lawyers in India

Does India Really Need a Data Exclusivity Law

Written by: Amit Bhaskar - I am a student of National law School of India University, Bangalore, pursuing LL.M in Business Law. I am in first year
Arbitration Law
Legal Service
  • Data exclusivity is a matter of heated controversy now-a-days all over the world and a source of tussle between developing and developed countries on the one hand and Multinational drug companies and Domestic pharmaceutical companies on the other .The controversy behind Data exclusivity is important to understand and analyze as it is closely connected to the accessibility and affordability of life saving drugs to millions of people in third world countries.

    Data Exclusivity

    Data Exclusivity refers to a practice whereby, for a fixed period of time, drug regulatory authorities do not allow the test data of the innovator company to be used to register a equivalent generic version of that medicine. To simplify it, top multi-national pharmaceutical giants spend time, money and huge investment (Research and Development) to assess the efficacy, quality and safety of the new product. This process is known as clinical trial and it involves enormous amount of expenditure, time and money. For example clinical trial process to test the efficacy, quality and safety of a new anti-cancer drug may take 6-7 years or in some cases even 15 years.

    The whole process of clinical trial is very complex, expensive ant time consuming because new drugs have to be tested firstly on animals and then on human beings in order to determine its efficacy and safety and drug companies must reach reasonable or near certain conclusion that the new drug is safe for common public. Then the regulatory authorities in different countries will analyze those data in order to ensure that only medicines having safety, efficacy and quality enter into the market. Often the national regulatory authorities would ask the innovator or originator drug companies to provide relevant information and data to assess the safety, efficacy and quality of the drugs.

    Such data are very crucial and it contains all details of clinical trials and it is this data that originator companies seeks to protect so that generic companies cannot use such data because such data are result of long term effort and investment put into clinical trials and hence it will be extremely unfair to allow a third party (generic drug makers) to make a commercial exploitation of such data. In order to protect such data originator companies are demanding data exclusivity law so that such data submitted to regulatory authorities are not exploited by generic drug makers to test the quality, efficacy and safety of bioequivalent generic version of that medicine The originator companies which are giant multi-national pharmaceutical companies want such data to be protected for a certain period of time so that during that period, generic companies are precluded from using such data to test the quality, efficacy and safety of the generic version of that medicine.

    International Law on Data Exclusivity

    The Pharmaceutical companies are demanding data exclusivity law by resorting to Article 39(3) of TRIPS. Article 39(3) of the TRIPS states that that “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 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 data are protected against unfair commercial use “But it should be remembered that Article 39(3) does not talk about “Data Exclusivity” but only about “unfair commercial use” and it is this phrase that is interpreted by Multi-national companies as containing “Data Exclusivity” provision and thus demanding data exclusivity law.

    Case against Data Exclusivity Law

    The demand for data exclusivity law has come under intense debate all over the world. Many generic drug manufacturers and public interest groups are against such data exclusivity law. Their main contention is that if such data exclusivity law is introduced in India, the Drug Controller of India (DCI), which is regulatory authority, will be barred from relying on test data, submitted by pharmaceutical giants, in granting marketing approval to generic medicines. Instead, it will ask the generic drug manufacturer to undertake its own clinical trials and submit test data to controller of drugs to assess the quality, efficacy and safety of the generic version of the drugs. Sine clinical trial is a very complex and time consuming process and demand huge investment in Research and Development, the generic companies usually lack the financial infrastructural capabilities to undertake such task and even if they undertake such task, it will led to significant increase in the price of such generic drugs because generic companies by using test data of innovator companies save significant expenditure cost which is reflected in their affordable pricing system and thus paves the way for easy accessibility of life saving drugs to common people.

    Moreover, the long gestation period undertaken by generic companies in conducting clinical trials will delay the process of arrival of life saving drugs at affordable price in the market by a number of years and would amount to monopolization of the pharmaceutical giants. It is also said that since Indian drug companies export significant amount of life saving drugs to other developing and least developed countries, any significant rise in the pricing of such drugs or delay in the introduction of generic version of such drugs in the market would significantly affect the population in and out of the country. The argument against data exclusivity law is that it will have detrimental impact on public health. The absence of cheaper generics will put many life saving drugs out of the reach of patients suffering from deadliest diseases such as HIV/AIDS, diabetes, cancer and Alzheimer disease.

    Secondly, It is argued that clinical trial process involves ethical questions, as the proposed drugs have to be tested on animals and then on the human beings, usually on volunteer patients, in order to determine its efficacy, quality and safety. If data exclusivity law is enacted, then generic drugs manufacturers have to undertake clinical trials for getting the marketing approval of the generic version of the same medicine and it will led to duplicative test5ing and it would also amount to unnecessary and possible human injury associated with clinical trial process. It is unethical to conduct clinical trials on the drugs, which have already proven effective. And it is also important to obviate social and economic costs of repetitive animal and human testing. Hence, data exclusivity law can be challenged on moral and ethical grounds also.

