Data Exclusivity: The Implications for India

Data Exclusivity: The Implications for India

By Alfred Adebare, Of Counsel,
LexCounsel, Law Offices
E-mail: aadebare@lexcounsel-india.com

What is Data Exclusivity:

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.

For example, in order for a generic drug[2] to be approved in the European Union ("EU"), it goes through what is called an abridged product license registration process. Generics companies have to prove bioequivalence to the original innovator's reference product, but do not have to conduct clinical trials that proved the efficacy and safety of the medicinal product. They are allowed to use the test and other data presented by the originator to gain the product license in a country. However, the generics companies are not allowed access to this data until the product has been approved in the EU for 6 or 10 years, depending upon the type of marketing authorization (centralized or otherwise), or the country of sale.

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.

During the data exclusivity period, the so-called abridged procedure for third parties obtaining a marketing authorization will not apply. After the data exclusivity period, the DRA is able to internally refer to the data of the originator company in order to assess the generic application for safety and efficacy and the abridged procedure permits an applicant for a marketing authorization to omit the pre-clinical and clinical test results normally necessary to support an application in circumstances where the equivalent data has already been filed by a third party in relation to a product that has already been authorized for sale in circumstances where:

the medicinal product is "essentially similar" to the product which is the subject of the earlier authorization;
the earlier authorization was granted within the EU and has been in force for the exclusivity period; and
at the time of the abridged application, the earlier approved product is being marketed in the member State where the abridged approval is being sought.
Data exclusivity in the EU is regulated by Article 4 of Directive 65/65/EEC (as amended from time to time) of the EU and interpreted in accordance with several judgments of the European Court of Justice. In terms of the most recent Directive 2004/27/EC, the 6 or 10 years exclusivity and protection periods has now been harmonized. The new Directive provides for 10 years of data exclusivity for results of preclinical tests and clinical trials that must be submitted when applying for marketing authorization, irrespective of the authorization procedure used. Though a generic applicant can file for approval on the 8th anniversary of the innovative product's approval, the generic authorization must await the 10th anniversary. Also, it is possible to extend the period for an additional 1 year, if during the first 8 years of the 10 years, a marketing authorization holder obtains an authorization for one or more significant therapeutic indications. Due to these technical details, the exclusivity formula in the new Directive is described as "8+2+1."

Due to the opposition to this overall increase in data exclusivity, the new period of data exclusivity will only take effect for reference products applying for marketing authorization after the new law is fully in effect (around November 2005). Therefore, the first generics applications under the 8+2+1-year data exclusivity period will not occur until late 2013.

Directive 2004/27/EC also introduced definitions of a reference medicinal product and a generic medicinal product. The intent is to clarify what is meant by "essential similarity" to a medicinal product already authorized in a given member State and generally to provide greater clarity on which products fall under the abridged application provisions of EU pharmaceutical legislation.


Data Exclusivity Laws Around the World:

United States ("US") – up to 5 years

In 1984, the US became the first country to enact data exclusivity legislation. The Drug Price Competition and Patent Term Restoration Act, commonly known as the "Hatch-Waxman Act", actually relaxed the level of protection afforded to testing data in the US. Previously, testing data submitted to regulatory agencies had received indefinite protection as trade secrets. Under the Hatch-Waxman Act, applications for approval of new drugs receive 5 years of data exclusivity. Applications for the approval of new indications for an existing drug receive 3 years of data exclusivity.

New Zealand – 5 years

New Zealand implemented Article 39.3 of TRIPS via the Medicines Amendment Act 1994 (NZ), effective as from 1 January 1995. Generally, the protection period is 5 years. There is no data exclusivity period for data relating to new uses or formulations of old active ingredients.

Japan – 4 to 10 years

In Japan, the data exclusivity period varies from 4 years (for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions) to 6 years (for drugs containing a new chemical entity or medicinal composition, or requiring a new route of administration) to 10 years (for orphan drugs or new drugs requiring pharmaco-epidemiological study).

China – 6 years

Under Article 35 of the Implementing Regulations of the Drug Administration Law of 4 August 2002, China provides 6 years of data exclusivity as from the date of marketing approval.

Australia -5 years

In Australia, the Therapeutic Goods Amendment Act 1998 established a 5 year data exclusivity period for new products containing pharmaceutical actives approved after 17 April 1998. The data exclusivity period begins on the date of marketing approval. Data exclusivity is provided in relation to therapeutic goods which contain a "new active component". This is defined as a substance having a therapeutic effect. The Explanatory Memorandum to the Act states that "substance" may include "a biological product or compound". This suggests that the data exclusivity period applies to biotechnology products requiring TGA approval.

