Data Exclusivity

Article 300A of the Constitution: A constitutional right to ‘data exclusivity’?


A. Introduction: Over the last few weeks there have been an increasing number of media reports on the Free Trade Agreement (FTA) that is being negotiated by the governments of the European Union and India. While there are several hurdles that are yet to be cleared before the signing of this Treaty that is expected to bring huge trade benefits to both countries, the focus in the recent past seems to be on the IP-related provisions that are allegedly going to affect the thriving generic pharmaceutical industry in India. In particular, generic industry lobbies like the Indian Drug Manufacturer Association, Non-Governmental Organizations like MSF are pressing the government to be wary against any attempt to include data-exclusivity provisions in the FTA, as the same, in their opinion, is not mandated by TRIPs.

A data exclusivity provision would prohibit generic pharmaceutical companies from depending on the clinical data submitted by innovator pharmaceutical companies to receive marketing approval for their product. The Drugs and Cosmetics Rules, 1945 currently allows for generic pharmaceutical companies to depend on clinical trial data submitted by innovator companies instead of requiring generic pharmaceutical companies to execute their own clinical trials. If generic pharmaceutical companies were required to carry out their own clinical trials, the cost of their product would likely increase, since clinical trials are usually an expensive affair. The only data required to be submitted by generic pharmaceutical companies is a bio-equivalence report, establishing that the generic drugs demonstrates biological activity i.e. similar to the original innovator drug. Therefore when the law mandates the innovator pharmaceutical company to submit expensive clinical data which will then be used by other generic pharmaceutical companies, for their marketing approvals, it is in a sense acquiring the ‘clinical trial data’ (property) of the innovator company for a ‘public purpose’.

Before I continue I would like to clarify that the aim of this post is not to examine whether data exclusivity/protection is required by TRIPs. Instead this post aims to examine a hypothetical scenario wherein an innovator company challenges certain provisions of the Drugs and Cosmetics Act & Rules, on the basis of Article 300A of the Constitution of India, in order to protect the clinical trial data submitted by them to the regulator. I am sure that many of our readers will dis-agree with most of what I have to say – I only request that any such criticism remains constructive and in good humour.

B. A brief history of property rights in Independent India: The history of property rights in India is way too complicated for me to provide for a detailed account herein. I’ll instead just aim for a very brief summary of the same.

When independent India first adopted its Constitution, the Right to Property, as enshrined in Article 19(1)(f), was a fundamental right and therefore placed at a high pedestal. Article 19(1)(f) had to be read along with Article 31 of the Constitution in order to prevent the Government from depriving a person of his property without the “authority of the law” and further that such law should provide “for compensation for the property taken possession of or acquired and either fixes the amount of compensation, or specifies the principles on which, and the manner in which, the compensation is to be determined and give”.

Both Article 19(1)(f) and Article 31 proved to be a substantial headache to the Indian Government, as these provisions made it very difficult for the Government to proceed with its socialist agenda of land reforms and nationalization schemes, as the Government simply could not afford to pay reasonable compensation for the lands and corporations acquired by it. Initially the Congress Party which was in power at the Centre aimed at maintaining the legality of its action by introducing new provisions such as Article 31A,B & C along with Schedule IX to the Constitution to protect, from judicial review, all those legislations which offended the fundamental rights enshrined in Part III of the Constitution. At last count there were at least 285 legislations, most of them land reform legislations, locked up under the safety of Schedule IX.

In 1977, the grand coalition of the Janata Party, had just wiped out the Congress Party, in the elections held after the lifting of the internal emergency imposed by then Prime Minister Indira Gandhi in the year 1975. A year later in 1978, the Janata Party passed the 44th Amendment to the Constitution of India. As a part of these Amendments both Article 19(1)(f) & Article 31 were deleted from the Constitution. Article 31 however was only party deleted in the sense that Article 31(1) which provided that “no person shall be deprived of his property, save by the authority of the law” was transferred out of the fundamental rights chapter and shifted to Chapter IV of Part XII, in the form of Article 300A.

