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In the line of fire

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Released recently, the annual report of the USTR (United States Trade Representative) lists ‘treatment of pharmaceutical patents in India’ amongst reasons it cites as a barrier to exports. This comes at a time when rumours are rife that the US Trade Representative might designate India as a ‘priority foreign country’ in its Special 301 Report, due on April 30. Influential pharmaceutical lobbies in the US are thought to have built up the momentum on the same and see India’s insistence to exercise flexibilities in the existing TRIPS as an infringement of IPR. Should this happen, India would be the only country apart from Ukraine to be placed in this category and the implications could result in trade sanctions including withdrawing tariff preferences for Indian exports.

Unilateral action

“Such unilateral action is against the principles of WTO. Much hue and cry is being created over India having issued only one compulsory licence so far, when the patent office recently rejected two applications.”
TC James,
President, NIPO

It is common knowledge that after the Supreme Court decision on Novartis, MNCs have been gingerly and extremely defensive about India’s IP laws. However, differences could have been addressed by challenging them under WTO’s dispute settlement system if the US strongly felt that our IP policy was particularly discriminating against its companies. Argues TC James, President, NIPO, “Such unilateral action is against the principles of WTO. Much hue and cry is being created over India having issued only one compulsory licence so far, when the patent office recently rejected two applications.” He cites a WTO report(December 1999) on United States- Section 301-310 of the trade act of 1974 which says:

7.88 When a member imposes unilateral measures in violation of Article 23 in a specific dispute, serious damage is created both to other Members and the market-place. However, in our view, the creation of damage is not confined to actual conduct in specific cases. A law reserving the right for unilateral measures to be taken contrary to DSU rules and procedures, may – as is the case here – constitute an ongoing threat and produce a ‘chilling effect’ causing serious damage in a variety of ways.

Further elaborating on the damage caused it says:

7.89 First, there is the damage caused directly to another member. Members faced with a threat of unilateral action, especially when it emanates from an economically powerful Member, may in effect be forced to give in to the demands imposed by the member exerting the threat, even before DSU procedures have been activated. To put it differently, merely carrying a big stick is, in many cases, as effective a means to having one’s way as actually using the stick. The threat alone of conduct prohibited by the WTO would enable the member concerned to exert undue leverage on other members. It would disrupt the very stability and equilibrium which multilateral dispute resolution was meant to foster and consequently establish, namely equal protection of both large and small, powerful and less powerful members through the consistent application of a set of rules and procedures.

“While older western firms maybe at fault for not doing the same, ultimately the blame lies with the Indian patenting system for not encouraging such voluntary licensing by approving a worthy patent.”
Roger Bate,
Author of Phake: The Deadly World of Falsified and Substandard Medicines and a scholar at the American Enterprise Institute

In its submission letter to the USTR, MSF also argues that “Rather than using the Special 301 Review Process as a unilateral tool to impose a heightened intellectual property regime on developing countries, the US Government should use its laws, policies, and financial resources to ensure that developing countries exercise the full flexibilities available to them to ensure access to medicines for all.” “India is on stronger grounds on IP issues than it is on quality, and if it was actually in breach of WTO rules, US or other nations probably would have brought an action/ case. A 301 report is US way of pressuring India to reform its IP system – short of WTO action”, pitches in Roger Bate, the author of Phake: The Deadly World of Falsified and Substandard Medicines and a scholar at the American Enterprise Institute.

TRIPS compliant?

“Based on inputs from pharma and IT lobbies, GIPC has adopted a lot of arbitrariness in allocating indices to different parameters. If indexing was done properly, India’s rank would be much higher.”
Raghava Saha,
Adviser, Intellectual Property Rights, Former Adviser, Department of Science and Technology

The GIPC(Global Intellectual Property Center) report which lists India as the lowest in IPR among list of 25 countries was contested by CII during its deposition before the USITC(United States International Trade Commision. “Based on inputs from pharma and IT lobbies, GIPC has adopted a lot of arbitrariness in allocating indices to different parameters. If indexing was done properly, India’s rank would be much higher. For example, on the parameter dealing with legal provisions about IPR, it has given a very low rank perhaps driven by the enforcement aspect only. In my view that is illogical,” says Raghava Saha, Adviser, Intellectual Property Rights, Former Adviser, Department of Science and Technology.

The Indian patent law has remained unchanged after it was amended in 2005 to comply with the requirements of the TRIPS agreement. Despite accounting for its flexibilities, it is far more stricter than that in the US which allows for the granting of secondary patents for very obvious modifications of existing medicines. Termed evergreening, this is something that section 3(d) of the Indian Patents Act desists, by restricting patents for already known drugs unless the new claims are superior in terms of efficacy.

