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Patent Conundrum: Ignoring India Will Just Not be Foolhardy, Not An Option Either

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The recent verdict of the Supreme Court against Novartis, upholding the decision of the Indian Patent Office (IPO) against grant of patent to their cancer drug Glivec, based on Section 3(d) of the Indian Patents Act, has caused a flutter and utter discontentment within the global pharmaceutical industry across the world.

However, on this verdict, the Director General of the World Trade Organization (WTO), Pascal Lamy has reportedly opined, “Recent decisions by the courts in India have led to a lot of protest by pharmaceutical companies. But decisions made by an independent judiciary have to be respected as such.”

The above decision on Glivec came close on the heels of IPO’s decision to grant its first ever Compulsory License (CL) to the Indian drug manufacturer Natco, last year, for the kidney cancer drug Nexavar of Bayer.

Interestingly, no member of the World Trade Organization has raised any concern on these issues, as the Head of WTO, Lamy recently confirmed, “No country has objected to India issuing compulsory license or refusing patent for drugs.” He further added, “TRIPS provides flexibilities that allow countries to issue compulsory licenses for patented medicines to address health urgencies.”

That said, simmering unhappiness within innovator companies on various areas of Indian patent laws is indeed quite palpable. Such discontent being expressed by many interested powerful voices is now reverberating in the corridors of power both in India and overseas.

Point and Counterpoint:

Although experts do opine that patent laws of India are well balanced, takes care of public health interest, encourage innovation and discourage evergreening, many global innovator companies think just the opposite. They feel, an appropriate ecosystem to foster innovation does not exist in India and their IP, by and large, is not safe in the country. The moot question is, therefore, ‘Could immediate fallout of this negative perception prompt them to ignore India or even play at a low key in this market?’

Looking at the issue from Indian perspective:

If we take this issue from the product patent perspective, India could probably be impacted in the following two ways:

  1. New innovative products may not be introduced in India
  2. The inflow of Foreign Direct Investments (FDI) in the pharma sector may get seriously restricted.

Let us now examine the possible outcome of each of these steps one at a time.

Will India be deprived of newer innovative drugs?

If the innovator companies decide to ignore India by not launching such products in the country, they may take either of the following two steps:

  1. Avoid filing a patent in India
  2. File a patent but do not launch the product

Keeping the emerging scenario in perspective, it will be extremely challenging for the global players to avoid the current patent regime in India, even if they do not like it. This is mainly because of the following reasons:

1. If an innovator company decides not to file a product patent in India, it will pave the way for Indian companies to introduce copy-cat versions of the same in no time, as it were, at a fractional price in the Indian market.

2. Further, there would also be a possibility of getting these copycat versions exported to the unregulated markets of the world from India at a very low price, causing potential business loss to the innovator companies.

3. If any innovator company files a product patent in India, but does not work the patent within the stipulated period of three years, as provided in the patent law of the country, in that case any Indian company can apply for CL for the same with a high probability of such a request being granted by the Patent Controller. 

A market too attractive to ignore:

India as a pharmaceutical market is quite challenging to ignore, despite its ‘warts and moles’ for various reasons. The story of increasing consumption of healthcare in India, including pharmaceuticals, especially when the country is expected to be one of the top 10 pharmaceutical markets in the world, is too enticing for any global player to ignore, despite unhappiness in various areas of business.

Increasing affordability of the fast growing middle-class population of the country will further drive the growth of this market, which is expected to register a value turnover of US$50 billion by 2020, as estimated by PwC.

PwC report also highlights that a growing and increasingly sophisticated pharmaceutical industry of India is gradually becoming a competitor of global pharma in some key areas, on the one hand and a potential partner in others, as is being witnessed today by many.

Despite urbanization, nearly 70 percent of the total population of India still lives in the rural villages. Untapped potential of the rural markets is expected to provide another boost to the growth momentum of the industry.

Too enticing to exit:

Other ‘Enticing Factors’ for India, in my views, may be considered as follows:

  • A country with 1.13 billion populations and a GDP of US$ 1.8 trillion in 2011 is expected to grow at an average of 8.2 percent in the next five-year period.
  • Public health expenditure to more than double from 1.1 percent of the GDP to 2.5 percent of GDP in the Twelfth Five Year Plan period (2012-17)
  • Government will commence rolling out ‘Universal Health Coverage’ initiative
  • Budget allocation of US$ 5.4 billion announced towards free distribution of essential medicines from government hospitals and health centers.
  • Greater plan outlay announced for NRHM, NUHM and RSBY projects.
  • Rapidly growing more prosperous middle class population of the country.
  • Fast growing domestic generic drug manufacturers who will have increasing penetration in both local and emerging markets.
  • Rising per capita income of the population and relative in-efficiency of the public healthcare systems will encourage private healthcare services of various types and scales to flourish.
  • Expected emergence of a robust health insurance model for all strata of society as the insurance sector is undergoing reform measures.
  • Fast growing Medical Tourism.
  • World-class local outsourcing opportunities for a combo-business model with both patented and branded generic drugs.