Article 300A now reads as follows: Article 300A. Persons not to be deprived of property save by authority of law.- No person shall be deprived of his property save by authority of law.
The constitution of India can be accessed here.
This amendment had two immediate implications:
(i) The Right to Property would now be a Constitutional Right and not a Fundamental Right. A legislation violating the constitutional right to property could now be challenged only in High Courts and not directly in the Supreme Court.
(ii)Due to the deletion of Article 31 the Government was no longer under an obligation to compensate persons whose land had been acquired as per a law passed by Parliament.

As of now, it is, beyond the scope of my research and understanding as to whether Proposition (ii) i.e. deprivation of property without compensation is still legally tenable especially in light of the Supreme Court’s ruling, in the Maneka Gandhi case, which held that each and every provision of the Constitution had to be interpreted in a just, fair and reasonable manner. Therefore any law depriving a person of his property shall have to do so in a reasonable manner. It could be argued that the only reasonable manner to deprive a person of his property would be to offer him, reasonable compensation for the same. This discussion however is not completely relevant for the purpose of this post. The only relevant point is the fact that under the Constitution no person can be deprived of their property without the authority of law.

The two relevant concepts that now require to be examined are (i) ‘property‘ & (ii) ‘authority by law‘.

C. ‘Property’ as understood in Article 300A: The obvious first question is as to whether or not ‘intellectual property’ such as ‘clinical trial data’ would fall within the definition of ‘property’ as understood in Article 300A. There seems to be enough authority to support the proposition that ‘property’ as understood in Article 300A is wider than just ‘immovable property’. One such authority in the context of ‘intellectual property rights’ is the judgment of the Supreme Court in the case of Entertainment Network India Ltd. (ENIL) v. Super Cassette Industries Ltd. (SCIL). In pertinent part the Court held the following:

The ownership of any copyright like ownership of any other property must be considered having regard to the principles contained in Article 19(1)(g) read with Article 300A of the Constitution, besides, the human rights on property.

The judgment goes on further to say that:

But the right of property is no longer a fundamental right. It will be subject to reasonable restrictions. In terms of Article 300A of the Constitution, it may be subject to the conditions laid down therein, namely, it may be wholly or in part acquired in public interest and on payment of reasonable compensation.

The fact that the Supreme Court recognizes ‘copyright’ to fall within Article 300A is indicative that even ‘clinical trial data’, collected after extensive experimenting, should in all likelihood fall within the definition of ‘property’ as understood in Article 300A.

D. ‘Authority by law’ as understood in Article 300A: The term ‘law’ as defined in Article 300A is understood to mean only a legislation or a statutory rule or order. The term ‘law’ as understood by Article 300A will not include executive fiats. The source of the ‘law’ depriving a person of his property has to be necessarily traced, through a statute, to the legislature. The question therefore is whether the relevant provisions of the Drugs and Cosmetics Rules, 1945 qualify as ‘law’ for the purpose of Article 300A or whether the same would be struck down as having no basis in the Act:

(i) The relevant provisions of the Drugs & Cosmetics Rules, 1945: I’ve always been slightly intrigued by the weak regulatory architecture of the Drugs and Cosmetics Act, 1940 since it has left the bulk of the regulation, especially essential policies pertaining to clinical trials etc., to the vagaries of delegated legislation i.e. the Drugs & Cosmetics Rules, 1945. The relevant provisions on the nature of data that is needed to be submitted for regulatory approval is laid out in the following Rules and Schedules:

(a) Rule 122 E – Definition of ‘new drug’: Any drug which has not been used within the territory of India for any significant extent under the conditions prescribed by the Act shall be deemed to be a ‘new drug’ for a period of 4 years after its approval by the relevant authority, which is now the DCGI/CDSCO.