“South Africa and Brazil are looking to the Indian IP system. The former does not have a patent examination system, pre-grant opposition system and is currently handing out patents blindly since 1992.”
Leena Menghaney,
Coordinator (India), Campaign for Access to Essential Medicines, Medecins Sans Frontieres

Leena Menghaney, Coordinator (India), Campaign for Access to Essential Medicines, Medecins Sans Frontieres strongly feels that using the stick to make India fall in line might be an example for other countries looking upto India as a role model. “South Africa and Brazil are looking to the Indian IP system. The former does not have a patent examination system, pre-grant opposition system and is currently handing out patents blindly since 1992.” It is not difficult to understand then that any action against India would help rein in countries thinking of following into its footsteps.

“The Bayer Nexavar decision is clearly inconsistent with Article 27.1 of the TRIPS Agreement, which prohibits limitations on the enjoyment of the patent right based on whether the products subject to the patent are manufactured locally or imported.”
Krishna Sarma,
Managing Partner, Corporate Law Group

However, Krishna Sarma, Managing Partner, Corporate Law Group is of the strong opinion that we might be missing the fact that TRIPS was brought about to protect and promote innovation cannot change. She highlights that Article 7 of the TRIPS Agreement which states that “the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.”

Further, she adds that Article 27.1 of the TRIPS requires that “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.” The patentability criteria of Section 3(d) are in addition to the internationally accepted criteria of novelty, inventive step and utility. “The Bayer Nexavar decision is clearly inconsistent with Article 27.1 of the TRIPS Agreement, which prohibits limitations on the enjoyment of the patent right based on whether the products subject to the patent are manufactured locally or imported,” she exhorts.

Bates cites the case of Gilead, which was denied a patent for VIREAD(Tenofir), at the same time atleast four Indian companies pay them a royalty for having the technology transfer for the product. “While it strikes me that it was a bad decision to deny that patent and businesses are making decisions ignoring the patent issue, I’d argue this is because Gilead doesn’t have the historical baggage of other firms and was prepared to work with Indian firms on this issue regardless of no patent granted,” he says. He is quick to add though, “While older western firms maybe at fault for not doing the same, ultimately the blame lies with the Indian patenting system for not encouraging such voluntary licensing by approving a worthy patent.”

Right or wrong?

It is not only India which is irking Big Pharma. If reports are to believed, PhRMA , has made a case for putting the EU on a priority watch list, accusing European Union of ineffective patent enforcement, taking generics into account when setting medicine prices and EMA’s data disclosure policy. On the latter, it is of the view that “providing virtually unrestricted access to and publication of biopharmaceutical companies’ clinical trial regulatory submissions and data will substantially harm patient privacy, the integrity of the regulatory system, and incentives for pharmaceutical research and development.” It further adds, “Failing to protect confidential commercial information contained in regulatory submissions is inconsistent with the EU’s treaty obligations contained in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and primarily benefits competitors who wish to free-ride off of the investments of innovators.”

India, meanwhile is closely cautious. This might explain why the recent proposal by the Health Ministry to issue a compulsorily licence for Dasatinib to the Ministry of Industry and Commerce was met with a response by the Department of Industrial Policy and Promotion (DIPP) stating that the kind of data and information provided was insufficient. According to DIPP, the use of Section 92 was impermissible since the provision allowed licensing in the specific circumstances – which were not prevailing in the country presently. It was added that Indian Patent Office(and not the government) has the power vested to wielding Section 84 on grounds of non-affordability of the drug and grant a licence upon receiving an application.

Saha strongly feels that there needs to be a more transparent, competent and broad based mechanism for arriving at a decision about granting CL, perhaps a bench. As far the US stand goes, he feels, “US might put us on a watch list. They will have to keep the interest of Boeing and other engineering industries in mind which have a big market in India. Considering India’s stand in respect of what is happening in Ukraine, USA may adopt arms twisting technique.” Even as India takes a measured approach to compulsory licensing, it doesn’t stop the western world from a view that the system is protectionist and flawed. Bate argues further, “If the patents were granted, and India then wanted to try and negotiate voluntary licenses at “fair prices” and failed and then issued compulsory licenses for those products, then it has the right to do so. Western companies may complain about that, but India would be following a more obviously correct protocol. Whether, this is right for long run of Indian development is of course another issue”. Even as the special 301 report is being penned down, NATCO pharma has approached India’s patent office to deny Gilead Sciences protection on its brand new Hepatitis C drug. The hornet’s nest has been stirred again, we can only wait and watch.

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