Core issues in patent conundrum:

I reckon, besides others, there are three core issues in the patent conundrum in India as follows, other issues can be sorted out by following:

1. ‘Pricing’ strategy of patented products: A large population across the globe believes that high prices of patented products severely restrict their access to many and at the same time increases the cost of healthcare even for the Governments very significantly.

2. To obtain a drug patent in India, passing the test of inventive steps will not just be enough, the invention should also pass the acid test of patentability criteria, to prevent evergreening, as enshrined in the laws of the land. Many other countries are expected to follow India in this area, in course of time. For example, after Philippines and Argentina, South Africa now reportedly plans to overhaul its patent laws by “closing a loophole known as ‘ever-greening’ used by drug companies to extend patent protection and profits”. Moreover, there does not seem to be any possibility to get this law amended by the Indian Parliament now or after the next general election.

3. Probably due to some legal loopholes, already granted patents are often violated without following the prescribed processes of law in terms of pre or post – grant challenges before and after launch of such products. There is a need for the government to plug all such legal loopholes, after taking full stock of the prevailing situation in this area, without further delay.

Some Global CEOs spoke on this issue:

In this context the Global CEO of GSK commented in October 18, 2012 that while intellectual property protection is an important aspect of ensuring that innovation is rewarded, the period of exclusivity in a country should not determine the price of the product. Witty said, ‘At GSK we will continuously strive to defend intellectual property, but more importantly, defend tier pricing to make sure that we have appropriate pricing for the affordability of the country and that’s why, in my personal view, our business in India has been so successful for so long.’

Does all in the global pharma industry share this view? 

Not really. All in the global pharmaceutical industry does not necessarily seem to share the above views of Andrew Witty and believe that to meet the unmet needs of patients, the Intellectual Property Rights (IPR) of innovative products must be strongly protected by the governments of all countries putting in place a robust product patent regime and the pricing of such products should not come in the way at all.

The industry also argues that to recover high costs of R&D and manufacturing of such products together with making a modest profit, the innovator companies set a product price, which at times may be perceived as too high for the marginalized section of the society, where government intervention is required more than the innovator companies. Aggressive marketing activities, the industry considers, during the patent life of a product, are essential to gain market access for such drugs to the patients.

In support of the pharmaceutical industry the following argument was put forth in a recent article:

“The underlying goal of every single business is to make money. People single out pharmaceutical companies for making profits, but it’s important to remember that they also create products that save millions of lives.”

How much then to charge for a patented drug? 

While there is no single or only right way to arrive at the price of an IPR protected medicine, how much the pharmaceutical manufacturers will charge for such drugs still remains an important, yet complex and difficult issue to resolve, both locally and globally.

A paper titled, “Pharmaceutical Price Controls in OECD Countries”, published by the US Department of Commerce after examining the drug price regulatory systems of 11 OECD countries concluded that all of them enforce some form of price controls to limit spending on pharmaceuticals. The report also indicated that the reimbursement prices in these countries are often treated as de facto market price. Moreover, some OECD governments regularly cut prices of even those drugs, which are already in the market. 

Should India address ‘Patented Products’ Pricing’ issue with HTA model?

Though some people hate the mechanism of Health Technology Assessment (HTA) to determine price of a patented drug, I reckon, it could be a justifiable and logical answer to price related pharmaceutical patent conundrum in India.

Health Technology Assessment, as many will know, examines the medical, economic, social and ethical implications of the incremental value of a medical technology or a drug in healthcare.

HTA, in that process, will analyze the costs of inputs and the output in terms of their consequences or outcomes. With in-depth understanding of these components, the policy makers decide the value of an intervention much more precisely.

Companies like, Merck, Pfizer and GSK have reportedly imbibed this mechanism to arrive at a value of the invention. National Pharmaceutical Pricing Authorities (NPPA) may well consider this approach for a well judged, scientific and transparent pricing decision mechanism in India, especially for innovative new drugs.

Could local manufacturing be an option?

Considering relatively higher volume sales in India, to bring down the price, the global companies may consider manufacturing their patented products in India with appropriate technology transfer agreements being in place and could even make India as one of their export hubs, as a couple of their counterparts have already initiated.

Accepting the reality responsibly:

In view of the above, the global pharmaceutical players, as experts believe, should take note of the following factors. All these could help, while formulating their India-specific game plan to be successful in the country, without worrying much about invocation of Compulsory License (CL) for not meeting ‘Reasonably Affordable Price’ criterion, as provided in the Patents Act of the country:

  • While respecting IPR and following Doha declaration, the government focus on ‘reasonably affordable drug prices’ will be even sharper due to increasing pressure from the Civil Society, Indian Parliament and also from the Courts of the country triggered by ‘Public Interest Litigations (PIL)’
  • India will continue to remain within the ‘modest-margin’ range for the pharmaceutical business with marketing excellence driven volume turnover.
  • Although innovation will continue to be encouraged with IPR protection, the amended Patents Act of India is ‘Public Health Interest’ oriented, including restrictions on patentability, which, based on early signals, many other countries are expected to follow as we move on.
  • This situation though very challenging for many innovator companies, is unlikely to change in the foreseeable future, even under pressure of various “Free Trade Agreements (FTA)”.  