(b) Schedule Y, Appendix 1 to the D & C Rules, 1945 (approval for new drugs) – These provisions prescribe the data that is to be submitted to the DCGI along with the application to manufacture a ‘new drug’. The clinical data that is required is as follows:
(i)Phase 1 & Phase 2 – Clinical Trial studies;
(ii) Phase III – Confirmatory Clinical Trial studies, which involves large scale testing on human beings (These studies would include mandatory Phase III trials on at least 100 Indian patients in India);
These requirements however are significantly diluted by the first proviso to Rule 122(B)(3) and Rule 122(A)(2), which states that local clinical trials need not be conducted if in case the Licensing Authority so decides to waive the requirement in light of tests carried out in foreign countries.

(c) Schedule Y, Appendix 1A (Approval for generic drugs) – These provisions prescribe the data that is to be submitted to the DCGI along with the application to manufacture a ‘new drug’ already approved for manufacture in India. Not surprisingly these provisions do not require the submission of any ‘clinical studies’ – the only requirement is that the application be accompanied by bio-equivalence studies along with sub-acute animal toxicity studies for intravenous infusions and injectables. Bio-equivalence studies are a relatively inexpensive affair and are aimed at establishing that the biological efficacy and safety of the generic drug in relation to the innovator drug. These studies save generic manufacturers the cost of executing expensive clinical trials and are in fact the primary reason for the low cost of generic drugs.

The long and short of this provision is that the approving authority of the Central Government, in effect depends, on clinical trial data submitted by the innovator company for the first approval of its new drug product. In a sense the Government ‘acquires’ the data for a ‘public purpose’ in a manner which directly affects the business of the innovator company.

Most importantly however this dependence on the innovator’s data is not mandated by the Act but instead by the Rules, which are delegated legislation.

(ii) Do ‘the relevant provisions’ of the D & C Rules, 1945, fall within the definition of ‘law’ as understood in Article 300A?

There is enough authority to support the proposition that Statutory Rules & Orders would fall within the definition of ‘law’ as understood in the context of Article 300A. For example an Order made under the procedure laid down by the Land Acquisition Act would qualify as ‘law’ for the purpose of Article 300A since it has been promulgated under the procedure prescribed by the Act. The ‘relevant provisions’ of the D & C Rules, 1945, that have been discussed above, may not qualify as ‘law’ since such delegated legislation, in my opinon, is beyond the scope of the Act.

As discussed by a Seven Judge Bench of the Supreme Court in the In Re Delhi Laws case, delegated legislation is permissible, to the extent that it does not allow for the delegation of an essential legislative function i.e. a question of policy cannot be delegated. The decision to ‘acquire’ valuable property, i.e. expensive clinical data, for a public purpose is an essential function which can be carried out only through an Act of the legislature. At the time when the United States of America decided to curtail the data exclusivity period of innovators drugs from perpetuity to 5 years it had to do so through a legislative action which was known as the Hatch-Waxman Act and not through FDA regulations.

Moreover each and every rule that is formulated in the guise of delegated legislation has to find its source in the Parent Statute. In the present case I have, either rightly or wrongly, not be been able to locate the source of these ‘relevant provisions’ in the Drugs and Cosmetics Act. While it is true that the Act provides the Central Government with a mandate to regulate the manufacture of drugs, it does not provide the Government with the power to deprive a person of his property.

It would therefore be difficult for the Government to defend these provisions on the basis of Article 300A of the Constitution.

Having said that, I would also like to clarify that the rights under Article 300A are always capable of being restricted by Parliament. It would thus be completely legal for Parliament to pass an amendment expressly allowing for generic companies to depend on the clinical data submitted by the innovator company, provided the innovator is reasonably compensated for sharing the same.

Conclusion: While I’m aware that this post may come across as a mindless academic fantasy, I am half convinced that if the ‘relevant provisions’ of the Drugs and Cosmetics Rule, 1945 were to be challenged, before a Court of Law, they would be struck down therefore allowing innovator companies to have de facto data exclusivity in perpetuity, until Parliament states otherwise through a legislation.

