Wednesday, July 13, 2011

Regulatory Framework For Data Exclusivity In India

Praveen Dalal

This is the updated version of my previous article on similar issue. India Patent regime has witnessed many important developments since the original article has been written. Some of these developments include willingness to recognise “Utility Models” in India, suggesting the draft Patents 3rd Amendment Rules 2010 in the Indian Patents Act 1970, etc.

However, till now the tussle between Pharmaceutical Companies and India Government regarding recognition of “Data Exclusivity” is still going on. Although some changes may have taken place since the time this article was originally written yet by and large the legal position and regulatory framework has remained the same. For latest changes we would come up with a new article very soon.

The grant or refusal of Data Exclusivity protection has to be considered keeping in mind the Nation's interest and provisions of Doha Declaration and TRIPS Agreement, more particularly Article 39.3 of the TRIPS Agreement.

Data exclusivity refers to a practice whereby, for a fixed period of time, drug regulatory authorities do not allow the registration files of an originator to be used to register a therapeutically equivalent generic version of that medicine. Data exclusivity is completely separate from patents but its practical effect is to confer an additional protection to patented invention.

In fact, the strongest impact may be felt in a country where there is no patent for a medicine - if data exclusivity is granted this will provide a monopoly for a set period. Data exclusivity is one of the most controversial issues in the current discussion on pharmaceutical intellectual property policy-making globally. It is aimed at protecting and safeguarding pharmaceutical registration files, i.e. the data submitted by pharmaceutical companies to drug regulatory authorities (DRA) for the purpose of obtaining marketing approval for new drugs.

The underlying logic of data exclusivity suggests that it is an expression of trade-secrets, and that as such, data exclusivity should be independent of patents. Compared with patents, the market power of data exclusivity is, in theory, less restrictive, mainly because it does not legally prevent other companies from generating their own registration data. However, in practice, the vast financial resources and extended time required for gathering and generating pharmaceutical registration data for a new drug create a market barrier that is too high for generic-based companies.

The data included in the registration file of a pharmaceutical product is disclosed to the health regulatory authorities. Without this data a drug cannot be approved for market use. This in turn means that the term unfair commercial use is linked to the responsibility of the Government for protecting this data. In what form such data has to be protected by the Government is a different issue. It may be protected in the form of administrative guidelines or it may be protected in the form of a separate law. The larger question that remains to be answered is whether India is at all required to protect the same in the form of a "statute"? This question directly relates to the Public International Law obligations of India as India is a signatory to the TRIPS Agreement. India is not required to provide any protection beyond the scope of TRIPS Agreement and any demand over and above that will be TRIPS plus option and not a TRIPS related obligation.

Article 39.1 of TRIPS establishes that in order to prevent unfair competition, as defined in Article 10bis of the Paris Convention, members shall protect undisclosed information and data submitted to governments and governmental agencies. Pursuant to Article 39.2, WTO members shall allow natural or legal persons to prevent information lawfully within their control from being disclosed, obtained, or used, without their consent, in a manner contrary to honest commercial practices. In order to be protected, undisclosed information must fulfill three criteria:

(1) It must be secret in the sense that it is not generally known or accessible to persons who normally deal with this kind of information (Art. 39.2a);
(2) It must have commercial value because it is secret (Art. 39.2b);
(3) Reasonable steps were taken by the owner of that information to keep it secret (Art. 39.2c).

As to pharmaceutical registration files, Article 39.3 states that "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 rationale is that where substantial cost has been incurred by the researcher, it would be unjust to deprive him of the legitimate and reasonable profits by allowing the other persons adopt its unfair commercial use. Developed countries pushed very hard during the TRIPS negotiations to have data exclusivity included in the TRIPS Agreement as a new kind of IPR. They succeeded in part, as test data are mentioned in Section 7 of the TRIPS Agreement, but not entirely, as TRIPS does not talk about "exclusivity" as such.

The conferment of data exclusivity has serious implications for domestic enterprises engaged in the fields of pharmaceutical and agro-chemical products. If data exclusivity is approved domestic enterprises would be prevented from taking marketing approvals on the basis of the data submitted by the first enterprise who had generated the data and submitted the same for taking marketing approval.

The World Health Organisation has recommended that developing countries must keep the systems of Intellectual Property Rights and drug regulation separate and reject efforts to make connections between the two. Recently, International Aid Agency Medecins Sans Frontieres (MSF) - Doctors Without Borders - said in its letter to the Prime Minister of India that the Drugs and Cosmetics Act was a legislation related to health and improving access to drugs.

An amendment to implement an intellectual property agreement in the Drugs and Cosmetics Act can have a serious impact on the approval and availability of generic versions of essential drugs. If the Indian Government starts providing exclusive rights over test data, this will delay generic competition from Indian pharmaceutical companies even in cases where the medicines are not patent protected.