    Thirdly, it is also argued that TRIPS agreement and specifically Article 39(3) does not at all refer to data exclusivity. It only talks about “unfair commercial use”. The pharmaceutical giants are misinterpreting Article 39(3) and construing “unfair commercial use” as “data exclusivity” with the sole purpose of monopolizing pharmaceutical business all over the world and maximizing their revenue with utter disregard for accessibility of medicines for the poor.

    Since it is very much clear that the term “unfair commercial use” appearing in Article 39(3) does not obligate implementation of data exclusivity law, the opponent is of the opinion that if such law is implemented it would amount to go beyond TRIPS agreement, in the light of the fact that Indian Government have also made clear that it is under no obligation to implement data exclusivity law under TRIPS Agreement. If such law is implemented it would amount to succumbing to the pressure of Multi-National companies and developed world and thus increasing the health care cost in the third world. The opponent points out that India is one of the largest global suppliers of the low-cost generic medicines and without access to it million of people in third world countries will lose access to such medicines. Thus in Indian context, the issue acquires global importance since India is one of the top 10 pharmaceutical products of the world and is also the major supplier of such drugs to third world.

    Any exclusivity right which hampers the growth expectation of the India’s pharmaceutical industry will have world wide ramification and would obstruct accessibility of life savings drugs to third world. Today 6.5 million people around the world urgently require HIV treatment and only 1.3 million are receiving therapy. The patenting regulation such as data exclusivity will severely restrict access to AIDS therapy globally.

    To support their viewpoint, the opponent of data protection law points out how such measures in other countries is already preventing drug regulatory authorities from granting approval to generic medicines thus seriously delaying access to affordable generic version of medicines. For example, in Guatemala, in February 2004, Atazanvira drug used in HIV treatment, priced at US$ 10,000 per person per year, received data protection for five years under the law passed by the Guatemala government. However more generic version of Atazanavir cannot enter the Guatemalan market until 2009 as drug regulatory authorities have to provide data exclusivity protection to test data related to Atazanavir. As a result drug accessibility in the form of generic version of Atazanavir is severely restricted.

    Fourthly, it is argued that data exclusivity law would led to ever greening of patent. The innovator companies will make minor modification of their drugs and will get it protected under data exclusivity law. Data exclusivity will encourage investment in modifying existing drugs rather than inventing new one. While patent would not cover data protection due to ever greening concept, data exclusivity is seen as new form of intellectual property right to effectively extend patent life. The Indian pharmaceutical alliance (IPA) argues that if data exclusivity law is implemented in India, and if data exclusivity allowed, say for five years, and a patented drug is introduced in the 17th year of the 20th year patent life, it could effectively extend the patent to seventeen plus five equaling 22 years and thus crossing the limit of patent protection of 20 years.

    Fifthly, the greatest disadvantage of data exclusivity is that it could prevent the registration of generic version of medicines even where innovator drugs lack patentability. For example, when a pharmaceutical product does not meet the standard of patentability or when no patents are granted, the test data could still comes under “Data exclusivity” purview. Hence, pharmaceutical giants will get protection of both patented as well as non-patented products and it would amount to double protection. Thus, even when any patent, Multi-National Pharmaceutical companies do not protect a medicine are assured minimum period of monopoly in countries having law on data exclusivity.

    Sixthly, one of the other disadvantages of implementing data exclusivity law is that it can defeat the provision of Compulsory Licensing. The Indian Patent Act under Section 84 contains law on Compulsory Licensing which can be enforced under certain conditions such as when patented drug is available in insufficient quantity or when the price is out of the reach of common people or in order to remedy anti-competition practice and in circumstance of extreme urgency or emergency. But if data exclusivity law protects such data, then the grant of Compulsory Licensing will be of no use to generic companies, as data exclusivity law will act as a barrier to marketing approval of generic version of patented drugs thus defeating the whole philosophy behind Compulsory Licensing.

    Case for Data Exclusivity

    The proponent for data exclusivity put forward the argument that test data, which are submitted to the drug regulatory authorities to assess the quality, efficacy and safety of the drug, are the result of huge and risky investment made by the innovator companies. According to Mr Hitesh Gajaria, partner, KPMG, ”It takes around 8-10 years of intensive clinical research and trials and investment between $800 million to $1.2 billion to bring a new drug to the market”. If such data are made available to the generic companies, it means that huge investment in Research and Development (R & D) made by the innovator companies to launch new drugs are unprotected. Echoing the same view, Mr Ranjit Sahani, vice-chairman and MD of Novartis points out that Research and Development is a high risk business. He says that it takes around 15 years to bring out a new molecule and a whole lot of data to provide the safety and efficacy and toxicology data which is proprietary to the company It is extremely unfair to allow the third party commercial exploitation of such data which are obtained after huge investment of time and money.