Sectors Attracting Highest FDI Equity inflows:

When one looks at the FDI equity inflow from April 2000 to March 2013 period as follows, it does not appear that FDI inflow in Drugs and Pharmaceuticals had any unusual impact due to ‘Patent Conundrums’ in the country at any time:

Ranks Sector

US$ Million

1. Service Sector

37,151
2. Construction Development:(Township, Housing, Built-up infrastructure)

22,008
3 Telecommunication(Radio paging, Cellular mobile,Basic telephone services)

12,660
4 Computer Software &Hardware

11,671
5 Drugs & Pharmaceuticals

10,309
6 Chemical

8,861
7 Automobile Industry

8,061
8 Power

7,828
9 Metallurgical Industries

7,434
10 Hotel & Tourism

6,589

Further, if we look at the FDI trend of the last three years, the conclusion probably will be similar.

Year

US$ Million.
2010-11

177.96
2011-12

2,704.63
2012-13

1,103.70

(Source: Fact Sheet on Foreign Investments, DIPP, Government of India)

Conclusion:

In search of excellence in India, global pharmaceutical companies will need to find out innovative win-win strategies adapting themselves to the legal requirements for business in the country, instead of trying to get the laws changed.

India, at the same time, should expeditiously address the issue of blatant patent infringements by some Indian players exploiting the legal loopholes and set up fast track courts to resolve all IP related disputes without inordinate delay.

Responsible drug pricing, public health oriented patent regime, technology transfer/local manufacturing of patented products and stringent regulatory requirements in all pharmaceutical industry related areas taking care of patients’ interest, are expected to be the key areas to address in the business models of global pharmaceutical companies for India.

Moreover,it is worth noting that any meaningful and long term FDI in the pharmaceutical industry of India will come mostly through investments in R&D and manufacturing. Such FDI may not be forthcoming without any policy compulsions, like in China. Hence, many believe, the orchestrated bogey of FDI for the pharmaceutical industry in India, other than brownfield acquisitions in the generics space, is just like dangling a carrot, as it were, besides being blatantly illusive.

Even with all these, India will continue to remain too lucrative a pharmaceutical market to ignore by any. Thus, I reckon, despite a high decibel patent conundrum, any thought to ignore or even be indifferent to Indian pharmaceutical market by any global player could well be foolhardy.

By: Tapan J. Ray 

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

 

Does China provide a more robust IPR environment than India?

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Soon after the Product Patent Act was reintroduced in India effective January 1, 2005, a raging global debate commenced focusing on the robustness of the Indian Patent system. Quite often, many participants in the debate continue to compare the adequacies of the Chinese patent system with the inadequacies of the same in India.

‘The Pharma Letter’ dated October 26, 2010 published an Article captioned, “Intellectual property concerns and domestic bias hold back R&D in Asia-Pacific.”

Asia-Pacific still lags behind in terms of global R&D investments:

Unlike the common perception in India that China is attracting a significant part of the global investments towards R&D, latest data of MedTRACK revealed that only 15% of all drugs development are taking place in Asia-Pacific despite the largest growth potential of the region in the world. The Pharma Letter also reported, “In December 2009, China unveiled that it would give domestic companies making innovative products an advantage in qualifying for government purchases. This measure is likely to further limit foreign investment in product development in China, and negatively affect growth of foreign brands.”

Such type of domestic bias and protectionist’s measures are yet to be witnessed in India.

Since US is a pioneering country in the field of global R&D and its commercial interest related to such initiatives spans across the globe, let me try to analyze this subject, in this article, quoting only from official US publications.

IPR environment in China – the US perspective:

So far as the current IPR environment in China is concerned, US Embassy based in that country has commented as follows:

“Despite stronger statutory protection, China continues to be a haven for counterfeiters and pirates. According to one copyright industry association, the piracy rate remains one of the highest in the world (over 90 percent) and U.S. companies lose over one billion dollars in legitimate business each year to piracy. On average, 20 percent of all consumer products in the Chinese market are counterfeit. If a product sells, it is likely to be illegally duplicated. U.S. companies are not alone, as pirates and counterfeiters target both foreign and domestic companies”.