Opponents of data exclusivity provisions argue that the TRIPS provisions speak only about the protection of test data against unfair use and nothing on data exclusivity. It is also pointed out that data exclusivity might restrict access to drugs, especially generics, which helps keep down prices. Other arguments focus on unwarranted extension of patent rights and obstacles to compulsory licensing, which helps poor countries to avert emergencies. In order to delay competition from generic manufacturers, multinational companies have been pushing hard to obtain exclusive rights over their test data. The biggest impact of data exclusivity is on medicines that are not patented in some countries, as a result of pre-TRIPS patent laws excluding pharmaceutical patents. This is the case of most antiretroviral medicines in Guatemala for instance, where generic manufacturers will now have to wait five years from the date of approval of the original medicine in Guatemala before obtaining registration of their own version of the medicine.

In other words, even when a medicine is not protected by any patent, multinational pharmaceutical companies are assured a minimum period of monopoly in countries that provide data exclusivity. This is clearly going beyond the TRIPS Agreement. In other situations, where a medicine is protected by patents, data exclusivity may constitute a barrier to the use of compulsory licenses. If a generic manufacturer is granted a compulsory license to overcome the patent, it will not be able to make effective use of the license if it has to wait for the expiry of data exclusivity before it can get its generic version approved by DRA and put on the market. Therefore, countries will need to ensure that the uses of compulsory licences are not restricted by data exclusivity. Data exclusivity is a means of impeding generic competition, and maintaining artificially high prices, thereby restricting access to medicines.

In simple words, what TRIPS says is that WTO Members should protect "undisclosed test or other data" against "unfair commercial use" and "disclosure". Nowhere does TRIPS state that countries should provide exclusive rights to the originator of the data for a given period. Since the wording of Article 39.3 is very general, Members maintain substantial flexibility when determining how submitted test data should be protected. WTO Members do not have an obligation under Article 39.3 to confer exclusive rights to test data, whether it is for three years, five years, or 10 years, as pointed out by many experts. This is because Article 39.3 allows considerable discretion as to what member states must do. It does not specify a minimum term of protection.

More importantly, it is not clear whether the phrase "unfair commercial use" includes use of the originator's data by the regulatory agency to assess applications by generic competitors. This has been argued not to amount to "unfair commercial use" so long as the regulatory agency does not disclose the data to the generic competitor. Under this interpretation, Article 39.3 does not require data exclusivity. On the other hand, the research-based pharmaceutical industry, the United States Trade Representative and others have argued strenuously that Article 39.3 does require data exclusivity. Thus, data exclusivity is no more than "TRIPS-plus" and is designed to delay the introduction of generic competition, creating a barrier to access of medicines, in particular where there are no patent barriers. The countries that are members of the WTO do not have to grant data exclusivity, as specified under TRIPS Article 39.3. However, if they agree to grant data exclusivity in a trade agreement signed after the TRIPS Agreement, they are bound by the later agreement, in accordance with the rules of international law, and will have to implement this obligation at national level.

Unlike US and European Union, India's stand and interpretation of Article 39.3 does not include market exclusivity to the innovator and does not create market protection. India is of the view that the said article only talks about the protection of test data against unfair use and nothing about data exclusivity, which is further interpreted to be same as market exclusivity.

It is viewed that Data Protection is very different from data exclusivity. EU and US are of the opinion that article 39.3 also covers data exclusivity, wherein they have adopted similar legislation to provide data exclusivity to innovator, the duration of which may exceed up to ten years in EU and five years in US.

The decision of India of not allowing data exclusivity is not only TRIPS compliant but also in nation's interest. It must be appreciated that we need not to follow precedents set by developed countries that are primarily based on a different societal set up and is guided by commercial exigencies. The larger interest of India requires us to stick to the obligations of TRIPS Agreement and not to venture into the arena of TRIPS plus terrains. The TRIPS Agreement nowhere stipulates and obligates India to confer data exclusivity and the only requirement is to prevent an unfair commercial use of the data submitted.

The concept of prevention is negative in nature whereas the conferment of data exclusivity is positive and pro-active in nature. It is strange that Government has not appreciated this simple fact. The Government must inculcate confidence in the mind of these pharmaceutical companies that their interest and data will not be misused as stipulated in the TRIPS Agreement and beyond that it need not to enter into the controversy of data exclusivity. The solution lies in administrative reforms and not in invoking the legislative machinery of India. This is more so when the TRIPS Agreement itself has left that provision flexible. Thus, India should not confer data exclusivity as that is not only against the TRIPS Agreement but also against nation's interest. The ideals of Doha Declaration must not be forgotten and India must consider the interest of nation first rather than succumbing to the pressure created by big multinational companies manufacturing pharmaceuticals.