The India-US bilateral talks starting tomorrow could mean renewed scrutiny of India’s IP regime and a letter from the Chairman and ranking members of the Ways and Means and Finance Committees to Secretary of State, John Kerry and Secretary of Finance, Penny Pritzker seeks to ensure that there is ample pressure on the Indian government to modify our laws to reflect the ‘right’ kind of policy. Highlighting the opportunities presented by a 1.2 billion member strong free market, this letter (authored by Paul Ryan, among others) reminds the Secretaries that “insufficient respect for and enforcement of patents, most notably related to biopharmaceuticals is also a perennial area of concern for US rights-holders.” The Indian Pharmaceutical Alliance responded with a letter to Minister of Commerce & Industry, Nirmala Sitharaman urging the government to take a firm stand in support of India’s present policy in relation to two issues – data exclusivity and patent linkages. While the IPA is prompting the government to take a strong position backing India’s IP laws, some are even now asking the government to push to US to take a look at their own position. CIS recently wrote an open letter asking India to push the US to ratify the much celebrated Marrakesh treaty (to help provide access to the print disabled), as well as to remove pressure on India to withdraw from any TPP talks. A timeline of the government’s changing stand on the issue and a list of submissions on the draft IP policy can be read here.
Though the Joint Statement on the First US-India Strategic and Commercial Dialogue did not mention IP, these points are worth debating in light of the imminent release of the final draft of India’s IP policy. In Part I of this post, I examine the arguments made on data exclusivity and Part II, on patent linkages.
See Swaraj’s fantastic discussion on this issue and how data exclusivity might be on the table in proposed changes to the law.
Before any drug can enter a market, it must be shown to pass minimum safety and efficacy standards set by drug regulators. For new drugs, this requires the investment heavy task of conducting clinical trials to demonstrate that the drug actually does what it claims to do and that it is not harmful for human use. Once this test data is available with regulators, later entrants into the market, i.e., generic manufacturers of the drug, do not need to conduct fresh clinical trials of their own, but rather, must simply demonstrate that their drug is ‘bioequivalent’ to the drug that has already been cleared by the regulator. This is not remarkable, since requiring fresh trials would be clearly inefficient and by driving up costs of a public good, against public interest. However, originator drug companies have argued (successfully in some jurisdictions) for the right to foreclose generics from referencing this test data in their drug regulatory applications on the basis that it is an act of free-riding on the originator company’s sizeable investment in the clinical trials process. Thus, the US and EU have introduced ‘data exclusivity’ provisions in law that ban drug regulators from considering originator clinical trial data in subsequent drug clearance applications by generics for a certain time period. As generics, unlike originator companies, are not designed for capital intensive activities and thus, can almost never conduct trials themselves, this effectively prevents generic entry into the market till the time that the data exclusivity period expires.
TRIPS on data exclusivity
Article 39.3 of TRIPS states:
“3. 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.”
The contours of the substantive obligation contained in the two phrases “shall protect” and “unfair commercial use” has been the subject of considerable debate. While the US and EU have advocated the position that this requires data exclusivity laws, the global South has been of the view that only means that regulators cannot disclose this data to generics and that use of this data by regulators as opposed to generics (say, in research) cannot be described as unfair commercial use. Rather, they argue that only the use of data obtained through dishonest commercial practices or disclosure of this data by regulators would fall foul of the TRIPS standard. The House of Lords has agreed with this latter interpretation in SmithKline & French Laboratories v. Licensing Authority  1 All. E. R. 578.
As Swaraj argues, proposals to introduce an explicit data exclusivity provision were shot down at the TRIPS negotiation. Moreover, it must be remembered that TRIPS is a minimum standards agreement that, read with the Doha Declaration, allows considerable flexibility to countries to interpret its provisions in a manner that balances the interests of public health. Thus, any ambiguity must be interpreted in a manner that gives effect to the larger objects of the agreement being “social and economic welfare” (Article 7) and “public interest in sectors of vital importance to their socio-economic and technological development” (Article 8). Article 30 of TRIPS is also widely read as permitting the Bolar or experimental use exception which allows the use of limited use patented products for clinical testing mandated by drug regulatory agencies. Read in that light, I submit that the position of the developing countries and adopted by the House of Lords is more harmonious reading of TRIPS as a whole.
