[Ip-health] Data Exclusivity-India

[prabhu ram]

http://www.hinduonnet.com/fline/stories/20060825003912200.htm

http://www.hinduonnet.com/fline/stories/20060825003812400.htm

DRUG POLICY

Data for leverage

SARAH HIDDLESTON

A new front has opened in the attack on generic drugs in the
pharmaceutical industry, which could push up the prices of medicines.


FAR away from public scrutiny in the corridors of power attempts are
under way to alter the laws that govern the Indian pharmaceutical
industry. There is widespread apprehension that the changes proposed
would result in a greater concentration of monopoly power in the drug
industry, impose barriers to the entry of cheap generic alternatives
and generally push up drug prices.

Apparently under pressure from the pharmaceutical lobbies, an
inter-ministerial group is considering proposals to amend the Drugs
and Cosmetics Act (DCA), 1940, which could incorporate `data
exclusivity' (DE) clauses for new drugs and pharmaceutical products.
Before any new drug is launched in the market, pharmaceutical
companies are required, under the DCA, to submit evidence of its
safeness, effectiveness and quality to the Drugs Controller General
(India) (DCG-I). This is usually test and clinical data from trials on
patients. Currently, if a generic competitor can prove that its
copycat drug has the same therapeutic quality as the original
(bioequivalence), the DCG(I) can use the original company's test data
to judge whether the drug is safe and effective. Data exclusivity
would prevent this and provide multinational companies with exclusive
rights to the test data they submit to the DGC(I) for a negotiated
period of time.

The issue of DE has been in cold storage for over three years and
debated and rejected since the alteration of the Patents Act in 1995.
Despite the fact that DE is outside the ambit of India's commitments
under the Trade Related Aspects of Intellectual Property Rights
(TRIPS) agreement at the World Trade Organisation (WTO), the
government is still considering DE proposals. Why?

The United States pharmaceutical industry, with the support of its
government, initiated discussions with India on DE earlier this year.
While President George W. Bush is said to have raised it with Prime
Minister Manmohan Singh when he visited India in March, evidence of
lobbying has come from two levels: the Pharmaceutical Research and
Manufacturers of America (PhRMA) and the U.S. India Business Council,
and the U.S. Trade Department, Department of Commerce, and the U.S.
embassy.

A confidential PhRMA document, in the possession of Frontline, sets
out what the U.S. is looking for: five years of "protection" for new
chemical entities (an active ingredient, including salt or ester,
which has not been previously approved in any other application) and
three years for other products that require clinical investigation.

There are several key points in the document that are worth
highlighting. First is the conflation of DE and data protection under
the label of `protection'. Second, the period of exclusivity is to
begin from the date of first commercial sale in India, not the date of
marketing approval, which is not the case anywhere else in the world.
Third, an earlier date of approval in any other country is irrelevant
to the multinational company's entitlement. (In most other countries,
the period of exclusivity is dated from the first date of market
approval anywhere in the world.) Fourth, no application for generic
drug approval can be submitted during this time, which would further
delay generic entry. Finally, the demand for the dismantling of price
controls could impact adversely the affordability of medicines.

Representatives from PhRMA, leading multinational pharmaceutical
companies, the U.S. India Business Council, the U.S. departments for
Trade and Commerce and the Federation of Indian Chambers and Commerce
and Industry (FICCI) met in New York on June 23 at the India-U.S.
Round Table on Pharmaceuticals. The meeting was co-chaired by Franklin
L. Lavin, Under Secretary, U.S. Department of Commerce and S.N. Menon,
Commerce Secretary. Records from the Indian Embassy in Washington show
that a significant proportion of time was given over to `data
protection'.

What is at stake?