In the same context the following remarks of Mr. Shaun Donnelly, Senior Director, International Business policy, National Association of Manufacturers (NAM) , USA, made at the Intenational Trade Commission on June 15, 2010 on IPR environment in China, is also quite interesting:

“Unfortunately China remains Ground Zero for international product counterfeiting and Piracy. Despite considerable efforts over many years by US Government agencies and other international partners as well as Chinese Government the Progress has been minimal…. China continued to be the number one source country for pirated goods seized in the US borders accounting for 79% of the total seizures…The top sectors of IPR infringing products seized included footwear, consumer electronics, apparel, computer hardware, pharmaceuticals…”

Patent enforcement in China – the US perspective:

Regarding product patent enforcement is concerned the US Embassy in China comments:

“Though we have observed commitment on the part of many central government officials to tackle the problem, enforcement measures taken to date have not been sufficient to deter massive IPR infringements effectively. There are several factors that undermine enforcement measures, including China’s reliance on administrative instead of criminal measures to combat IPR infringements, corruption and local protectionism, limited resources and training available to enforcement officials, and lack of public education regarding the economic and social impact of counterfeiting and piracy”.

“Notwithstanding the increased number of applications, many patent owners (both foreign and domestic) continue to experience problems with infringement in China. Counterfeiting and other infringing activities are rampant, and critics frequently complain of lax enforcement of intellectual property laws. As a result, any party considering introducing a patented (or patentable) technology into China – especially one that could be easily reverse engineered or duplicated – would be well advised to proceed with extreme caution, seek legal advice from the outset, and plan fastidiously”.

Regulatory Data Protection (RDP) in India:

Regulatory Data Protection (RDP) for Pharmaceutical Products is still not in place in India, as the Government of India has already articulated that RDP is a ‘TRIPS Plus’ requirement and is non-binding to the country. The Government further reiterated that if any or more interested parties will feel that it is not so, they can certainly go to the WTO forum for the redressal of their grievances in this matter.

RDP in China – the US perspective:

However, on this subject the US feels that though RDP for a 5 year period is now in place in China, ‘inadequacies in their current regulatory environment allow for unfair commercial use of safety and efficacy data generated by the global innovator companies.”

In such a scenario the sanctity of RDP gets significantly diluted and may prove to be a virtually meaningless exercise.

Conclusion:

R. Fernando and D. Purkayastha of ICMR Center for Management Research in their article titled, “Pfizer’s Intellectual Property Rights Battles in China for Viagra” had commented as follows:

“Though the foreign research-based pharmaceutical companies were not happy with the lax IPR regime, the booming Chinese pharmaceutical market provided enough incentive for these companies to stay put and fight it out with the local firms for a share in this emerging market”.

Under these circumstances, while recommending for a world class robust patent regime in India to foster innovation in the country, if anybody wants to draw examples from China on the subject, it would indeed be foolhardy.

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

George Washington University Law School’s “The India Project” – Arguments and Counter Arguments

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Recently we witnessed yet another huge controversy on the ‘IP Summit’ organized by the George Washington University Law School (GWULS), USA. It was alleged that this summit supported by law firms, some pharmaceutical companies and others, was intended to influence the participating sitting judges on the pharmaceutical patent related cases currently being fought in various courts in India.

The Arguments:

However, the GWULS reiterated that this summit is intended to help India to build capacity in the IP law of the country. GWULS states the following in its magazine of winter 2009:

“From New Delhi to Bangalore, GW Law is building bridges of understanding between the United States and Indian legal communities through its fast-growing India Project, a collaborative enterprise fostering broad-based relationships and heightened international dialogue on issues of mutual concern”.

During their recent visit to India, in an announcement to the media GWULS explained the following:

“We have contributed to education by heightening the dialogue and understanding between India and the U.S. on IP law. We have done so in a collaborative way, as we have much to learn from our Indian counterparts. For example, the new Indian patent law, enacted in 2005, involves a range of issues that require clarification, and the project has resulted in a two-way discussion of real importance to the future of IP protection in India and across the world. Is the new law in compliance with Indian constitutional standards? How does it compare with U.S. law in addressing issues that arise during the processing of a patent application? (With regard to this question we recently held educational sessions with patent examiners at various Indian patent offices). Is it consistent with international standards? These are just some of the issues that attract the attention of people associated with GW’s India Project.”

The Counter Arguments:

The other group strongly counter argues highlighting that Indian judiciary and lawmakers have a long history of dealing with the patent laws since 1911. Although in between from 1970 to 2004, the situation slightly changed with the abolition of ‘Pharmaceutical Product Patent’, the re-introduction of the same effective January 1, 2005, does not call for an ‘un-called for’ indirect intervention in the judicial process of the country by law schools located beyond the shores of India.

This group feels that GWULS indirectly casts aspersions on the legal standard of the country and the competence of Indian judiciary, which needs to be protested, unequivocally. Moreover, the group argues, “even if IP awareness had to be taken to the people once again after the 2005 amendment, why did GWULS mount such a major campaign here?”

So far the Patent Law is concerned; this group accepts that our Patent Attorneys and particularly those lawyers who will argue the cases in front of the judges must possess impeccable knowledge in the nuances of patent law with all its nitty- gritty. Thus lawyers rather than judges should regularly update their knowledge on the details of patent related issues.