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Prashant Reddy

Prashant Reddy

T. Prashant Reddy graduated from the National Law School of India University, Bangalore, with a B.A.LLB (Hons.) degree in 2008. He later graduated with a LLM degree (Law, Science & Technology) from the Stanford Law School in 2013. Prashant has worked with law firms in Delhi and in academia in India and Singapore. He is also co-author of the book Create, Copy, Disrupt: India's Intellectual Property Dilemmas (OUP). He has recently been appointed as an Assistant Professor at NALSAR, Hyderabad, starting September 1, 2017.

10 comments.

  1. mnbvcxzaq1

    its a “mindless academic fantasy” in NO way. i largely agree with your analysis of the property aspect involved in data exclusivity (which is linked eventually to the patent-linkage and ultimately to the compliance/non-compliance with article 39.3 of trips, too). however, in my view, your property-angled analysis of data exclusivity issue underscores my advocacy for an ‘indianized’ data exclusivity regime, albeit with a very short exclusivity period, say 2-3 years) for the pharma industry. all of this has a serius implication for the patent linkage issue. shamnad’s borrowal/adaptation of the CL model (from reichman, dunca, etc.) and also his Notification Scheme can only partly solve the complex problem of patent linkage n data exclusivity. i have a full-fledged theory on this; however,it cannot be fully discussed here in the ‘comments’ section.
    -aditya kant

    Reply
  2. VC

    Hi Prashant good attempt but sincerely felt there is some missing links. However, still would like to congrats you for making such jurisprudential attempt. You reminded me of my college days when we used to have extensive discussions with our Vice-Chancellor Prof. N.L. Mitra on PROPERTY. It was his favorite topic of discussion.

    Reply
  3. Anonymous

    VC…
    can you please guide us / give clues on what are the missing links in PR’s article….?

    This article is a new thought area for us and we would appreciate all guidance from you folks!

    Reply
  4. Yogi

    Hi Prashant,
    Aren’t you are assuming that clinical trial data has some inherent “property” status? I think it’s still open to intense debate if trade secrets qualify as “property” under Article 300A. A misappropriation regime of trade secrets cannot be ideally fixed into the traditional understanding of IP as property (much unlike copyrights, patents). A regime based on the precepts of “unfair competition” fails to qualify in its essential characteristics as “property”- the reason why they are verily treated under principles of unfair competition. The closest US SC judgment in support of your claims is Ruckelshaus v. Monsanto Co. However, I doubt if it can have any rational basis for justifying property status in clinical trial data in India. Few scholars have even thought of this judgment to be far fetching.

    Reply
  5. J. Sai Deepak

    Hi Prashant,
    Great Post! Since we are on Art.300A, i thought this study prepared by the Late Justice Anand Mohan Bhattacharya might be of interest. This was prepared by a group of judges when Justice Bhattacharya was teaching at NLS (probably when Prof.Mitra was the vice-chancellor). This study apparently concluded that right to property had been cemented further by making it a constitutional right as opposed to a fundamental right. I am trying to get a copy of it, but if you have one, do let me know.

    Bests,
    Sai.

    Reply
  6. VC

    Dear Anon,

    Though I am not that learned person to add much to jurisprudential reasoning of PROPERTY but still will give a try to add some input, may be in coming days as I need sometime to refresh my college days memories discussing property jurisprudence with Prof. N.L. Mitra. I still remember those extensive discussions on topics such as Is intellectual property a property? Why IPR not IP? What is property? And so on.

    I personally think that analysis on “clinical trial data” as property is incomplete without scrutinizing with jurisprudential attributes of property, that is, (1) tangibilization, (2) scarcity, and (3) utility. Almost all IP laws are originated from these attributes of property but still failed to meet absolute definition of property (particularly aspect of right in rem). Surely I will love to contribute more on intellectual property jurisprudence in coming days.

