In
the past few months India witnessed two major events which have given an
unprecedented boost to its domestic generic pharmaceutical industries. First one
was the grant of India’s first compulsory licence to NATCO for Bayer’s Nexavar
(sorafenib tosylate) and
the latter, the Supreme Court decision in Novartis case, where the Apex Court
refused to grant patent for the beta crystalline form of Imatinib Mesylate
discouraging the practice of Evergreening by the pharmaceuticals. These
decisions came as a warning for the Multinational Pharmaceutical giants against
their attempt to exploit India’s vast pharmaceutical market using their patent
rights. These decisions are allowing the prevalence of the required competition
in the pharmaceutical market providing for the existence of the generic drug
industries which shall eventually force the pharmaceutical companies to bring
down the drug prices down to ground level and thereby force them to chisel
narrow their profit rates. But what if these Pharmaceutical companies were
allowed to sue the Government for the losses suffered by these decisions? I do
think that such an eventuality will be least helpful in the Indian scenario. This
is one of the much feared consequences of the investment clause of the India EU
broad based, ambitious and
balanced Free Trade Agreement (BITA). Amongst the jubilant celebration of
the Novartis verdict, a piece of news went rather unnoticed by the Indian
media, where, in a joint statement made on the 11th of April, India
and EU reiterated their strong commitment to bring in a successful outcome to the EU India
negotiations for the bilateral trade agreement as soon as possible. On the face
of it the BITA seems rather harmless and beneficial, but when one scans through
the general nature of the Regional Trade Agreements signed by United States and
EU with various developing countries reveals the dangers underlying the RTAs. The
lack of transparency regarding the contents of the BITA and regarding the
negotiations has also thickened the suspicions in the mind of the critics of
the Agreement.
The United States and EU have been
striving for a higher standard of intellectual property protection for a long
time to safeguard the interests of the Multinational Pharmaceutical giants
situated in these countries. It was the lobbying of these countries in the
Uruguay Round that had lead to the formation of the TRIPS agreement which had
raised the standard of the Intellectual Property protection across the world
without considering the individual needs of the world nations[i]. When
we analyse the provisions of TRIPS we can see that one of the primary things it
did was to force its members to grant both process and product patents without
any exceptions, thereby forcing them to grant patents for pharmaceutical
products. TRIPS imposed a uniform IP Regime to be strictly followed by the WTO
members, as a minimum standard, in their domestic IP laws raising the IP
standards to new heights totally disregarding the domestic requirements of the
Developing countries and Least Developed Countries (LDCs). Compulsory
licensing, which would have acted as an effective tool against this
monopolisation, was reined in with extreme restraints. The TRIPS Agreement,
though allowed the member countries to grant compulsory licences, it required
that the production under the compulsory licence must be used predominantly for
the domestic purpose. This language totally disregarded those countries who
were not having the sufficient technical knowhow to manufacture such products
domestically, who were totally depended on the imports from other countries.
Parallel imports were also restricted by placing them within the four walls of
exhaustion policies. These measures, though, allowed the pharmaceutical cartels
to regain their ascendency by effectively reining in the generic industry, in
effect they robbed the people of the developing countries and the LDCs of their
right of access to medicine. The only category that seemed to be content with
TRIPS were the pharmaceutical giants of the developed countries as they were
able to chain the generic drug industry, which was threatening their monopoly
and forcing them to bring down prices.
This issue was echoed in the 1999 Seattle WTO Ministerial Summit[ii] by
countries like India and Brazil and again in the Fourth Ministerial Conference
of the WTO took place in Doha in 2001 leading to the Doha Declaration on TRIPS
and Public Health.
Doha Declaration along with WTO Decision
on Para 6 decision of 2003, adopted a broad mindset in addressing these issues.
It inserted such flexibilities in the matters of compulsory licensing and
parallel importation, to enable the creation of an effective system to ensure
access to medicines. Accepting the proposal put forth by the developing
countries and the EU in pith and substance, the WTO decision on the Para 6 of
Doha Declaration defined pharmaceutical products in such a fashion as to
include within their scope not only medicines but also such products produced
through patented processes of the pharmaceutical sector which are needed to
address the public health problems mentioned in para.1 of the Doha Declaration.