Laws are by and large country specific, with an exception probably of international law. After hearing the arguments of respective lawyers, this group feels that the judge will interpret the law of the land and give his/her judgment accordingly, as happens in any other comparable sphere of law. Just as for laws related to ‘terrorist’ act, India will not require its judges to be trained by other countries, this group reiterates, the same argument holds good for patent law, as well.

The Times of India (March 29, 2010), a leading daily of the country, reported the following in a news item titled, “’Vested interests behind discussion on patents”:

“Several civil society groups have come together to question the commerce and industry ministry’s alleged complicity in allowing meetings and interactions undermining India’s legal position on intellectual property (IP). These interactions are being organized annually with Indian judges and policy makers by the George Washington University Law School (GW Law), under its India Project, with funding from multinational pharmaceutical companies, industry associations and corporate law firms”.

Conclusion:

Be that as it may, the arguments from either side do not seem to be unbiased without any vested interests and are not convincing enough. In a globalized economy, from such comments it appears that the one group is feeling that Indian legal system is inefficient, if not incompetent, to deal with its patent related cases involving global pharmaceutical companies. On the other side, the local voice seems to be afraid of a ‘foreign hand’ intruding into the judicial space of India, which in my view is stretching the imagination far too much.

Overall, Indian Judiciary has a long tradition of keeping the institution robust enough and free from any external influences, whatsoever, notwithstanding GWULS coming to India almost every year, since around 2005.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

India and China…Practical relevance of ‘Priority Watch List (PWL)’ status in ‘Special 301 Reports’ of America…and the REAL ‘Game Changers’

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Many stakeholders around the world believe that Intellectual Property Rights (IPR) environment in China is far better than what we have in India. Interestingly “2010 Special 301 Report” of the United States of America dated April 30, 2010, paints a totally different picture.

The priority watch list (PWL)’ countries:

The Office of The United States Trade Representative, in the Press Release of ’2010 Special 301 report’, mentioned the names of PWL countries as follows:
“Trading partners on the Priority Watch List (PWL) do not provide an adequate level of IPR protection or enforcement, or market access for persons relying on intellectual property protection. China, Russia, Algeria, Argentina, Canada, Chile, India, Indonesia, Pakistan, Thailand, and Venezuela are on the Priority Watch List. These countries will be the subject of particularly intense engagement through bilateral discussion during the coming year”.

It is, therefore, quite clear that so far as IPR environment is concerned both China and India feature in the PWL of America. This totally breaks the perceived myth, as is being very often made out to be by many, that China is a better implementer of IPR than India.
Reasons for featuring in the ‘Priority Watch List’ (PWL):
“2010 Special 301 Report” makes the following comments for China and India being in the PWL of the USA:

China:
1. China will remain on the Priority Watch List in 2010 and will remain subject to Section 306 monitoring. China’s enforcement of IPR and implementation of its TRIPS Agreement obligations remain top priorities for the United States…the overall level of IPR theft in China remains unacceptable.
2. The United States is heartened by many positive steps the Chinese government took in 2009 with respect to these issues, including the largest software piracy prosecution in Chinese history, and an increase in the numbers of civil IP cases in the courts.
3. The United States is also deeply troubled by the development of policies that may unfairly disadvantage U.S. rights holders by promoting “indigenous innovation” including through, among other things, preferential government procurement and other measures that could severely restrict market access for foreign technology and products.
4. China’s IPR enforcement regime remains largely ineffective and non-deterrent.
5. The U.S. copyright industries report severe losses due to piracy in China.
6. Counterfeiting remains pervasive in many retail and wholesale markets.
7. China maintains market access barriers, such as import restrictions and restrictions on wholesale and retail distribution, which can discourage and delay the introduction into China’s market of a number of legitimate foreign products that rely on IPR.
8. China’s market access barriers create additional incentives to infringe products.
9. China adopts policies that unfairly advantage domestic or “indigenous” innovation over foreign innovation and technologies.
10. Draft Regulations for the Administration of the Formulation and Revision of Patent-Involving National Standards, released for public comment in November 2009 by the Standardization Administration of China (SAC), raise concerns regarding their expansive scope, the feasibility of certain patent disclosure requirements, and the possible use of compulsory licensing for essential patents included in national standards.
11. With respect to patents, on October 1, 2009, the Third Amendment to China’s Patent Law, passed in December 2008, went into effect. While many provisions of the Patent Law were clarified and improved, rights holders have raised a number of concerns about the new law and implementing regulations, including the effect of disclosure of origin requirements on patent validity, inventor remuneration, and the scope of and procedures related to compulsory licensing, among other matters. The United States will closely follow the implementation of these measures in 2010.
12. The United States encourages China to provide an effective system to expeditiously address patent issues in connection with applications to market pharmaceutical products.
13. The United States continues to have concerns about the extent to which China provides effective protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.
14. Generally, IPR enforcement at the local level is hampered by poor coordination among Chinese government ministries and agencies, local protectionism and corruption, high thresholds for initiating investigations and prosecuting criminal cases, lack of training, and inadequate and non-transparent processes. As in the past, the United States will continue to review the policies and enforcement situation in China at the sub-national levels of government.

