Why did the Government of India oppose the ‘counterfeit drug’ definition proposed by IMPACT?

In July last year the ET reported that the Government, in a bid to boost the credibility of Indian generics in the international market, was proposing a new definition of what exactly constituted a counterfeit drug. This move may have been inspired by the efforts of the International Medical Products Anti-Counterfeiting Taskforce (IMPACT) to come up with a new definition of counterfeit drugs. IMPACT is an agency setup by the World Health Organization (WHO). A senior Health Ministry official was quoted as saying “It is not only innovator companies that are troubled with counterfeit drugs; generic companies also face the problem as people are involved in distributing medicine packs that look same as the brand.”

By October the ET reported that the Indian Government had rejected the definition being proposed by IMPACT because it was concerned that the definition could be used to hinder the export of the genuine generic drugs from India. The DGCI was quoted, by the ET, as saying “The government is concerned about certain words being used in the new definition of counterfeits proposed by IMPACT. We are afraid developed countries may use such a definition to stifle the growth of our generic industry”. Civil society groups shared the Government’s apprehensions since according to them the new definition would hamper the access to generic drugs.

By January the newspapers were reporting that the Indian Government scored a major victory at WHO meeting on counterfeit drugs because WHO had decided to shelf the new definition in face of opposition from developing countries spearheaded by India & Brazil. Ideally a debate on the definition of counterfeit drugs should have had public health concerns as its central focus. Interestingly the powers that are to be have articulated this debate in the language of trade barriers & survivability of export based generic drug industries. Even more interesting are the tactics used to influence this debate. Forget the definition, the very credibility of IMPACT as policy making institution itself was questioned by its critics. Allegedly the funding of IMPACT is under scrutiny since it is suspected that 8% of its funding is received from the ‘industry’ and it is also speculated that IMPACT’s high degree of co-ordination with big pharma companies may actually be causing a conflict of interest. The text of one of WHO’s resolutions makes a clear mention that 62% of IMPACT’s funding comes from the EU, while another 30% of the funding comes from WHO. Oddly its silent on the remaining 8% funding. Personally I don’t think the question of funding is such a big deal. As long as logic and reasoning are apparent in the definition it is irrelevant who paid for it. Allegations of irregularities in funding simply distract the focus from the main questions. If there is a problem with the definition it is possible to attack it with reason and logic. Another reason behind the allegations of conflict interest is the fact that IMPACT’s chair on technology – Dr. Harvery Bale is also the Director General of the International Federation of Pharmaceutical Manufacturers & Association (IFPMA). Indian company Piramal, Ranbaxy’s new owners Daiychi Sankyo & India based OPPI are all members of IFPMA which represents mainly innovator companies, all of whom are affected by counterfeit drugs. It is ridiculous to suggest that no member of IFPMA should have been involved with IMPACT. After all counterfeiting is as much their problem as the rest of the world’s and they are probably the most experienced.

Anyway enough of the conspiracy theories. It’s time to deal with the main issues. What is IMPACT? What were the issues it sought to discuss? & Why is its definition of counterfeit drugs so controversial?

What is IMPACT?

Back in 1999 a WHO report had warned that counterfeit drugs were posing an increasingly serious public health crisis. One of the most serious problems was that there was almost no global study as to the true magnitude of the problem. In 2006 the participants of theWHO International Conference on Counterfeit Drugs passed a resolution (The “Rome Resolution”) to initiate policy measures to co-ordinate action against counterfeit drugs on an international scale. One of the proposals of this resolution was to setup a dedicated body – IMPACT – consisting of governmental, non-governmental and international institutions to raise awareness about the counterfeiting menace and increase co-ordination and information sharing amongst different countries. For its part IMPACT defines itself as “a partnership comprised of all the major anti-counterfeiting players, including: international organizations, non-governmental organizations, enforcement agencies, pharmaceutical manufacturers associations and drug and regulatory authorities.” You can click over here to access IMPACT’s website.

What was the definition that IMPACT proposed?

