Data exclusivity back on the table for India

D.G. Shah, Secretary General of the Indian Pharmaceutical Alliance sends us news that will be of interest to many of our readers. He says,

“… Government plans to introduce a Pesticides (Amendment) Bill in the Parliament during the current session. The Bill has a provision that not only makes India’s Intellectual Property (IP) regime TRIPS Plus but would also eliminate competition and create legal monopoly for agro-chemicals and pesticides making them unaffordable to small farmers. The Bill proposes to introduce Data Exclusivity for a period of five years. As you may be aware, MNCs and their local agents have been demanding this TRIPS Plus provision in India’s IP regime for both agro-chemicals and pharmaceuticals…” See Shah’s full note here – PDF.

While it hasn’t specifically been mentioned as such, presumably the bill referred to is an amended version of the long languishing Pesticides Management Bill, 2008. Coincidentally (or not), this is also one of two issues that ‘inside sources’ had warned Anand Sharma of earlier last month: “From inside sources it appears that PM Modi is very keen to assure the US President Barack Obama and US multinational companies (MNCs) that India will agree to the changes proposed by them. Inside sources also reveal that two issues likely to be worked upon are Data Exclusivity and Patent Linkage.” (see our post here).

This post will first give a brief introduction to Data exclusivity, its TRIPS plus nature, its history in India and finally what this development may mean for India. (Very long post ahead! – Scroll straight to the bottom if you’re only interested in the India implications)

What is Data Exclusivity:

Data exclusivity is a form of exclusivity, which prevents regulators from using the clinical trial test data that had been used to approve the originator’s product, to also approve the chemically (or otherwise) equivalent generic product. This means that if the generic company wants to get regulatory approval during the period of data exclusivity (generally 5-10 years), it needs to duplicate the expenses and time taken to take its product through clinical trials. If the period of data exclusivity completely overlaps with the patent duration, there is usually no substantial effect as the patent would anyway prevent generics from releasing the product. However, off-patent or non-patented products can also be granted data exclusivity – in which case they would enjoy 5-10 years of exclusivity. Data-exclusivity rights are also not necessarily ‘bound’ by the same exceptions and flexibilities that patent rights are.

TRIPS Plus requirement:

Article 39.3 is the relevant TRIPS provision to be looking at here. It states:

“Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.”

While many IP-maximalists, (including the EU in its EU-India FTA negotiations, and USTR in its Indo-US negotiations) have tried arguing that this provision of TRIPS mandates data exclusivty, this is clearly a flawed position. As the negotiating history of TRIPS shows (Reichman, Undisclosed Clinical Trial Data Under the TRIPS Agreement and Its Progeny), at least two proposals explicitly requiring data exclusivity were made, and removed before the final draft – showing a clear intention by the negotiators to not mandate an interpretation of data exclusivity. Rather, as Charles Clift states here, most observers view Article 39.3 as being about data protection. Clift writes,

“Article 39(3) does not create new property rights, nor a right to prevent reliance on the test data submitted by an originator for the marketing approval of an equivalent product by a third party, except where unfair commercial practices are involved. The article is an articulation of widely accepted legal precepts regarding trade secrets and unfair competition, not an invitation to create a new intellectual property right for test data.”

While Prof Correa and others have interpreted Art.39(3) to be one of where the regulator simply has to ensure ‘non-disclosure’ of test data to other private players but can rely on originator data to give regulatory approval (see here), others such as Prof Basheer (see here) and CPTech (now KEI – see here) have proposed compensatory liability or cost-sharing methods of preventing ‘unfair commercial use’, rather than the much more restrictive and negative-externality filled data exclusivity approach.

India’s history with Data-exclusivity:

In a fantastically researched post earlier Prashant took us through the history of data exclusivity in India. For this post, I’ll reproduce the bare bones of that post.

The Satwant Reddy Committee Report in 2007, recommended that data exclusivity not be required for pharmaceutical products but that agro-chemicals be given a three year data exclusivity protection by way of amending the Insecticides Act, 1968. This recommendation was based not on a reading of TRIPS but on a ‘broad industry consensus’.  The resultant bill, the Pesticides Management Bill, 2008 introduced data exclusivity through the following provision:

Section 12: (6) The data submitted for the purpose of registration in respect of a pesticide under this section which has not been previously registered shall not be relied upon for grant of registration of the same pesticide in respect of any other person for a period of three years.