    As far as data exclusivity is concerned, they are designed to protect investment rather than innovation which creates jurisprudential complexity defining “data exclusivity” as intellectual property (and possibly property too). In fact, data exclusivity is backed by absolute economic incentive theory rather any legal property theory.

    Reply
  7. Prashant Reddy

    @Mr. Kant – Thank you for your comments. I however did not understand your point on how data exclusivity is linked up to patent linkage?

    In my opinion data exclusivity is within the sole domain of the Drug Regulatory Authority and has no linkage whatsoever to the Patent Status of the drugs. In fact this is what makes data exclusivity a much more reliable option for pharma companies especially since there are several inventions which although not patentable are still required to be tested through expensive clinical trials.

    @ VC – Thank you for your comments and encouragement. I remember Prof. Mitra teaching me banking law, he was quite passionate about that too. In regards the ‘missing links’ could you please elaborate on the same – I would like to fill them in.

    @Yogi – Thank you for your comments and its good to see you back in action on the blog 🙂

    Firstly I disagree with the notion that clinical trial data qualify for trade secrets for the simple reason that a large portion of these clinical trials are required to be published in peer-reviewed journals before regulatory approval is granted.

    Secondly we will have to understand the definition of ‘property’ in the context of precedents of the Indian Supreme Court. This alone can be a subject of an independent papers. However even if we were to go by classical definition of property I don’t see why clinical data should not qualify as data. When man mixes his labour with nature’s resources, the result is his property which he is entitled to protect. If he were not given such protection he would be a victim of the ‘tragedy of commons’. In any case I’m aware that this is a over-simplistic definition and we should probably dig-up the SC position on this.

    @ Sai Deepak: Thanks man! Good spotting. I’ll try and contact someone at NLS and see if we can get ourself a copy of that report. I’ll keep you updated on that.

    I also heard some years ago that there is currently an attempt in the Bombay High Court to strike down the 44th Constitutional Amendment as unconstitutional since it violates the basic structure doctrine that was laid down in the Keshavananda Bharti.

    Warm Regards,
    Prashant

    Reply
  8. mnbvcxzaq1

    i agree with u on your view on de-pl issue in the first clause of the first sentence of the second para of your comment. however i slightly disagree with the second clause thereof. true that your statement faithfully reflects the current indian state-of-affairs & jurisprudence on the issue, yet i find it a lil inequitable towards the innovators. in my theory, i ve tried to balance the equities from a very non-partisan angle. its neither pro-india/generics, nor its pro-innovator/west/mnc. in my view, there is a nexus between the ‘de’ and ‘pl’ concepts, esp. in india. the nexus is through the use of confidential (mainly efficacy) data of the innovators by the generics for applying/getting the regulatory approval of dcga. whether a certain regime allows de or disallows it, in both scenarios, the policy materially affects the outcome – i.e. if de is allowed, then generics’ entry will be delayed (the duration of delay will depend on the period of de); n if de is not allowed, the generics’ entry is substantially facilitated (n it involves complex question of bolar provision, article 39.3 of trips n interpretation of the term ‘unfair commercial use’, etc.).
    lastly, viewing things from this perspective, i dont have any objection to your comment’s second sentence of the second para. i wish i cud ve been able to enter into a detailed discussion here, but ‘comments’ is not the appropriate place for such discussions, i guess. yet, i ve tried to share my basic views in these two comments of mine.
    -aditya kant

    Reply
  9. SURABHI

    Hi Prasant,
    I am convinced with your analysis and interpretation. Drugs and Cosmetics act is incomplete in many aspects, and gaps are filled by rule making power of delegated authorities and the same is affirmed by Supreme Court, treating the same as inherent power of government. But, acquisition of property including data exclusivity is no way covered under the objective of Drugs and Cosmetics act, therefore, ultravires to parent act as held in Re Delhi Law case.

    Reply

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