In pursuance to WHO Resolution No: WHA 41.16, an international conference on counterfeit drugs was held in 1992. The participants of that conference, which included a large number of member countries, Interpol, the World Customs Organizations, the International Organization of Consumer Unions adopted a definition jointly formulated by the World Health Organization (WHO) and IFPMA, which is as follows:

a medicine, which is deliberately and fraudulently mislabelled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient active ingredients or with fake packaging.

In December 2008 the Secretariat of the World Health Organization introduced for the first time a new draft of a definition as proposed by IMPACT. The new definition is as follows:

The first limb of the definition, defines a counterfeit drug:

A medical product is counterfeit when there is a false representation¹ in relation to its identity² and/or source³. This applies to the product, its container or other packaging or labelling information. Counterfeiting can apply to both branded and generic products. Counterfeits may include products with correct ingredients/components⁴, with wrong ingredients/components, without active ingredients, with incorrect amounts of active ingredients, or with fake packaging.

The second limb of this definition, defines what is not a counterfeit drug:

Violations or disputes concerning patents must not be confused with counterfeiting of medical products. Medical products (whether generic or branded) that are not authorized for marketing in a given country but authorized elsewhere are not considered counterfeit. Substandard batches or quality defects or non-compliance with Good Manufacturing Practices/Good Distribution Practices in legitimate and medical products should not be confused with counterfeiting.

In addition, the first limb of the definition has four footnotes as shown above and expanded below:

1. Counterfeiting is done fraudulently and deliberately. The criminal intent and/or careless behaviour shall be considered during the legal procedures for the purposes of sanctions imposed.

2. This includes any misleading statement with respect to name, composition, strength or other elements.

3. This includes any misleading statement with respect to manufacturer, country of manufacturing, country of origin, marketing authorization holder or steps of distribution.

4. This refers to all components of a medical product.

(NOTE: There have also been some references to the use of the word ‘history’ along with ‘identity’ and ‘source’ but I have not been able to find a mention of that in any of the WHO resolutions and hence have not discussed it. Please do let me know if any of you find a mention of it anyway.)

What is so new in the new definition of a “counterfeit drug”?

1. The new definition uses the word ‘medical product’ instead of ‘medicine’. Some news reports have tried to point out that this is problematic because the initial WHA resolutions refer to only medicines. This however is not logical because a counterfeit condom can prove to be as dangerous, if not more, as a counterfeit drug.

2. Apart from that the new definition replaces the words ‘deliberately and fraudulently mislabelled’ with the words ‘false misrepresentation’. The new definition however also inserts a footnote after ‘false misrepresentation’ stating that “Counterfeiting is done fraudulently and deliberately. The criminal intent and/or careless behaviour shall be considered during the legal procedures for the purposes of sanctions imposed”. I’ll deal with this in more detail later.

3. The third change in the new definition is this next sentence: “This applies to the product, its container or other packaging or labelling information.”

Apparently points 2& 3 turned out to be the most controversial part for the Indian government and generics. I’ll deal with this below.

The second limb of the definition: How the definition actually addressed the concerns of developing countries

1. A senior government official was quoted in this news report as saying “Calling trademark violations counterfeit may also mean that if a drug is not registered in a country then it becomes a counterfeit, which is completely wrong. The drug may not be registered because it may not suit that country’s environment. This does not make it a counterfeit.” Clearly these objections seem to have been taken into count because the final draft of the definition had this: “Medical products (whether generic or branded) that are not authorized for marketing in a given country but authorized elsewhere are not considered counterfeit.” This, I think, is a major concession for as EU backed (as alleged) committee to make especially given the weak regulatory architecture in some of the developing countries.

2. There have been some news items such as this one which (way back in May, 2008 before the final draft was ready) speculated that the new definition may club ‘sub-standard’ medicines with ‘counterfeit’ medicines. This view was echoed in several other reports. However the IMPACT definition puts to rest this apprehension. The new definition clarifies that “Substandard batches or quality defects or non-compliance with Good Manufacturing Practices/Good Distribution Practices in legitimate and medical products should not be confused with counterfeiting.” This distinction has been criticised by many since it is widely thought that sub-standard drugs pose as much a problem as counterfeit drugs. Read one such critique here. In fact an expert committee constituted by the Government of India some years ago dealt with the problem of spurious/counterfeit drugs in the same breath because it reasoned that both were equally dangerous. Sub-standard drugs may in fact be even more dangerous because they may cause higher resistance levels to be triggered amongst some pathogens. In all probability IMPACT wanted to focus exclusively on counterfeiting issues without any distractions.