(7) Subject to sub-section (6), where a pesticide has been granted a patent, the period of non-reliance on data shall be limited to the period of the patent.

Explanation.. The words “not been previously registered” in respect of a pesticide shall include its name or label expansion through “new uses”:
Provided that the provisions of non-reliance on data submitted for registration of a pesticide by the first registrant shall be available for the period with effect from the date of the first marketing approval granted anywhere in the world and this shall not apply to the data relating to bio-efficacy and shelf-life part of pesticides where data is to be generated for use under Indian conditions.
(8) Subject to the provisions of sub-section (6), the Central Government may relax or exempt the provision of non-reliance of data submitted for registration of a pesticide by the first registrant in the following circumstances, namely:.
(i) (a)national exigency; or
(b) in cases of urgency; or
(c) public interest; or
(ii) for use by the Government for academic and research purposes

The Parliamentary Standing Committee then, in Feb 2009, submitted their report with the recommendation that this period be extended to 5 years, on an evidence-lacking mere sentence to the effect that 5 years would encourage the introduction of newer pesticide molecules in the country.

Interestingly, as this ET article points out, the BJP opposed the Bill then, stating: “certain clauses had been inserted in it under pressure from the West and were inimical to the country’s interests.” and “Under the data exclusivity provision , the researcher’s data will be his monopoly, and no one else in the world would be allowed to have control over it. “Monopoly can also lead to exploitation, and a hike in the prices of pesticides. Such a clause will have dangerous consequences for the developing countries such as India,” a senior leader argued.”

As DG Shah also points out, the Parliamentary Standing Committee observed in its 88th report that the consequences of data exclusivity are quite serious and strongly recommended “the Government should not fall prey to such demands of MNCs. The Government must thwart such attempts, being made at the behest of certain vested interests. It should guard against moves to enter into FTA with USA, as the developed countries, particularly the USA, are trying to bring in certain TRIPS Plus measures through Bilateral and Regional Agreements.”

While the bill was lying pending though, the executive branch of the Government passed 2 notifications [(i)No.17-2/2006-PP.I dated 30th October, 2007 and (ii)F.No.17-2/2006-PP.I dated 18th February, 2008)] implementing data exclusivity under the Insecticides Act. However, in a complicated case where a company, Syngenta tried to enforce this though, Justice Ravindra Bhat of the Delhi High Court noted that an essential legislative function cannot be subsumed within rulemaking powers of the government.

Implications for India now:

It would seem then that an updated version of this Pesticides Management Bill is the one being referred to in DG Shah’s letter. For starters, that this long languishing bill is coming back into consideration by the same party that initially opposed it, may be an indication that there is weight to the concern that the present government is willing to do what it takes to ‘assure’ US / EU of its ‘good intentions’ – regardless of what it means for the country. If indeed this is the case, then it we should see some action on the patent-linkage front soon as well – which is more cause for worry.

Secondly, and more directly, there needs to be a strong call for empirical data based policy. If the claim is that data exclusivity would result bringing more chemical products to the market, or that it would result in increased foreign direct investment – then data must be made available to show this is true in the first place. As Shamnad has discussed in his post here – it is unlikely that such a provision would do anything more than help foreign countries receive more money, while not giving the claimed benefit to the host country. Let’s not forget the time where Indian generic companies were (intentionally?) completely misquoted to appear as though they were supporting data exclusivity when in fact they were doing the opposite – see our post here.

On a broader note, we certainly do have regulatory issues that need to be fixed, and incentive mechanisms that may need to be changed, but if that is the issue, then let us focus on that, rather than this pseudo proxy mechanism which seems to be based in rhetoric and lobbying, rather than empirical evidence.

And finally – while the so called benefits seem to be evidence-less, there are negative consequences that will most definitely take place with the introduction of such a provision:

• It extends monopoly periods of products and keeps products inaccessible. Relevantly, as per DG Shah’s note (above) in 70 of the 92 products approved in EU from 2007-2009, the data exclusivity period extended beyond the patent period.
• It provides a stepping stone for other multinational pharmaceuticals to start demanding data exclusivity for pharmaceutical products – which will in turn make medicines harder to access in terms of when they are available as well as how much they cost.
• Signal to IP maximalist lobbyists and countries that India is willing to back down from its hitherto well defended stance of ensuring a balanced IP regime contextualised for its own populace – and ready to start giving in to foreign multinational companies’ demands instead.