Automatically bringing in the LDCs under the definition of the “Eligible
Importing Member”, it further provided that any other member country will also
be eligible to import under the Decision provided it has notified the TRIPS
Council of its intention to do so. These adoptions were made discarding the
strong oppositions from the United States, which had held the position that the
obligation under TRIPS Agreement should be strictly interpreted and
implemented, as if the Doha Declaration had never been adopted.[iii] Thus
the WTO Decision provided for an effective outline for the import and export of
generic drugs for in order to meet the needs of the LDCs and such other
countries which were not able to fully enjoy the fruits of the original
provisions of the Doha Declaration.
But even with the Doha flexibilities
being incorporated under TRIPS Agreement under Article 31bis, the TRIPS still
remains as the minimum standard to be followed without any prescribed ceilings.
This has given the freedom to the North Block countries which are home to the
transnational pharmaceutical countries to persuade the developing countries to
follow TRIPS-Plus IP standards by way of bilateral and multilateral free trade
agreements. Majority of these RTAs and FTAs contain an Intellectual Property
Chapter along with other issues, which requires the signing parties to follow a
TRIPS Plus standard in their IP transactions. The IP chapters in many of the
FTAs inked around the world by United States and The European Community with
various States are characterised by conditions like patent linkage[iv],
patent term extensions[v],
conditions of data exclusivity[vi]
and so on.[vii]
The broad definition given to the term
“investment” in the drafts of BITA allows to bring within its ambit “intellectual
property rights, goodwill, technical processes and know-how as conferred by
law.[viii]
This provision allows the foreign investors to challenge any appropriation of
their assets including the intellectual property assets by the Government even
though such actions may be valid under the domestic laws or in accordance with
the court decisions even though it was given by the Apex court. Thus if this
comes into force as apprehended, Bayer and Novartis will be able to sue the
Government for their losses in future if such a circumstance occur in the
future. Though it may look as too much a hypothetical situation, the sad fact
is that similar situations have already come up in many Countries. For instance
Government of Canada is facing such an action from the US drug giant Eli Lilly
& Co. which has demanded $100 Million under the conditions laid down under
the North American Free Trade Agreement (NAFTA) in compensation for the
Canadian Supreme Court decision regarding their drug Strattera, whereby
the Court had stripped the Company of its patent on the said drug.[ix]
Article 30 of the leaked text of the
India EU BITA (same can be accessed here)dealing with the border measures follow the lines of the
controversial EU Border Regulation 1383, against which India and Brazil had
approached the WTO dispute settlement forum[x].
The Regulation allowed the customs authorities to take action against goods
suspected of infringing IP rights when they enter the EC territory for release
for free circulation, export or re-export, as well as in cases of infringing
goods found during checks when entering or leaving the EC territory, placed
under a suspensive procedure, in the
process of being re-exported subject to notification or placed in a free zone. The entire IP spectrum including patents,
supplementary protection certificates, plant variety rights, designations of origins
and geographical indications was brought under the ambit of the Regulation, in
addition to the traditionally protected sectors of trademarks and copyright. The
clauses related to the patent laws are yet unknown. Though there are many
versions regarding the presence of similar conditions in the India EU BITA, and
though the EU Commissioner for Health and Public Policy, stated that EU is not
insisting on patent term extension[xi],
the EU Briefing Note issued in May, 2011 (same available here) confirms that
the drafts which were being negotiated necessarily contained the provisions of
data exclusivity and patent term extension.[xii]
If the final text of the BITA includes the patent related clauses similar to
this or ACTA or the Trans Pacific Partnership (TPP) of US, then that will be
sounding the last bell for the Indian generic industry and for the ‘Pharmacy of
the World’.
India and European Union have been
negotiating the Bilateral Trade and Investment Agreement (BTIA) since mid-2007
but differences between the two sides on several issues had prolonged the
discussions without any conclusions. But the sudden increase of interest, with
an ugly haste, to finalise the BITA, read together with the protests raised by
the Multinational Pharmaceuticals, a majority of whom are based in EU region,
in relation to the Novartis decision creates a heavy shadow of doubt on the
genuinity of the intentions of the EU in this matter. The Strategy for the
Enforcement of Intellectual Property Rights in Third Countries published by
the Directorate General for Trade of the European Commission[xiii]
published in 2005, clearly states that establishment of a very high standard
of protection of IP (including the enforcement thereof) is the goal, the IP
chapters of the bilateral trade agreements of the EU aims to achieve. The
strategy paper aims to identify priority countries (the term priority
gives way to ‘problematic’ when we come to the Annexure of the document)
and enforce this strategy through various means including the signing of
bilateral trade agreements. They have identified the priority countries under
three categories: Source Country (where the allegedly IP infringing goods
originate), Transit Country (countries allowing the transit of such goods
through their borders) and Target Countries (the end market)[xiv].