India:
1. India will remain on the Priority Watch List in 2010.
2. India continues to make gradual progress on efforts to improve its legislative, administrative, and enforcement infrastructure for IPR.
3. India has made incremental improvements on enforcement, and its IP offices continued to pursue promising modernization efforts.
4. Among other steps, the United States is encouraged by the Indian government’s consideration of possible trademark law amendments that would facilitate India’s accession to the Madrid Protocol.
5. The United States encourages the continuation of efforts to reduce patent application backlogs and streamline patent opposition proceedings.
6. Some industries report improved engagement and commitment from enforcement officials on key enforcement challenges such as optical disc and book piracy.
7. However, concerns remain over India’s inadequate legal framework and ineffective enforcement.
8. Piracy and counterfeiting, including the counterfeiting of medicines, remains widespread and India’s enforcement regime remains ineffective at addressing this problem.
9. The United States continues to urge India to improve its IPR regime by providing stronger protection for patents.
10. One concern in this regard is a provision in India’s Patent Law that prohibits patents on certain chemical forms absent a showing of increased efficacy. While the full import of this provision remains unclear, it appears to limit the patentability of potentially beneficial innovations, such as temperature-stable forms of a drug or new means of drug delivery.
11. The United States also encourages India to provide protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products.
12. The United States encourages India to improve its criminal enforcement regime by providing for expeditious judicial disposition of IPR infringement cases as well as deterrent sentences, and to change the perception that IPR offenses are low priority crimes.
13. The United States urges India to strengthen its IPR regime and will continue to work with India on these issues in the coming year.

Responses and reactions in India:
‘Special 301 Reports’ have always been received with skepticism both by the Government of India and the domestic media. Even in the past, PWL status has hardly bothered either India or China to bring in a radical change in the IPR environment of the respective countries, as desired by the USA.

A recent article on the ‘Special 301 Report 2010’ that appeared in ‘Business Standard’, Sunday, May 2, 2010 comments as follows:

“India, in fact, continues to be on the ‘priority watch list’ of the USTR’s ‘Special 301’ report, despite a detailed submission of the intellectual property rights (IPR) compliance measures initiated by it in 2009”.

Many stakeholders in India feel and have also articulated that despite the country taking important steps to improve implementation of IPR within the country, the position of India in ‘Special 301 Reports’ has not changed much since last so many years. India, therefore, envisages no harsh measures by the US Government as a result of being continuously in the PWL of the ‘Special 301 Reports’.

Why then China attracts more Foreign Direct Investments (FDI) than India in the Pharmaceutical space?

In my view, this has got not much to do with the IPR environment in these two countries. The key ‘Game Changers’ for China, I reckon, are as follows:

1. Larger market size due to greater access to medicines:
Access to medicine in China covers 85% of their 1.2 billion population, against 35% of 1.1 billion population of India.

2. Larger market size due to better affordability of medicine:

Around 85% of the population in China is covered through various medicine price reimbursement schemes. Whereas in India around 78% of such expenditure is ‘out of pocket’ expenses. Conversely, not more than 22% of the population is currently covered by drug price reimbursement schemes in India.

3. Strong signals to the Government that ‘innovative companies’ are contributing to the ‘Economic Progress’ of the country:

In such a booming pharmaceutical market scenario, it is essential for the business to keep the government engaged to help create a more ‘innovative pharmaceutical business’ friendly environment, where even a slight improvement in the prevailing IPR conditions will give a significant boost to their business performance.

IMS forecasts that by 2013 China is going to be the third largest pharmaceutical market in the world with an estimated turnover of US $66.7 billion against 13 ranking of India in the same league table, with an estimated turnover of US $15.5 billion.

Similar trend was observed in the immediate past, as well. As reported by IMS MAT September 2009, China registered a turnover of US $24 billion with 27.1% growth against US $7.7 billion with 12.9% growth of India, during the same period. IMS, based on their research data forecasts that during 2008-13 period, China will contribute 36% of the growth of the Asia Pacific Region, against 12% of India.

Under this situation, it appears quite prudent for the ‘innovative pharmaceutical companies’ to send signals to the Chinese Government that they are contributing to the ‘Economic Progress’ of the nation by making significant direct investments, obviously with an expectation to get more business friendly environment in that country.

Recent ‘Healthcare Reform’ in China has further improved its market attractiveness.

Thus the business attractiveness of China as a pharmaceutical market scores much higher than India, fetching more FDIs for them, prevailing IPR environment and PWL status in the ‘Special 301 Reports’ for the country not withstanding.

Conclusion:

Overall IPR environment in India, many experts strongly believe, does not seem to be much different from China, if not a shade better. While interacting with Chinese experts recently in that part of the world, I understand, ‘Data Protection’ is just ‘on paper’ in China, causing a huge issue for the innovator companies in that country. Similar situation prevails so far as the effectiveness of patent enforcement mechanism is concerned, where innovator companies are fighting and required to fight such infringement cases in the provincial level and in so many provinces of the country, posing a huge challenge to the patent holders.