    The proponents also points out that Article 39.3 of TRIPS talks about “unfair commercial use” and any commercial use of such data by generic companies without prior consent of the innovator companies would amount to “unfair commercial use” and thus violating India’s obligation under TRIPS. Further where Substantial cost and expenditure is incurred by originator companies in the form of huge investment in R & D and clinical trials, it would be unfair and unjust to deprive him of legitimate and reasonable profits by allowing the generic companies to avoid the cost of undertaking similar procedure and coming out with the generic version of patented drugs without incurring expenditure on investment. This would amount to acting in manner contrary to prudent commercial practice.

    Secondly, if such data are protected, it would encourage pharmaceutical giants to make massive investment in R & D which is complex, time consuming and most importantly very expensive. Such huge investment in R & D is beyond the scope of the domestic manufacturers and even outside the financial limit of the third world countries. Thus data exclusivity will act as a incentive for such companies to make more risky and huge investment in drugs and medicines.

    The proponents are of the view that developing countries with appropriate data exclusivity law will enjoy better access to more innovative products sooner.
    Thirdly, it is being emphasized that since patent protection are not available in all countries, data exclusivity law at national level will encourage and act as an incentive for the innovator companies to launch innovative drugs in those markets and where adequate intellectual property protections are not available. And since it is not easy to launch the new products everyday, new uses are being found for the existing ones. While patent would not cover these because of ever greening concept, data exclusivity law can play a crucial role in protecting the investors interest where new uses are made of the existing products or where new products in the market lacks the standard of patentability or were denied patent protection.

    Fourthly, it is said that data exclusivity law will encourage and boost Foreign Direct Investment (FDI) in the country by Multi-national pharmaceutical giants and it would be good for India’s economic development. Concerned over absence of data exclusivity law in the country, multinational pharmaceutical companies are of the view that India could lose out on foreign investment in the pharma sector as protection of test data was the key to company decision on location of clinical trials. India’s technological and research and development will expand with resultant economic benefits if the data exclusivity law is implemented in the country.
    Fifthly, the proponents also argue that enactment of data exclusivity will encourage brain- gain as Indian scientists will return home to pursue innovation in their own country and will gain increased access to clinical trials in the country and hence Indian scientists will acquire global competitiveness and world class expertise in clinical trials in their own country.

    Sixthly, one important argument advanced in favour of data exclusivity law is that, if implemented, India may be excluded from the list of “Priority Watch List” of United States Trade Representative (USTR) under special 301 of the U.S Trade Act of 1974.

    The Priority Watch List is the list of all those countries that failed to provide and adequate level of Intellectual Property (IP) protection or market access to U.S manufacturer that failed to provide an adequate level of IP protection. Special 301 is an important part of the U.S Trade Law that requires the USTR to identify countries that deny adequate protection for intellectual property rights or that deny fair equitable market access for the U.S companies and/or persons who rely on IP protection. Inclusion of India in the Priority Watch List is not good for country’s economic development as it hampers the prospects of better trade relation with U.S and the prime reason for India’s inclusion in the list is the absence of data exclusivity law in the country. Once India will implement such law, it will lead to significant expansion of India’s trade relation with U.S.A.

    Seventhly, the proponents argue that all the fears created regarding accessibility of the drugs with the implementation of data exclusivity law are baseless. They point out that when Patent Act was amended in 2005 as required by TRIPS Agreement, hue and cry were made by generic drug manufacturers and health activists that it will led to catastrophe in pricing, availability or access to essential medicines in India or in developing countries importing life saving drugs from India. Such arguments advanced against 2005 amendment proved to be baseless with no evidence of such increased inaccessibility or price rise of essential medicines in the country. Instead they point out that inclusion of data exclusivity law in the country will accelerate access to new medicine therapies and will encourage the companies to innovate new drugs in the exporting market which will improve the quality of health care in the country.

    Eighthly, another argument that can be advanced in their favour is that not all in the country are against such law. For example, Confederation of Indian Industry (CII) favours data exclusivity for five years. Ranbaxy also supports CII view. Biocon Ltd, a Bio-Tech company, also favour it since biotech products need their own data for approval due to their complex nature. The Department of Scientific and Industrial Research (DSIR) has recommended data exclusivity law three years along with sufficient safeguards. The high level committee under the chairperson of Mr Satwant Reddy, secretary, Ministry of Chemicals and Fertilizers, has also recommended five year term of data exclusivity for India.

    Data Exclusivity Laws around the World

    The U.S.A was the first country in the world to give legal sanctity to data exclusivity in 1984.It enacted Hatch-Waxman Act which provides a five year data exclusivity for New Molecular Entities (NMEs).In European Countries; it varies from 6 to 10 years. In U.K the period is 10 year. In Japan its 6 years and in China grants for 6 years. In Australia, New Zealand and Brazil the period is 5 years. However in Jordan it is 15 years.