Data exclusivity is only provided in relation to new active components which have never been included in the Australian Register of Therapeutic Goods. Therefore, data exclusivity is not provided for new uses or new formulations of existing compounds.

Data Exclusivity Related International Obligations: Agreement on Trade Related Aspects of Intellectual Property Rights ("TRIPS").

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.

"Article 39.3: Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use."

Article 39.3 of TRIPS 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 DRA. 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:

"To have a meaningful purpose this provision (Article 39.3) must be interpreted to require the protection of data against use by the competitors. Even if there is some concern about government use of such data in a commercial manner, it is minuscule in comparison to the problem of competitors´ use of the data. Consequently, in light of the maxim of statutory construction that a provision will be interpreted so that no part will be inoperative or superfluous, void or insignificant, Article 39 para.(3) must be interpreted to provide protection against the use of data by competitors for some period of time"

The Office of the United States Trade Representative has interpreted Article 39.3 of the TRIPS Agreement to mean that:

"the data will not be used to support, clear or otherwise review other applications for marketing approval for a set amount of time unless authorized by the original submitter of the data. Any other definition of this term would be inconsistent with logic and the negotiating history of the provision".

The EU argues, similarly, that Article 39.3 established an exclusivity obligation. According to the EU, all that is left to member countries is the determination of the duration thereof.

"the only way to guarantee that no "unfair commercial use" within the meaning of Article 39.3 shall be made is to provide that regulatory authorities should not rely on these data for a reasonable period of time, the determination of what is a reasonable period of time being left to the discretion of the Members".

In theory, Article 39.3 appears to give Members the discretion to provide for different means of data protection, although it is very difficult to imagine other ways than non-reliance over a certain period of time, except for a (temporary) refusal to grant any second market approval to similar products (even if the second applicant submits its own data), as is the case in at least one WTO Member and maybe for an obligation to pay as a compensation for reliance on proprietary data without having to obtain consent from the first applicant. The question remains whether such payment would indeed be sufficient to guarantee that any "unfair commercial use" of test data takes place. For instance, it would be essential that such payment reflects the investments made by the original applicant -- which may not always be easy to establish.

In theory, any country maintaining an effective system to implement obligations under 39.3 even if different from non-reliance over time, would not be in breach of its TRIPS obligations, but we are not aware of many alternatives and it is clear that what the TRIPS-negotiations had in mind was data exclusivity over a certain period of time. On the other hand, as it does not set any time limit, Article 39.3 would not prevent a country from providing for data exclusivity for an unlimited period of time".

It has been argued that the EU position suffers from several shortcomings:

First, had the negotiating parties agreed to embrace the concept of exclusivity, they simply could have done so explicitly. The TRIPS agreement's obligations in relation to copyrights, trademarks, industrial designs, patents and integrated circuits (via incorporation of the Washington Treaty), all explicitly provide for exclusivity. The negotiating history of Article 39.3 reveals that the parties considered at length, but did not adopt, text which clearly required exclusivity for test data.

Second, if the agreement only left the members the freedom to determine the duration of the exclusivity period, on what basis could a panel establish an "adequate" duration? The basic rule of Article 3.2 of the WTO's Dispute Settlement Understanding prohibits dispute settlement bodies from adding to or subtracting from WTO agreement rights.

In essence, Article 39.3 clearly requires some form of protection for test data. Its main purpose is not to prevent the commercial use of such data by governments, but the use by competitors. In our view, the wording, context and purpose of the article does not support an interpretation that the required protection can be implemented only on the basis of an exclusivity protection.

Multilateral and Regional Obligations

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"), which paved the way for the mammoth Free Trade Area of the Americas ("FTAA"). It brings together El Salvador, Guatemala, Nicaragua, Honduras, and Costa Rica in a tight trade embrace with the US. It has been argued that all these bilateral agreements contain TRIPs-plus provisions and are attempts clearly aimed at enabling the US lobby and the Pharmaceutical Research and Manufacturers of America (PhRMA), to dominate all markets and delay competition from generics.

Data Exclusivity: 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 clarity……Under 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[3] .

Patent Amendment Act, 2005

January 1 2005 marked the culmination of a long, often controversial process of amending India's 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[4] .

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] A generic medicine is the therapeutic equivalent of an originator pharmaceutical product whose patent has expired. It contains the same active substance as, is essentially similar to, and is therefore interchangeable with the originator product.

[3] 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.

[4] 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.