So far as PWL status in ‘Special 301 Reports’ is concerned, it seems to have almost lost its relevance, as both India and China become stronger economies with increasing global dependence on them, consistently registering double digit or near double digit GDP growth.

In china, the pharmaceutical market attractiveness, its size and growth are driven by two key factors as mentioned above, viz, huge domestic market access/ penetration and better affordability of medicines through various effective medicine price re-imbursement schemes, across the country. The recent ‘Healthcare Reform’ of the country has added further momentum to this progress.

So long as India does not take robust policy measures, followed by their effective implementation to address, much ignored, the access and affordability issues of medicines for the common man, the country will continue to be a laggard, compared to China in the race of market leadership within the global pharmaceutical industry.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Regulatory Data Protection and Indian Interest

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Of late, I read and hear raging debates, especially through media, on the relevance of Regulatory Data Protection (RDP) or Data Exclusivity in India. This issue is being considered by many as a fight between the commercial interests of multinational and the domestic Indian companies. In this fight the provision for RDP is being highlighted as something, which is against our national interest.

In this scenario, I shall try to argue that in our country, on the contrary, a provision for a robust RDP mechanism, which will protect clinical trial data of ANY innovator both against disclosure and unfair commercial use, is in the best interest of India, at least, for the following four important reasons:

1. RDP to benefit even small to medium size domestic Indian pharmaceutical companies:

Small to medium size pharmaceutical companies in India, who do not have adequate wherewithal to get engaged in drug discovery research, will also be benefitted from RDP. They will be able to obtain data exclusivity for a specific period on the new clinical data that they will be generating for new fixed dose combinations (FDC), new medical uses and new formulations of medicines. This will help them create more resources to invest in R&D to meet the unmet needs of the patients.

2. RDP on traditional medicines to benefit Indian Pharmaceutical companies:

Rich reservoir of Indian traditional medicines, commonly categorized under Ayurvedic, Unani and Siddha, are being used by a large majority of Indian populations over centuries. Such medicines are not protected by product patents, as such.

Further clinical development of these traditional medicines for greater efficacy and safety profile or newer usage, even if the ultimate product is not patentable, will help the common man immensely with affordable medicines.

The new clinical data generated by the researcher for such initiatives will be protected through RDP for a specific time period both against disclosure and unfair commercial use to make such efforts commercially viable and attractive.

RDP in this way can help the researcher to invest in the R&D of traditional plant based or similar medicines, which are not protected by any product patent. This in turn will help many domestic Indian pharmaceutical companies to get engaged in less cost intensive R&D with a robust economic model, built around RDP or data exclusivity.

3. RDP to boost outsourcing of clinical trials to India:

As per CII, clinical trials market in India is currently growing at 30-35%. McKinsey estimated that EU and US based pharmaceutical companies will spend US$ 1.5 billion per year on clinical trials in India by 2010. Currently China with 5 year regulatory data protection in place is having significant edge over India in this area.

Many CROs have started making investments in India to create world class clinical trial facilities to encash this opportunity. Such investments, both domestic as well as in form of FDI, are expected to further increase, if an effective RDP mechanism is created within the country.

4. RDP to help Competition from China:

Despite some significant inherent weaknesses of China, as compared to India, in terms of a preferred global pharmaceutical business destination, China is fast outpacing India in R&D related activities. More number of global R&D based pharmaceutical companies has started investing quite significantly in China. One of the key reasons for such development is that China provides product patent, patent linkage and RDP, whereas India provides only product patent.

R&D based global pharmaceutical and biotech companies who want a robust IPR regime in the countries where they will invest more, therefore, prefer China to India in terms of FDI.

A robust RDP mechanism in India would help bridging this gap considerably.

Conclusion:

There is a widespread apprehension in some quarters in India that RDP will delay the entry of cheaper generic drugs in the country. This apprehension seems to be unfounded.

Unlike product patent, RDP will not provide any market exclusivity even within the specified period of RDP. Any generic manufacturer can generate its own regulatory data and obtain marketing approval from the Drug Controller General of India (DCGI) to market a non patent related product in the country, just as in any developed market of the world. Thus RDP will not delay any generic entry into the market.

My final argument, if the provision for RDP or Data Exclusivity will delay the entry of cheaper generic medicines into India, why the same is not happening in the developed markets of the world like, USA, EU, Japan and even in China, despite having a robust provision for RDP or Data Exclusivity firmly in place in each of these countries?

