Earlier this month the Indian Pharmaceutical Alliance was up in arms over a proposed rule change being considered by the Centre to provide a longer period of data exclusivity to “new” drugs, which it believes will severely impact the availability of low cost affordable generic medicines in India.

The move comes allegedly at the behest of the United States Trade Representative (USTR), which is the arm of the US government tasked with the role of enforcing US intellectual property in markets around the world. The proposal change will result in increasing the data exclusivity period from the current four years to 10 years.

Data protection

Data exclusivity protects data generated in the course of clinical trials of a drug. Before a drug can be marketed, the approval regulations require drugs to undergo detailed clinical testing to ensure it is safe and efficacious. The cost of undertaking tests is considerable, involves human subjects and is, therefore, an arduous exercise. Most governments award a drug company that has undertaken clinical trials with a period of “exclusivity” which ranges anywhere from five to eight years.

Historically, data exclusivity represents a compromise between the innovator drug companies and generic drug companies, where innovator companies get a period of exclusivity. But once that exclusive period is over, a generic company can use the data for its own drug approval. The compromise, first memorialised in the US under the Hatch-Waxman Act 1984, provides a period of exclusivity of five years to protect the original data of the clinical trials.

In effect, the data exclusivity period allows drug companies to recoup the investment on clinical trials (which can run up to four separate phases involving several patients). During this period, generic drug companies cannot make an application to manufacture a drug by using the clinical trial data of the innovator even if the patent on that drug has been invalidated.

Delay tactics

During the data exclusivity period, a drug regulator such as the US Food and Drug Administration (FDA) will not use or apply information from the clinical trials of the first applicant to approve a generic version of the same drug. The FDA grants new chemical entities (NCEs) a total data exclusivity period of up to five years. However, if a generic drug company is able to successfully challenge the applicant’s patent, the FDA will process the generic company’s application for drug approval after the fourth year of the data exclusivity period, but not before.

Thus, data exclusivity tends to delay the entry of generic competition into the market allowing innovator companies to monopolise the market during the exclusivity period even when the patent is invalidated. This is why data exclusivity is controversial because it plays an important part in staving off competition from a generic version even if the patent is invalidated. In effect, data exclusivity indirectly gives innovator drug companies a period of protection from competition even when the underlying patent over the drug is invalidated.

Under Indian law, the Drugs and Cosmetics Act 1940 provides for data exclusivity for a “new drug” under section 122E for a total period of four years from the date of approval. A “new drug” is not defined as a patented drug but simply a drug which has not been used in the country to any significant extent. Like the US, the Indian regulations require an applicant for a new drug to engage in extensive testing and clinical trials. But, the requirement may be waived for purposes of “public interest” or, if the new drug has been approved and marketed for several years in other countries. Such a requirement is a standard norm to avoid duplication of trials in different jurisdictions which can result in increasing the cost and delaying the introduction of the drug in the market.

Harmful move

If the Government indeed intends to increase the data exclusivity period to 10 years, such a move would be particularly harmful to generic Indian drug companies. This is because even where a patent is invalidated the generic drug company will be prevented from entering the market until the data exclusivity period of 10 years is over.

Critics may suggest that generic drug companies are free to conduct their own clinical trials, but the financial as well as other costs of repeating an exercise already undertaken far outweighs the benefits. Where a generic company had to previously wait for four years to market its drug, it will now have to wait for 10 years. Thus, an increase in the data exclusivity protection period will impact Indian patients detrimentally.

Importantly, the WTO TRIPS Agreement under Article 39 does not subject India or any WTO member to a fixed term of protection and hence it is unnecessary for India to agree to such an increased level of exclusivity commitment. Even under the Trans-Pacific Partnership, the proposal for extension of data exclusivity was a subject of severe criticism. Given this, it is unfortunate that India agreed to extend data exclusivity to 10 years.

Big tool

US pharmaceutical companies have been trying for years to slow the introduction of generics by a reversal of section 3(d) of the Indian Patent Act, without much success. The UN report on Access to Medication has highlighted the poor quality of high value pharmaceutical patents and raised awareness over the importance of providing access to generic drugs.

Data exclusivity has become the next big tool for US pharmaceutical industry to indirectly seek market exclusivity. Increasing the period of data exclusivity is the absolute best and indirect way of delaying generic competition. It is time for the Indian government to reconsider its position and evaluate where it stands on making drugs affordable for its ever growing population.

Ragavan is a professor at Texas A&M School of Law; Joshi is foreign attorney, Pillsbury Winthrop Shaw Pittman LLP