    Indian Government Stand
    The Government of India has made clear that Article 39.3 does not bind her to implement data exclusivity law and it is under no obligation to enact the law on data exclusivity. The Government of India is of the opinion that Article 39.3 only requires WTO members to protect the test data against any “unfair commercial use” It neither includes market exclusivity to the innovator nor does it create market protection The Government constituted a high level committee under the chairmanship of Mr satwant Reddy,secretary,Ministry of Chemicals and Fertilizers, to consider steps to be taken in the context of Article 39.3 0f the TRIPS agreement for the protection of undisclosed information. The committee recommended data exclusivity for a period of five years.

    The government is still considering the proposal put forward by the Satwant Reddy committee, which would allow multinationals exclusive use of their costly data for three to five years with adequate safeguards and it is said that the prime reason for non-implementation of the report is that ministries are divided on the issue and no consensus has been reached on this matter. The Health Ministry has said that India already has necessary legal provisions to protect data and hence there is no need for any further protection, while Satwant Reddy committee was of the view that there is no legal provision to protect test data. It is alleged by the Health and Human right activist that government is under pressure from Multi-National Companies and western countries to enact law on data exclusivity. The Health Activists contend that Government should not forget the guiding philosophy of Doha Declaration (November, 2001), 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 medicine for all.

    If the government wants to enact such law, it can do either by amending Indian Patent Act, 1970 or Drug Control Act, 1940 or by amending Drugs and Cosmetics Act,_ and inserting a new section on data exclusivity.

    The Way Out
    Since the matter is very controversial and each side has their own valid points, it must be remembered that the issue relates to the accessibility and affordability of the life saving drugs to millions of people in third world countries and any rigid or adamant attitude from any side will adversely affect all especially the common people. Each side should try to find a middle-path formula so that interest of all can be reconciled with the larger interest of the common people in developing and third world nations.
    The best possible solution to the matter in hand is that the Compensatory Liability Model (CLM) should be adopted. Generic manufacturers must compensate the originator of data for the use of the data. After all such test data are products of long and intensive research, which involves considerable amount of expenditure, and commercial exploitation of such data without the consent of innovator companies is nothing less than “unfair commercial use” under Article 39.3 of TRIPS Agreement. The compensatory model seems to be appropriate in the circumstances, as this would make generic companies share the fair cost of bringing a new drug in the market and the innovator company will be able to earn a fair return on its investment. But amount of compensation must be reasonable and must be well within the financial limits of generics manufacturers.

    No doubt, it will be daunting task to determine reasonable compensation and to satisfy both the parties but international communities and national governments must accept the challenge and it would be better if such consensus evolve at WTO level so that it can be universally recognized. Hence data exclusivity law should be enacted in our country and generics manufacturers must be allowed to negotiate, on reasonable commercial terms, with innovator companies in order to gain access to such data. Moreover, protection should in no case extend beyond five years and during those five years domestic manufacturers should try to negotiate with innovator companies to gain access to the data on reasonable commercial terms. And any adamant attitude on part of innovator companies must be strictly dealt with and even in extreme and exceptional cases reasoning behind Compulsory Licensing must be made applicable to Data Exclusivity (DE) law because matter must not be weighed only on profit and loss account but larger interest of accessibility of drugs to millions of poor in third world countries should be kept in mind.

    It is generally said that all such issue arouse because of poor drafting of Article 39.3 of TRIPS Agreement which is not clear as to whether the term “unfair commercial Use” imposes obligation on the member states to enact Data Exclusivity (DE) law. However, it should be remembered that there is no defect in the law because intention of the framer of Article 39.3 was to allow sufficient flexibility to member states to apply and interpret law according to their local conditions and peculiar situations. Thus, if India says that it is not bound to implement such law as contrary to the view taken by the western nations, then it must be understood that both are right in their own respect. The developed countries can bear the health cost because of their health insurance law and strong purchasing power of the citizens. But the same is not true of third world countries.

    It would be better that matter reaches to appellate body of WTO which can help in clarifying the term “unfair commercial use”. Till such time, the declaration made in Doha Summit (2001) that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health and to promote access to medicine for all should be the guiding principle for the whole international community. Further, it would be patently wrong to say that Intellectual Property (IP) protection and public health are inherently opposed to each other. Both can co-exist and can even complement each other and the need is to change our mindsets, adopt flexibility in our approach and follow the principle of scientific approach to problem solving.

    At last, it must be remembered that Indian constitution aims to create socialist welfare state and both fundamental rights and directive principles of sate policy, which are backbone and founding pillars of our constitution, obligate government to address the issue in sensitive manner and it must be kept in mind that right to health is a part of right to life guaranteed under Article 21 of the constitution.


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