In view of the EU seizure of Indian Generic drug shipments transiting via
Netherlands and Germany in 2008, to Brazil, Nigeria and Republic of Vantau under
the EU Border Regulation 1383, India clearly falls under the category of
“source country”, under the terms of this document, bringing it under the group
of Priority Countries mentioned under the EU Strategy. Unlike the GATT and GATS
Agreements, TRIPS Agreement does not include any provisions which exempt the
application of MFN principle for the Intellectual Property provisions in FTAs,
thus extending these TRIPS-Plus conditions indirectly applicable to all other
countries dealing with the signatories of these FTAs. If the fears raised by
the critics of BITA regarding the IP chapter (which are validated by the EU
Trade policy and their other FTAs) and the related issues including the
Investment clauses in the BITA text, becomes a reality, it shall defeat all the
efforts taken by India and other the developing countries including Brazil,
South Africa etc in WTO Doha Round to ensure access to medicines for the people
not only in India but also of the developing countries and least developed
countries (LDCs).
[i] See Drahos Peter, Expanding Intellectual
Property’s Empire: The Role of FTAs, GRAIN (2003), available at http://ictsd.org/i/ip/24737/ (last visited on 30th March, 2013) The
international pharmaceutical lobby, which had felt threatened by the
ever-increasing presence of the generic industry, effectively lobbied with
their home governments and was successful in bringing in the TRIPS Agreement
[ii] N.S. Gopalakrishnan, “TRIPS Agreement and Public Health: An overview of
International Issues” (2008) 13(4) J.I.P.R. 395, 396
[iii] See Sun, “The Road to Doha and Beyond” (2004) 15 E.J.I.L. 123, 146
[iv] The system of ‘patent
linkage’ refers to the practice of linking drug marketing approval to the
status of the patent of the originator’s product. It directly affects the entry
of generic drugs into the market; See Mittal, Anshul, Patent Linkage in
India: Current Scenario and Need for Deliberation, JIPR Vol.15(3) [May
2010]
[v] An extended patent term (in most of the FTAs
signed by EU and US involves a term extension of five to seven years) shall
further delay the entry of the generic producers into the market.
[vi] As of now when the generic companies approach
the Drug Controller for grant of marketing rights of the generic product, the
only thing they have to do is to show that their product is bioequivalent to
the patented drug molecule, and they do not have to conduct any separate
clinical trials. If the data exclusivity clause is agreed to under the FTA they
generics will have to conduct separate clinical trials by themselves which is
time consuming and ethically wrong and further delays the entry of the generic
version into the market extending the monopoly of the patent holder, at times
even after the expiry of the patent
period.
[vii] Section 5 of the IP Chapter of the EU-Andean
FTA includes the requirement of Patent term extension and Data Exclusivity (Articles
230 and 231)
[viii] See The Intellectual Property and
Investment Chapters of the EU-India FTA:
Implications
for Health., Available at http://ec.europa.eu/health/eu_world/docs/ev_20110616_rd01_en.pdf (last accessed on 16th April, 2013)
[ix] See Eli Lilly fights Canada’s move to strip
drug patent., available at http://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/eli-lilly-fights-canadas-move-to-strip-drug-patent/article6082557/ (last accessed on 16th
April, 2013)
[x] See Martin Khor, “Row
Over Seizure of Low-cost Drugs Exposes Dangers of TRIP-Plus Measures” ,
http://www.southcentre.org/ARCHIVES/index.php?option=com_content&task=view&id=1072&Itemid=279
[xi] See
http://www.thehindu.com/business/Economy/not-insisting-on-patent-extension-says-eu/article4610892.ece
[xii] The Intellectual
Property and Investment Chapters of the EU-India FTA:
Implications
for Health., Available at http://ec.europa.eu/health/eu_world/docs/ev_20110616_rd01_en.pdf (last accessed on 16th April, 2013)
[xiii]Available at http://trade.ec.europa.eu/doclib/docs/2005/april/tradoc_122636.pdf
(last visited on 16th April, 2013)
[xiv] Id Annexe 1 at p.17
