco will pay Bayer a mandatory royalty of 6 percent of its net sales of the drug each quarter and, like Bayer, will supply the drug free of cost to many patients unable to afford it. It will, for now, be the only Indian company licensed to produce generic Nexavar, and will retain its license until Bayer’s Indian patent on the drug expires in 2021.

The U.S. trade group PhRMA called issuance of compulsory licenses an inappropriate tool. “Legitimate health emergencies that require making exceptions to intellectual property rights can and should be accommodated under the international framework, but only after exhausting all other efforts and under extraordinary circumstances,” says John Castellani, the group’s president and CEO.

“If countries begin to routinely use compulsory licensing, we could see a ‘race to the bottom’ in which governments in the developing world walk away from their responsibility to support research and innovation in public health,” he says.

India joins Thailand and Brazil as part of the small group of nations that have enacted compulsory licensing on drugs for public health reasons thus far, according to Knowledge Ecology International. “Today the Indian government took a first step toward protecting its public from high prices on patented drugs,” says James Love, the group’s director.

Bayer is expected to appeal the decision in the Supreme Court in India. The high court is expected to rule shortly in another major controversy involving the patent office and Novartis, which is seeking a patent on the cancer therapy Glivec.