The Indian Patent Act, 1970 does not contain any data exclusivity rights. In its letter, the IPA strongly reminds the Minister that TRIPS only obligates the protection of ‘undisclosed test data’ and that no provision of Indian law permits the Central Drugs Standards Organisation or the Drugs Controller General of India (DCGI) to disclose this information to generic manufacturers. They cite the report of the WHO Commission on Intellectual Property Rights, Innovation and Public Health which unequivocally opposes the introduction of data exclusivity in developing countries with “markets with a limited ability to pay and little innovative capacity” to support their position.
In Syngenta India Ltd v. Union Of India the Delhi High Court categorically noted the absence of any statutory mandate for data exclusivity. However, the Satwant Reddy Committee, set up in 2007 to review India’s compliance with Article 39.3, though endorsing the view that data exclusivity is not mandated by TRIPS and noting that trade secrets laws were sufficient to fulfil India’s TRIPS obligations, suggested its introduction in phases. In particular, it advocated the immediate implementation of data exclusivity for agro chemicals and traditional medicines in the interest of forcing local trials of these products since they were believed to be sensitive to differences in population and local climate.
Reviewing the debate
Arguments for and against data exclusivity have been around whether this measure is necessary to incentivize pharmaceutical innovation. While those supporting the regime prioritize returns to originator companies for their investment in clinical trials, public health advocates have highlighted the dangers in delaying generic entry into the market. A study analyzing 140 medicines used in treating chronic diseases in Jordan found that at least 16 % had no competition from generics and that “originator companies were relying mainly on the use of data exclusivity instead of patents to preclude generic competition.” This highlights the real danger that data exclusivity could subvert the careful balancing of public interest with the profitability of innovation encapsulated in the patent system.
In the Indian context, the debate takes on a third global dimension as clinical trials in Indian are mostly in the form of bridge trials. Since the invention of new drugs in India itself is an exception rather than the norm, most drugs introduced in India, even by originator companies, need only conduct small-scale Phase III clinical trials to demonstrate that the drugs do not have a detrimental impact on Indians. This is because these drugs are likely to have cleared elaborate clinical trial standards in the foreign country where they were developed and first introduced. Thus, the introduction of data exclusivity in India can have the effect of passing on clinical testing costs in foreign jurisdictions (that reflect costs that are commensurate with developed world contexts) to Indian patients through monopoly driven pricing. Moreover, branded drug companies have been forced to enter into voluntary licensing agreements with generics in the face of increasing challenges to the strength of their patents. Though these have been problematic, they have led to controls on drug pricing. The introduction of data exclusivity driven monopolies would remove any pricing pressures (whether by licensing arrangements with generics or by forcing more reasonable prices of branded drugs) currently forcing Big pharma to rethink their pricing strategies in the developing world, or even worse, incentivise the side-stepping of the patent system itself.
In the wake of a brazen but unremarkable 5500% increase in the price of a vital drug used in cancer and AIDS treatment, the perils of a pharmaceutical policy that is shaped merely by industry interests are clearly not paranoid projections by activists. At the same time, it has increasingly become clear that looking to generics simply as flag bearers of public health is naive. The real innovation gap seems to be in our thinking on incentivising pharmaceutical inventions. Shamnad, a pioneering innovator of innovation systems, has suggested a compensatory liability system that identifies the investment of originator drug companies in obtaining regulatory permits before the Indian drug regulator and distributes the burden of these costs among generics that seeks to use this clinical data for clearance of their bio-equivalent drugs. With tweaking to allow greater leeway to generics selling life saving drugs, this model could bring in a middle path that prioritizes public interest. The Satwant Reddy Committee cast aside this model without seriously engaging in any debate on it.
What is clear is that the debate on data exclusivity cannot happen de hors a larger examination of pharmaceutical innovation which cannot happen without greater transparency in data on costs of research and development of patents and conducting clinical testing. In Part II, I will develop this thread further by examining the question of patent linkages. The IPA’s letter is an invitation to engage in a debate that has been long overdue and I sincerely invite comments on this question from our readers.