The cumulative success of the lobbying is evident in the interim
report - `The Interim Report of the Committee constituted to consider
the steps to be taken by the government in the context of the
provisions of Article 39.3 of the TRIPS agreement" - of the
inter-ministerial group, a copy of which is in the possession of
Frontline. The group includes officials of the departments of
Scientific and Industrial Research, Commerce, Economic Affairs,
Biotechnology, Chemicals and Fertilizers, Chemicals and
Petrochemicals, and the Ministry of Health and Family Welfare.

The report, which suggests a three-year DE period along the lines put
forward by PhRMA, reveals a mindset that exaggerates the benefits of
DE and ignores the adverse implications for public health. On the
issue of data protection, it accommodates the misgivings of
multinational companies (MNCs) about the Indian intellectual property
regime, and notes that, on the negative side, the U.S. includes India
in the IPR defaulters list of countries under the "Special 301
provisions".

The three perceived gains of data exclusivity are an increase in
foreign direct investment (FDI) in the sector; gains for the export
market; and the arrival of newer medicines for Indian patients. All of
these gains, however, are misjudged.

The argument in favour of increased FDI rings hollow because FDI in
pharmaceuticals has nothing to do with the level of intellectual
property protection. D.G. Shah, CEO of Vision Consulting and
Secretary-General of the Indian Pharmaceutical Alliance (IPA), told
Frontline: "In India, in 1970, when product protection was abolished,
several foreign companies came and made major investments. In 1995,
when India signed the TRIPS agreement and agreed to an intellectual
property regime by 2005, these very foreign companies divested their
manufacturing certificates... and reaped the foreign investment. So
this is actually the direct opposite of the argument being made."

Further, K.M. Gopakumar, research officer, Centre for Trade and
Development, made the following point in an interview with this
correspondent: Since data generated by trials outsourced to India are
not even registered with the DCG(I), the protection of trial data is
not the overriding concern of multinationals when considering
investment. In any case, he said, trial data are adequately protected
by the Official Secrets Act and Common Law. So there is no relation
between FDI and any increase in clinical trials.

Over the last 10 years, the volume of trials of the number of
molecules being tested in India has gone up almost 20-fold.
Pharmaceutical companies will continue to invest in clinical research
and introduce new drugs in India because there are substantial cost
savings (60 per cent, according to one estimate).

The argument in favour of gains in the export market also appears to
be on shaky ground. It rests on the hope that other countries may
somehow be induced by the U.S. not to implement stringent TRIPS plus
provisions so Indian exports of generic medicines are benefited. The
U.S. has rarely, if ever, gone out of its way to promote the interests
of another nation's trade over its own. Canada, a developed country
with a good generic export industry and a five-year DE period, is
facing increasing pressure from the U.S. to raise this to eight years.
So it is na=EFve to expect any gains in this sphere.

The argument that DE laws will encourage the introduction of new
medicines into the Indian market betrays a misunderstanding of their
implications. According to Shah, the IPA, which includes many leading
domestic pharmaceutical companies and represents about 30 per cent of
the domestic pharmaceutical market, is worried that DE would actually
provide incentives to delay the entry of new products for two reasons.
First, MNCs would prefer to keep prices high in developed markets by
delaying their entry into the developing world at lower prices.
Second, they can delay generic entry into the U.S. market immediately
on the expiry of the patent.

"Big Pharma is feeling the pinch of the aggressive entry of Indian
generics in the U.S. market," he said. Big Pharma's protectionist
lobby, backed by the U.S. government, has been intense. "Into the last
three months the government has seen a delegation from Washington and
PhRMA representatives every 15 days. A U.S. embassy official concerned
confided in me that DE is a Key Result Area," he said.

The interim report of the inter-ministerial group recognised that the
domestic generic industry would object to a tight DE regime. It noted
that "Domestic Pharma companies may perceive it [DE] as a barrier for
their growth and are likely to raise objections to it." It also noted
that finding an alternative way to protect data other than DE would
help keep prices down and "avoid giving monopoly rights to the
innovator".