Thus in my view, the provision for RDP in India is undoubtedly in the best interest of our country.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion

On ‘Patent Linkage’ – a rational argument on an emotive debate

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WTO TRIPS Article 28.1a says that the member countries agree to ensure exclusive rights to patent holder for a specific time period. In case of India, like most other countries, this time period is for 20 years.During this period the member countries agree to prevent third parties from making, using, offering for sale the patented product without the owner’s consent.In India, during last twelve months, at least 4 patents were infringed by the local generic companies. All these cases are currently under litigation. No one at this stage will possibly be able to hazard a guess as to when will these cases ultimately get resolved. If it takes another two to three years to get the final verdict from the honourable High Courts, the revenue of the innovator companies who have already launched their patented products in India will get shaved off, at least for this period, leaving a very adverse commercial impact on them. There is a theoretical possibility that it may take even more time for the honourable High Courts to resolve these cases and during the remaining period of limited patent life of these products the cases may not get resolved, at all.

Moreover, in India there is no known strong deterrent for patent infringement. In absence of which, the opportunity to make significant commercial gain through patent infringement, on the pretext of extending benefits to patients could indeed be, many a times, difficult to resist. Media reports that the National Pharmaceutical Pricing Authority (NPPA) has raised huge demand in crores of rupees for overcharging the common man, flouting the drug pricing norms, by some of these large companies involved in patent infringement litigations, vindicates the point of their basic overall intention of significant commercial gain over extending pricing benefits to the patients. The moot question that follows is who is responsible to ensure the sanctity of the product patent system in India?

The prevailing situation warrants a strong regulatory system which could prohibit marketing approval of generic equivalents of patented molecules during their patent period.

The question that is often raised in this context is who exactly be held responsible for implementation of such a system in our country? While addressing this question one should realize that it is the Government in its entirety and not just the Patent offices or any particular ministry or ministries of the Governments is bound by the WTO TRIPS Agreement. Therefore, it is justifiably the responsibility of all Government departments/ministries to ensure that TRIPS obligations of the Government on proper enforcement of patent are properly met.

The process of granting marketing approval for patented molecules, in general, rests on the Ministry of Health (MoH) of WTO member states. Thus for WTO member states to meet TRIPS obligations effective communication between the MoH and the Patent offices of the country is absolutely essential. Such a system will help prevent approval of generic versions of patented molecules before expiration of the product patents.

Establishing this communication process will ensure that one department/ministry of the Government (say DCGI) does not impair the efforts of another Government department/ministry (say IPOs) to provide effective intellectual property protection as articulated in Article 28.1 of the WTO TRIPS Agreement.

This system will ensure that Health Regulatory Authorities do not, even unintentionally, undermine the commitment of the Government to conform to the TRIPS Agreement.

My experience of the last three years of post product patent regime in India prompts the need for establishing a “Patent Linkage” system without further delay, not only for effective patent protection but also to encourage innovators to get more involved and engaged in the process of innovation in India.

Will India be the unique country if such a system of “Patent Linkage” is put in place? The answer is obviously ‘no’.

In the largest market of the global pharmaceutical industry, the USA, such a system exists. US FDA maintains a listing of pharmaceutical products known as the ‘Orange Book’. The soft copy of the ‘Orange Book’ is also available through internet at: http:/www.fda.gov/cder/ob/.

US FDA does not authorize marketing approval of generic versions of patented molecules listed in the ‘Orange Book’.

What then happens in the second largest market of the global pharmaceutical industry, the European Union (EU)? In the EU, sanctity of the product patent is ensured by granting 10/11 years data exclusivity. Thus, if any company intends to introduce a generic version of a patented molecule, it will have to generate its own sets of entire regulatory data through a very long and expensive process, which may take several years. Even after spending huge amount money and time towards generation of their own clinical data, there is no guarantee that such companies will be able to market the product without getting involved into expensive patent infringement litigation. Thus in the EU, the deterrent to make such an ambitious attempt is humongous.

Various types of ‘Patent Linkage’ system also exists in Australia, Canada, Mexico, Jordan, UAE, Singapore, China etc. While putting in place of such a system is reportedly in progress in countries like, Chile, Dominican Republic – Central America, Bahrain, Morocco, Oman etc.

To conclude, in my view, when the Government of India is the sole authority to grant product patents in India, it is the responsibility of the same Government to protect those patents through its Health Regulatory System i.e. DCGI’s office. I reckon, such a system already exists in India. The procedure of (‘Patent Linkage’) checking the patent status before granting marketing approval already exists in FORM 44, which is an application to the DCGI for grant of permission to import or manufacture a New Drug or to undertake clinical trial in India. In the first page of FORM 44 (available in the website of the DCGI) under ‘Particulars of New Drug’ in point 8, it seeks details of the ‘Patent Status of the drug’. Can this information be not effectively utilized to justifiably deny marketing approval of a generic version of a patented molecule during its patent life in India? If not, it is difficult to make out what purpose will the DCGI utilize this information for?

Thus in my view, the procedure to be followed for ‘Patent Linkage’ in India is already in place. There is hardly any need to reinvent this wheel either. The Health Regulatory Authority of India should now make this procedure work effectively in its obligation to adhere to the commitment of the national Government to honour Article 21.1 of WTO TRIPS Agreement.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.