By Alfred Adebare Introduction: Data exclusivity refers to a practice whereby, for a fixed period of time, test and other data provided to the drug regulatory authority (DRA) of a country (to demonstrate the efficacy and safety of a medicinal product [1]) in order to obtain an authorization to place the product on the market in that country, are not allowed to be used to register a therapeutically equivalent generic version of that product. Oftentimes, this data arises out of many years of research and clinical trials and is very expensive for the originator of the drug to produce. The framework for pharmaceutical regulation and authorization attempts to protect the investment of companies in their innovations by providing periods of so-called data exclusivity. In essence, data exclusivity refers to a period during which no third party applicant can rely on data filed by the original applicant for a marketing authorization. Accordingly, during this exclusivity period any subsequent applicant would need to have generated its own data to support the safety and efficacy of the product. It has, therefore, been argued, that data exclusivity is a misleading term; a more appropriate term would be market exclusivity. The most important international agreement dealing with the use of data submitted for regulatory approval is the World Trade Organization (WTO)s Agreement on TRIPS. Article 39.3 of TRIPS (reproduced below) obliges countries to protect against unfair commercial use of confidential data on new chemical entities submitted by companies to obtain approval for marketing new drugs from a regulatory agency. However, not all WTO member states have enacted data exclusivity laws as described. This is because Article 39.3 allows considerable discretion as to what member states must do. Nowhere does Article 39.3 state that countries should provide exclusive rights to the originator of the data for a given period or 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. In terms of this interpretation, Article 39.3 does not require data exclusivity. On the other hand, according to the research-based pharmaceutical industry, the only way to effectively protect test data against unfair commercial use is to provide an exclusivity period for the use of the data. Both the Office of the United States Trade Representative and the European Union (”EU”) have urged that Article 39.3 of the TRIPS Agreement established an exclusivity obligation. According to the EU, all that is left to member countries is the determination of the duration thereof. In addition to Article 39.3, there have been other bilateral arrangements and regional free trade agreements signed or under negotiation by the US in the wake of the failure of multilateral negotiations in the WTO, which contain data exclusivity provisions. The most significant of the trade negotiations wrapped up by the USTR is Central American Free Trade Agreement (”CAFTA). The Indian Position In 2003, the Government of India issued a statement that the Government does not have a position on data exclusivity at the moment. But it is clear that we have no obligation under TRIPS (trade- related aspects of intellectual property rights) to have provisions for the same in the country. The Government of India was of the opinion that Article 39.3 only requires WTO members to protect the test data against any unfair commercial use or unfair competition. It neither includes market exclusivity to the innovator nor does it create market protection. The rationale/basis for such a view has originated from the term unfair competition as described by the World Intellectual Property Organization (WIPO), that the repression of unfair competition is not concerned with exclusive rights, but is directed against acts of competition contrary to honest practices in industrial or commercial matters, for example in relation to undisclosed information (trade secrets). Since the repression of unfair competition does not advocate any kind of exclusive rights nor the word exclusivity has been mentioned anywhere in the Article, the demand to give market exclusivity to pharmaceutical companies or the innovator on the basis of Article 39.3 would be unfair. Also, a Government official reportedly stated that TRIPS only requires us to protect test data against unfair use under Article 39.3, but there is nothing that says that we have to provide marketing exclusivity. Interpretations vary depending on which side you are on. It is only when a case comes up at the Appellate Authority at WTO can there be clarityUnder the existing circumstances, it is highly unlikely that marketing exclusivity would be provided for any period of time. It would be possible only if TRIPS is modified, which one cannot see happening. With new products not coming to the market, new uses are being found for the existing ones. While patents would not cover these, data protection is being seen by American companies as a new form of intellectual property right to effectively extend patent life. It was clear that at that point India did not consider itself to be under any obligation to enact any data exclusivity laws. The domestic sector including the Indian Pharmaceutical Alliance (IPA), does not believe the