US-India relations stall over pharma IP squabble

IP protection for international pharmaceutical companies in India remains an unresolved issue, as India battles for affordable medicines and the US argues that better patent protection must be forthcoming. The potential of this huge market hangs in the balance as discussions continue

American pharmaceutical industry officials and trade groups remain cautiously optimistic that intellectual property (IP) negotiations with India can be resolved to the benefit of both nations’ medicine sectors. For now, however, India remains on a so-called ‘priority watch list’ of nations the US is urging to address key IP protection concerns.

The latest congressionally mandated ‘301 Report’, released in April, places India alongside 12 other US trading partner nations, including China, Indonesia, Pakistan and Russia, that ‘present the most significant concerns this year regarding insufficient IP protection or enforcement or actions that otherwise limited market access for persons relying on intellectual property protection’.

India remains on the list for 2015, the report says, but ‘with the full expectation that the new channels for engagement created in the past year will bring about substantive and measurable improvements in India’s intellectual property regime (IPR) for the benefit of a broad range of innovative and creative industries.’

Until now, India’s ‘unpredictable’ IP protection and enforcement regime has harmed its ability to attract investment from the US and elsewhere

Recent negotiations between the two nations include via a US-India Trade Policy Forum and a High-Level IPR Working Group. These groups were created after Indian Prime Minister Narendra Modi’s visit to the US in 2014. India is the USA’s 11th largest export (total) goods market, according to the Food & Drug Administration (FDA), with the US exporting pharmaceutical preparations worth some US$317.8m to India in 2014, up from $241.4m in 2010, and $116.4m in 2006, according to the US Census Bureau.

Mark Grayson, Deputy Vice-President and spokesman for international issues at the Pharmaceutical Research and Manufacturers of America (PhRMA), said that until now, India’s ‘unpredictable’ IP protection and enforcement regime has harmed its ability to attract investment from the US and elsewhere.

He argued that if India stepped up its IP protection and enforcement, the gains ‘could be significant’, pointing to a December 2014 report by the US International Trade Commission. It concluded that if India’s trade restrictions were eliminated and standards of IP protection were made comparable to US and Western European levels, US investment in India could double.

US-based biopharmaceutical companies are engaging both the American and Indian governments to inform the ongoing bilateral discussions and to support progress and solutions

US-based biopharmaceutical companies are engaging both the American and Indian governments to inform the ongoing bilateral discussions and to support progress and solutions, Grayson said. Among other things, they are seeking action by the Indian government to protect test and other data submitted for marketing approval of biopharmaceutical products; to put in place mechanisms that allow for resolution of patent disputes prior to marketing approval of third-party products; and to ensure innovators benefit from patent protection for new forms of known substances.

Patrick Kilbride, Executive Director of international intellectual property at the Global Intellectual Property Centre of the US Chamber of Commerce, said the World Trade Organisation (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), implemented between 1994 and 2005, was a ‘high point’ in US-India negotiations on IP protection. Its nadir was during 2013, ahead of Modi’s elections, where there was a ‘sense across the spectrum that India was becoming a difficult place to do business.’ The costs to US pharmaceutical companies were not just in terms of lost revenues, Kilbride said, but also in lags in innovation, research and development.

Countries that succeed in driving growth, providing legal certainty, in taking an idea from the mind of an inventor to the market, they’re creating an asset that has value. That’s missing in India today

Under the current negotiations, the American business community is seeking to put the pharmaceutical IP issue ‘in a broader context of common interest across issues from security to energy to climate change to economic growth’, according to Kilbride. ‘We think a strong intellectual property environment is important to catalyse the economic growth Modi says is important to the future of India… Countries that succeed in driving growth, providing legal certainty, in taking an idea from the mind of an inventor to the market, they’re creating an asset that has value. That’s missing in India today.’

The US Chamber would like to see an agreement in the current negotiations, and sees ‘positive developments’, said Kilbride. He regards the priority watch list ruling as potentially ‘catalysing’, encouraging reform in India.

That said, Brook Baker, a professor of law at Harvard University, is a prominent critic of the US negotiating position and says the US pharmaceutical industry is attempting ‘to protect and expand monopoly rights and pricing’, by promoting IP reform. The consequence, Baker argues, is that ‘poor people and governments can’t afford these medicines…The India government is correct to maximise access to affordable medicines’.

The India government is correct to maximise access to affordable medicines

He says the US government and business interests are saying to India, ‘we’ll protect your interests. They provide some immediate commercial advantage, future promises, and geo-political considerations’.

‘One way to think about it, is which direction has the most positive impact on the right to health and affordable medicine. The basic human right is to have the government try to maximise health interest, and that includes under an international understanding of the right to medicine,’ Baker explained.

In the 301 Report, US Trade Representative Michael Froman said: ‘Tens of millions of Americans owe their jobs to intellectual property-intensive industries. Strong and balanced protection and enforcement of intellectual property are critical for promoting exports of US innovative and creative goods and services, and sustaining those jobs here at home.’