3. Some of you may have been following our recent posts on the secretive negotiations over the ACTA. One of the proposals of the ACTA was to classify all patent-infringing drugs as counterfeit. That is a dangerous proposal because while most patent statutes do not prescribe a criminal punishment for patent infringement almost every anti-counterfeiting statute will result in a jail term. Additionally, the EC when publishing its annual anti-counterfeiting reports was classifying even patent infringing goods as counterfeit as a result of which Switzerland accounted for 39.21% of all counterfeit drugs entering the E.U. The European Generic Association (EGA) which was involved in the IMPACT discussions came out with a brief paper stating its objections to the ACTA’s proposal. (This paper can be accessed here). It looks like the EGA managed to impact the final draft because IMPACT’s definition clearly states that “Violations or disputes concerning patents must not be confused with counterfeiting of medical products.” Imagine the victory that the developing countries could have ensured themselves if they had decided to adopt the IMPACT definition. Instead they have clearly stated their opposition to this definition thereby keeping the door wide open for the ACTA proposal.

   It is therefore quite obvious that IMPACT was listening to everybody unlike some sources which seem to hint at a biased streak within IMPACT.

What exactly was the biggest objection to IMPACT’s definition?

The biggest objection to the new definition as has been reported in news report after news report after newsreport after newsreport (this report by Sriram Iyer was extremely balanced and objective) is the possibility that the new definition would cover even trademark violations i.e. even drugs with correct ingredients but violative trademarks will be classified as counterfeit drugs. As put in one news report “This had spread fear amongst the Indian industry that if deviations were found in packaging, container and labelling, their drugs would also be deemed counterfeit even if they contained the right chemical ingredient.” The fear thus was that developed countries would use this definition as a tool to hinder the export of generic medicines from countries like India. The Indian Pharmaceutical Alliance, the SME Pharma Industries Confederation (SPIC) and several other generic drug manufacturers associations along with several NGOs have opposed the new definition because they fear that the definition will deem even trademark violations to be counterfeits. According to the critics of the definition the fact that the new definition replaces ‘deliberately and fraudulently mislabelled’ with the words ‘false misrepresentation’ apart from inserting a new line – “This applies to the product, its container or other packaging or labelling information” greatly increases the possibility of trademark violations leading to drugs being deemed counterfeit. In addition ‘identity’ is interpreted to mean “misleading statement with respect to name, composition, strength or other elements.” In the words of one critic “in the new definition, false representation of identity and source applies not only to labelling but also to the “product, its container or other packaging”; thus false representation with regard to any of those elements would make the product a “counterfeit” within the scope of the definition.

This means that a product also may be classified as counterfeit for example when the shape or color schemes of a product is similar to the competing product irrespective correct labeling information and contents. This is particularly problematic since presently the scope of trademark protection covers not only traditional trademark like words, signs or combination of both but also non-traditional trademark taste, shape, color, touch and feel, smell, etc. Thus, in this case the definition is more about protection of IP elements.”

The above are basically the reasons for opposition to IMPACT’s definition. In my opinion this is a wrong interpretation of the definition. However before proceeding any further it is first necessary to take a look at the relevant provisions in the Drugs & Cosmetic Act.

Section 17. Misbranded drugs.—For the purposes of this Chapter, a drug shall be deemed to be misbranded,—

(a) if it is so coloured, coated, powdered or polished that damage is concealed or if it is made to appear of betapeutic value than it really is; or

(b) if it is not labelled in the prescribed manner; or

(c) if its label or container or anything accompanying the drug bears any statement, design or device which makes any false claim for the drug or which is false or misleading in any particular.  

Section 17B. Spurious drugs.—For the purposes of this Chapter, a drug shall be deemed to be spurious,—

(a) if it is manufactured under a name which belongs to another drug; or

(b) if it is an imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bears upon it or upon its label or container the name of another drug unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other drug ; or

(c) if the label or container bears the name of an individual or company purporting to be the manufacturer of the drug, which individual or company is fictitious or does not exist; or

(d) if it has been substituted wholly or in part by another drug or substance; or

(e) if it purports to be the product of a manufacturer of whom it is not truly a product.