Indian Government should concede to any demand for data exclusivity. The IPA says that TRIPS does not call for market exclusivity as understood in the USA or EU. Regulatory authorities are not prohibited from relying upon such data for determining the safety and efficacy of a previously approved product, when marketing approval is sought by generic manufacturers who do not infringe patents. This is particularly necessary to obviate the social and economic costs of repetitive animal and human testing. The IPA is also against ever-greening of patents. They argue that if data exclusivity in the country is allowed for say, five years, and a patented drug is introduced in the 17th year of the 20-year patent life, it could effectively extend the patent to 17 plus five equaling 22 years. If data exclusivity is introduced, they argue that the exclusivity period should not run beyond the life of a patent. However, multinational pharma companies are almost unanimous in their view: More product introductions, research and development and clinical trials business will come to the country only if data exclusivity is in place. This is even more important to us than patents. But Indian firms and authorities say these are all claims; we will have to see how much of it happens even if data exclusivity is enforced in the country. It is contended that the pressure from the multinational companies primarily based in the EU and USA, is against the spirit of Doha Declaration, where it was stated that, the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. It was further stated that the TRIPS Agreement can and should be interpreted and implemented in a manner supportive of WTO Members right to protect public health and, in particular, to promote access to medicines for all. Thus, on the one hand it is feared by the MNCs that the lack of data exclusivity will affect contract research and manufacturing. On the other hand, Indian pharmaceutical companies are afraid that it will delay the launch of off-patent expiring drugs and result in higher prices for medicines. Under the rapidly changing international trade scenario and intense lobbying of multinational pharmaceutical companies, India was forced to assess its stand on Article 39.3. An inter-ministerial committee was constituted to examine the issue afresh and to examine whether data protection can be offered under the existing legal provisions. The committee also sought suggestions from various ministries including ministries of science and technology, agriculture and commerce & industry. While the committee in its draft report acknowledged that the existing Drugs and Cosmetics Act does not provide any form of protection for the data submitted by authorities for approval of drugs, the Ministry of Health, in its recommendations, stated that India already has necessary legal provisions to protect data submitted by innovator companies, hence there is no need for any further protection. The committee suggested to incorporate certain changes in the Drugs and Cosmetics Act so as to allow the protection of the undisclosed drug data submitted to the regulator by the pharmaceutical companies[2] . Patent Amendment Act, 2005 January 1 2005 marked the culmination of a long, often controversial process of amending Indias IPR laws to bring them in conformity with the TRIPS norms. Though the deadline of January 1, 2005 has gone by and the Patents (Amendment) Act of 2005 passed and made effective from January 1, 2005, however, there is no provision therein introducing data exclusivity. A recourse open for India is to provide for data exclusivity, making it mandatory that the time period of such exclusivity must lapse within the 20 years patent period granted under the Patents Act. For instance, the period of protection may not exceed 5 to 6 years (or as may be agreed) calculating the same from the first date of global registration of the patent. Such a move will evade the possibility of ever-greening of patents. However, it seems unlikely for India to take into consideration the above approach because the data exclusivity demand means further restriction on public disclosure aspect of the patenting system which not only implies the de facto continuation of the monopoly of existing patent holders but also research institutions would not have access to this data, impeding further research. In addition, if compulsory/non-voluntary patents were granted, the working of such patents would be difficult in the absence of data, the domestic sector during the course of market exclusivity would not be able to duplicate even its own data for taking marketing approval even when they may be granted compulsory license for meeting the demands of the country of the patented products. Keeping in view the above situation, the legislature, as of now, has resorted to the Bolar exemption provision vide Section 107A of the Patents Act. The Bolar exemption strikes a careful balance between promoting invention and ensuring that consumers have timely access to cheaper generics, after the expiry of the patent. Section 107A of the Patent Act provides that any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India or any country other than India as well as importation of patented