Opinion - News Analysis   

India and the data exclusivity trap

Sarah Hiddleston

In a coda to the Patents Act, fresh attempts are under way to inhibit the growth of India's vibrant generic industry by altering the laws that govern drug registration. This could further consolidate power in the hands of the drug majors and result in more expensive medicines.

UNDER PRESSURE from the Pharmaceutical and Research Manufacturers of America (PhRMA), and the U.S. Trade Department and Department of Commerce, the Indian Government could introduce `data exclusivity'(DE) clauses into the Indian Drugs Cosmetics Act, 1940. DE will allow multinational companies an extra five years of exclusive access to the drugs market. It is not just new innovative drugs under patent (New Chemical Entities) that will be affected. Drugs submitted for approval before India's accession to the World Trade Organisation (WTO), those created through public funding or using knowledge from the public domain, and those that are mere modifications of existing drugs are also on the hit list.

Closeted away behind closed doors, an inter-ministerial committee is considering these proposals. The Interim Report on its deliberations, which in the possession of The Hindu , shows the extent to which Ministers are moved by multinationals' concerns. It also shows how, in the absence of public debate, the far-reaching implications of DE for the generic industry and public health are being overlooked.

However, consideration of the impact of DE and an examination of the roots of the protection issue reveal that DE is not in the national interest, nor need the Government feel caught in the jaws of the intense lobby that has been put up.

National interest

DE laws tie the hands of the generic industry, inhibiting its ability to compete in domestic and international markets. DE will prevent the Drugs Controller General of India (DCGI) from judging the safety of a generic competitor by comparing theoretical proof of bioequivalence with the clinical trial data of an originator company. It will force generic companies to redo expensive and time-consuming trials or delay entry into the market altogether. Because the generic industry depends on producing volumes at very low cost, the high margins associated with clinical trials will make their operations unviable.

For the same reason, DE will affect the generic industry's ability to compete in markets in the U.S. where the aggressive entry of generics is giving multinationals a run for their money. The Government should not be swayed by the naïve argument that to compensate the industry the U.S. might induce other countries in the developing world not to introduce DE measures. In fact, this may set a precedent that would prevent generic industry exports to these markets.

DE laws will also have a detrimental impact on public health. The absence of cheap generics will put many life-saving medicines out of reach for patients with diseases including HIV/AIDS, diabetes, and Alzheimer's disease. Moreover DE will actually create incentives to delay the arrival of new drugs. This is because in the absence of a cost differential with prices in the developing world, greater profits can be made from high prices in multinationals' home markets. DE will also encourage investment in modifying existing drugs rather than inventing new ones (evergreening), which are disallowed under patent licensing. This arises from the ease and speed with which small investments can yield a substantial return.

Protecting profit

In the absence of DE over the last decade, the volume of clinical trials in India has gone up almost 20-fold. Multinationals continue to invest in the country because it makes good business sense. Since multinational companies do not reveal their data even to the DCGI while the original drug is undergoing trial, the confidentiality of the data cannot be their real concern for implementing DE laws.

The fact is that multinationals are facing declining profits in the absence of innovation. A Centre for Trade and Development tabulation of drug patent expiry dates for 327 New Chemical Entities from the U.S. Federal Drug Administration's Approved Drug Products and Therapeutic Equivalence Evaluations (the Orange Book) reveals that at most 58 molecules are eligible for patent in India. DE is a way of extending current profits on existing patented drugs, and reaping new benefits from a raft of drugs that are outside patentability altogether. It also has the bonus of cutting out the competition in their home markets.

This is in contravention of the TRIPS agreement agreed by the international community at the WTO, which balances intellectual property rights and public health. Intellectual property patents exist to protect innovation, not investment in clinical trials for safety. Pharma's claim that the current practice of drug registration in India constitutes `unfair commercial use' under article 39.3 does not hold water. The trial data registered with the DCGI are not passed on to any third party; generic companies reverse engineer the originator's drug through their own creativity. Further the DCGI is not a commercial body — but a regulatory authority acting in the public interest.

In any case the cost of investment in trials is already accounted for. When patent licenses were reviewed in 1995, multinationals made the case for a six year DE period. Instead, negotiators extended patent life from 14 to 20 years. DE is nothing other than a case of double-billing.

No fear

Since it is not the protection of data but the protection of profits that is at the root of the problem, neither the industry nor the Government should have anything to fear from multinationals. Their concern for profits will lead them to continue investments in clinical trials in India because of the cheaper cost of labour, the educated English-speaking workforce, low operating costs, and existing pharmaceutical infrastructure.

In the light of considerations about the impact of DE on the generic industry and public health, the Government should therefore feel empowered to reject DE clauses.

That is assuming that DE is not being used as a trade-off for gains in another sphere of negotiations with the U.S. At the very least, the Government could open the floor for public debate in a transparent and democratic manner.

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