The highlighted portions of the above two provisions of law [Sec. 17(c) & Sec. 17B(e)] are very similar to the amendments proposed by IMPACT. If the new IMPACT definition can classify trademark violations as counterfeit drugs then so can the above two provisions. Both definitions use the word ‘false’ and ‘misleading’ in respect of the label or container. Additionally the S. 17 definition uses the words ‘design’ which is much more specific than the IMPACT definition. The language of Sec. 17B(e) could easily classify all drugs with trademark violations as ‘spurious drugs’. Manufacturing or selling mis-branded or spurious drugs are criminal offences carrying prison terms for 3 years and 5 years respectively. There was a proposal a couple of years to amend the 5 year limit for spurious drugs and replace it with either the death sentence or life imprisonment.

The question therefore is why is the Indian Government objecting to IMPACT’s definition when the amendments bear so many startling similarities with the definition found in our law? Is it because the Government of India does not implement its own laws or is it just a terrible case of mass hysteria? Everytime an intellectual property issue is brought up by an international organization in the context of public health we presume that there is an ‘imperialist/blood thirsty East India type corporation’ conspiring against India. The level of paronia is simply unbelievable. It is time India started acting like a responsible, confident nation before it decides to torpedo international negotiations. We could have used this opportunity to clarify certain points with the developing world before the USTR tries to spring any surprises through the ACTA. It would also be nice if the Government could start articulating its concerns in the language of public health and not in the language of the generic drug industry.

What is the actual impact of IMPACT’s definition – should it exclude references to trademark law?

To begin with I dis-agree with the presumption that principles of trademark law should not be imported into the definition of counterfeit. The principle aim of trademark law is to prevent confusion amongst consumers since it effects consumers. Principles like dilution entered trademark jurisprudence at a much later stage. When trademark law provides us with a well developed, time-tested, sophisticated jurisprudence it makes sense to borrow from trademark law instead of attempting to create an entire new branch of law. In fact I think we would be hard-pressed to find a more appropriate law to fight this menace of counterfeit drug. Lets now try to understand how this new definition would work.

Contrary to several media reports the new definition does not delete the terms “fraudulent and deliberate” when it inserts the term “false representation”. It only shifts “fraudulent and deliberate” to the footnote stating that “criminal intent shall be considered during the legal procedures for the purpose of sanctions.” At first glance it may seem that the main definition is conflicting with the footnote. The impact of inserting the words ‘false representation’ is that it probably lowers the threshold to seize counterfeit drugs. Could this pose a barrier to legitimate trade. In all probability it will not. Once the drugs are seized the normal judicial procedures will kick in to determine whether the seizure was valid and whether the drugs were indeed counterfeit.

In my limited understanding, all that the new definition does is that it reverses the burden of proof i.e. any drug making any false representation or misrepresenting any information so as to mislead the consumer will be deemed to be counterfeit and the person manufacturing the drug will be deemed to be guilty until he can prove otherwise. The ‘reversal of burden of proof’ is not an uncommon proposition in Indian law. Although a majority of our criminal laws are based on the presumption of innocence there are a few special legislations like the anti-narcotic laws, dowry harrasment laws where it is presumed that the person is guilty until he can prove otherwise. The suspect therefore has to either prove that the counterfeit drug is not counterfeit or that they were not in his possession. Although such laws may seem unreasonable such low thresholds for determining guilt are usually a reflection of society’s intolerance for particular criminal offences. It is however a moot point as to whether such an approach actually creates a greater deterrent against any possible violation of the law.

In case it is determined that the label, packaging is indeed confusing the quantum of punishment will most probably depend on whether the conclusion was reached on a question of fact, law or a mixed question of law and fact.

In conclusion I think India lost an important opportunity to clarify certain important definitions. As correctly noted by Sriram Iyer of Money Control we’ve only opened the door for greater uncertainity in the future. For those of you who have actually read till the end, my humble apologies for the length of this post.