product by any person from a person duly authorized under law to produce, sell or distribute the product will not be considered as an infringement of the patent rights. In order to avoid the loopholes, OPPI requested the Government to explicitly state that Bolar provisions will be used only for research and development and not for manufacturing and stockpiling. Conclusion So, what does future hold? According to an industry source, India signed TRIPS for product patents only after the Indian industry realised its benefits and pushed for the same in the government. The decision of data exclusivity could largely rest on what domestic pharma lobbies for. Thus, it appears that the Government may not grant data exclusivity to pharmaceutical companies that are seeking to market their products in India. Instead, it may give limited protection to them and anyone found guilty of leaking protected information will be prosecuted under the Official Secrets Act, 1923[3]. Whether or not India enact data exclusivity laws, it should be kept in mind that: Article 39.3 does not need protection for data that is already public; Protection is required only for new chemical entities. Countries have considerable discretion in defining new and can exclude applications for second indications, formulations, etc.; Before granting protection, regulators can ask applicants to prove that the data for which protection is sought is the result of significant investment; and Article 39.3 only seeks protection against unfair commercial use and countries are allowed considerable discretion in defining ‘unfair’ use. These interpretations have been supported by the US and Canadian Supreme Court decisions. It is apparent that the Government of India wants to go slow on the demand of data exclusivity. It is suggested that India should adopt the model of such countries with manufacturing potential, but weak drug development capabilities which provide trade secret form of protection for undisclosed data submitted for approval. This will adequately satisfy the obligations under Article 39.3 of TRIPs and at same time ensure availability of drugs at affordable cost. ——————————————————————————– This Article does not, and should not be construed, to constitute legal advice. It is not a substitute for legal advice from qualified counsel. ——————————————————————————– Endnotes: [1] Medicinal product is any substance or combination of substances presented for treating or preventing disease in human beings or animals. Any substance or combination of substances that may be administered to human beings or animals with a view to making a medical diagnosis, or to restoring, correcting or modifying physiological functions in human beings or in animals is likewise considered a medicinal product. [2] It is proposed to add a new Section 18A for prohibition and liability for disclosure of information and to amend Drugs & Cosmetics Rules, 1945. The amendment to Rule 122 A and 122 B seek to ensure that for drugs approved/marketed in other countries, the importer will submit to the local authority, only data from local clinical trials and not data approved abroad. In the Insecticides Act 1968, it is proposed to provide additional provisions for data protection under the Section 9 and by way of amendments to Form I. The introduction of Section 18A will ensure that no person is entitled to the license under sub-section (c) of Section 10 or under section (c) of Section 18 for a drug unless approved by the licensing authorities in accordance with the Rules prescribed under the Drugs & Cosmetics Act. For approval under subsection (1), the licensing authorities may ask for submission of undisclosed information by the applicant. The licensing authority will have to keep undisclosed such information submitted under sub-clause (2) for new drugs, unless the government by notification seek disclosure of such information in public interest. The applicant will be entitled to injunction, compensation, or account of profit from any person using the information submitted under subsection (3) in violation of breach of confidence. Such violation will be liable for prosecution under the Official Secrets Act, 1923. In addition, the Organization of Pharmaceutical Producers of India (OPPI) has requested the Government to amend Schedule Y of the Drugs & Cosmetics Act to include provision for data exclusivity for a period of 6 years from the date of marketing approval. [3] The Official Secrets Act, which is generally propagated as an adequate safeguard for data protection, deals with the wrongful communication of information entrusted to regulatory authorities and does not check reliance of such undisclosed data while granting marketing approvals to other entrants. Alfred Adebare is a consultant having fourteen (14) years experience, of which the last ten (10) years has been spent in India advising on complex and substantial cross border commercial transactions. Alfreds practice focuses on all aspects of cross border transactions including acquisitions in the areas of infrastructure, power, oil & gas, project finance, venture capital, private equity, information technology, foreign trade and capital markets. 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