However, Indian health and pharmaceutical industry leaders claim they hold a higher moral ground on the drugs patent issue, and believe the US is being insensitive towards Indian social and economic conditions.

In India, most of the payers are poor patients, who do not have the means to protect their rights

‘Drug prices fixed by the innovator are not in response to or not cognisant of the payers’ capability,’ said Dr Rao VSV Vadlamudi, President of the Indian Pharmaceutical Association. ‘In India, most of the payers are poor patients, who do not have the means to protect their rights.’

According to Gopakumar G Nair, a leading patent lawyer in Mumbai, international patent laws have tilted more towards patentee, licensee or an assignee over the past few years. ‘This protection has gone overboard, substantially against the interests of the users and consumers,’ he said.

Still, the patents are very much protected in India and it is only due to certain cases that multinational pharmaceutical companies are protesting, said Dr Vadlamudi. ‘If a patent is not granted, it does not mean that there is no patent regime in India,’ he explained. ‘Patents have been [legally] contested and [Indian] courts upheld the contention.’

Dr Vadlamudi referred to an April 2013 case when, after a seven-year legal battle, Swiss pharmaceutical company Novartis International lost a case in the Supreme Court of India to protect its patent for anticancer drug Glivec. The company was contesting an interpretation of section 3(d) of the Indian Patents Act, 1970, by the Intellectual Property Appellate Board, which justified the denial of the patent. According to section 3(d), ‘the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance…’ is not an invention.

Evergreening of products

SV Veeramani, President of the Indian Drugs Manufacturers Association, told Manufacturing Chemist that in certain products, there was only a slight change in the chemistry with a different salt of the same product and no additional benefits, and a granting of the patent in such an instance would have led to an evergreening of the patent. ‘If the concerned companies are not stopped [on this issue] then they will come out with more and more such claims,’ he said.

According to Veeramani, some big pharmaceutical companies are trying to maintain their business by tweaking formulations of their existing drugs because not many new drugs are in the pipeline. In the past few years, there have been several cases of patent refusals for new drugs in India. Most recently, US biotechnology company Gilead was denied a patent for its hepatitis C drug Sofosbuvir in January.

Meanwhile foreign drug manufacturers are also concerned about India’s policy of compulsory licensing of completely new drugs. In 2012, Indian patent authorities granted a compulsory licence for Nexavar, an anticancer drug developed by Bayer Healthcare with Onyx Pharmaceuticals, which priced a monthly dose at $5,700, while the generic version later introduced by India’s Natco Pharma sold at $176. Multinational pharmaceutical companies were upset, and while Bayer did challenge the order in the Indian courts, it was unsuccessful, with judges ruling that the patent authorities had the full backing of the law.

According to Section 84 of the Indian Patents Act, 1970, a compulsory licence on the patent can be applied after three years of granting a patent on the grounds of ‘reasonable requirements of the public with respect to the patented invention have not been satisfied, or the patented invention is not available to the public at a reasonably affordable price…’

The subjectivity of the clause could be a cause of worry but Nair points out that until now, Nexavar remains the only compulsory patent granted by Indian authorities. ‘If India had been going overboard, dozens of compulsory licence would have been issued,’ he said.

Raising doubts about the Indian legal system also does not hold ground, said Nair, as unlike China, India is providing extremely balanced judicial pronouncements and processes. ‘Very often India companies lose against the multinationals,’ he said, ‘but if in one case a multinational loses, it is highlighted as India being unfair to developed countries.’

Multinational pharmaceutical companies are worried that if India is not checked, then other countries will follow in its footsteps

Nair said multinational pharmaceutical companies are worried that if India is not checked, then other countries will follow in its footsteps and eat into their profits. ‘Already Philippines has a provision similar to section 3(d), while South Africa, Brazil and some Latin American countries are incorporating consumer friendly provisions similar to Indian law,’ he said.

Veeramani alleges US companies may be worried about the ability of Indian companies to produce good quality pharmaceutical products at very little cost and the fact that India is already a big supplier of generics to UN International Children’s Fund (UNICEF), the World Health Organisation (WHO) and even the US government. ‘More than 60% of the world’s vaccine production is coming from India,’ he said.

According to the Indian ministry of commerce and industry, India is the third largest producer of drugs in volume terms, but in terms of value it remains in 13th position, signifying that the price of goods produced is much lower than other countries. In 2013, there were 250 large and 8,000 small pharma manufacturing units across the country, with annual sales of $12bn and growing at an annual rate of 9%, the ministry said.

Nair believes India is going to be a market that cannot be written off. However, despite the animosity, ‘friendship and friendly trade with the US is paramount to India’s interest,’ he said. Indian Prime Minister Narendra Modi told a group of US CEOs in January that India ‘will nurture innovation and protect your IP’.

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