Producers of generic drugs operate with very low margins, and depend
on volumes. However, DE fosters an anti-competitive atmosphere in
which generics are pushed out of the market. The high costs associated
with clinical trials would make their operations unviable. Shah
believes that Indian generic producers would rather wait for a drug to
emerge out of exclusivity than invest in clinical trials. This will
put India at a disadvantage if India adopts a DE regime; companies in
other countries will have access to an inexpensive and streamlined
approval process via their regulatory bodies.

Further, there is an ethical question as to whether a population
should be subjected to repeated testing. Multinationals stand to gain
twice over at the expense of the same population, first from cheaper
costs in the original trials, (the data of which are not passed to the
DCG(I) until the companies decide to launch in India) and then by
preventing generic competition for three years.

Leena Menghaney, project manager-India, Medicines Sans Frontiers and
the Campaign for Access to Essential Medicines, voiced concern that
the availability of medicines for many disease areas could be affected
by the resulting market monopoly. Furthermore, DE would render
redundant the use of compulsory licence, a market exclusivity waiver
on patents provided by the TRIPS agreement in the event of a global
health emergency. "They will not be able to obtain a market approval
for the drug produced. A compulsory licence will have to be coupled
with a waiver on the DE clause," she said.

Unless a considerable amount of attention is paid to detail, the
following categories of drugs could be affected: those created prior
to the 1995 patent agreement but are only now getting market approval;
drugs that are not patented because they have been produced through
public funding or incorporate knowledge that is part of the public
domain; and, importantly, drugs that are not eligible for patent
because they are merely modifications, such as new dosages or new
dosage forms of existing drugs.

The last category is especially significant since the DCA currently
allows a wider scope for new drugs that require regulatory approval
than for new chemical entities specified in Article 39.3 of the TRIPS
agreement. If DE is enacted for all new drugs thus defined, then
companies will enjoy a market monopoly on trivial changes. According
to Gopakumar, these are, in fact, the targets of multinationals. They
will gain market exclusivity where they would not otherwise because
the drugs are not innovative enough to be patented. It would
effectively render useless a provision in the Patent Act against such
practice.

In the national interest?


According to news reports, at its meeting on July 26 the
inter-ministerial group agreed that DE was not mandated by the
international TRIPS agreement. Advocates of a DE regime insisted that
it was being pursued only in the national interest. It appears that
national interest just happens to coincide with the interests of Big
Pharma, say its critics.

The inter-ministerial group is now considering a `compensatory
liability model', in which generic companies would pay a royalty to
the originator for the DCG(I) to make use of data filed to it. This is
a practice already used in the agrochemical industry, but it would be
a world first for the pharmaceutical sector. Royalty payments not only
leave intact the problem for generics of operating at low margins, but
open a Pandora's box of issues. These include the lack of industry
standards of royalty, transaction costs involved, market- and
cost-differentiation between countries, disclosure issues when
calculating originator costs and whether and to what extent it applies
to the export market, and the administrative burden of the scheme. How
can these be overcome? R.A. Mashelkar, Secretary, Department of
Scientific and Industrial Research, who is the chairman of the
inter-ministerial group, did not want to comment. Two other members,
G.S. Sandhu, Joint Secretary, Department of Chemicals and Fertilizers,
and Rita Teaotia, Joint Secretary, Ministry of Health and Family
Welfare, declined to speak to Frontline.

If the U.S. had its way, it would export its own intellectual property
regime, known as the Hatch-Waxman regime, to a country with very
different income and needs. One of its main proponents, Representative
Henry A. Waxman, said at a Congress Committee meeting in 2003 that "to
impose such a system on a country without a [health care] safety net,
depriving millions of people of life-saving drugs, is irresponsible
and even unethical".

If India does not need to implement such stringent measures under the
TRIPS agreement, if it brings no gains and is detrimental to both
India's generic drugs industry and its public health, in what sense is
DE in the national interest? One thing at least is clear: too much is
at stake for DE not to be given proper public debate.