Health GAP
www.healthgap.org

September 19, 2005
By Professor Brook K. Baker
Northeastern U. School of Law, Policy Analyst Health GAP (Global Access Project)

For further information, please contact:
B.Baker@neu.edu

INDIA'S 2005 PATENT ACT:
Death by Patent or Universal Access to Second- and Future-Generation ARVs?

India already has well over 5 million people living with AIDS. If it is to meet the G8's new global call for universal access to anti-retroviral (ARV) treatment by 2010, India must provide medicines to hundreds of thousands of people each year. The good news is that India is blessed with a highly competent and cost-effective generic industry currently making world-class first-generation ARVs at a very low cost. The bad news is that the liberal patent laws permitting it to produce generic equivalents of life-saving medicines have now been revised to preclude routine copying of post-1995 patented pharmaceutical products. The 2005 Patent Act portends a crisis of access to second-generation ARVs for people with AIDS in India and worldwide.

India has had a vibrant generic industry since 1970 when it lawfully amended its existing patent act to disallow patent protection for pharmaceutical products. This action catapulted India from a country importing most of its medicines at some of the highest prices in the world to a country that was self-reliant in producing life-saving medicines. India has been and remains the producer of choice for medications in most developing countries, producing medicines of assured quality that meet all international standards, at the lowest costs and highest volumes.

Large global research and development companies (Big Pharma), in response to their loss of market hegemony, have lobbied to strengthen intellectual property protections for pharmaceutical products and processes. After 10 years of negotiations and threats of trade sanctions, the U.S. Trade Representative-Big Pharma team succeeded in imposing a patent-monopoly system on India and other countries through the World Trade Organization Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement of 1994.

The TRIPS Agreement: Intellectual Property Protections and Flexibilities

TRIPS required WTO member states to grant patents on all classes of products (including medicines), to provide protections for a minimum of 20 years, and to allow patent rights to be satisfied either by importing the drug or by producing the drug domestically. India was now required to start collecting drug patent applications filed between 1995 and 2005 and to amend its patent law by Jan. 1, 2005.

Despite these new requirements, the TRIPS agreement allowed the continuing production of pre-1995 drugs and several "transitional" years to become TRIPS-compliant. It also contained important allowances enabling access to lower-priced medicines. These included rights to issue compulsory licenses (involuntary rights to the process and product with payment of a reasonable royalty) and rights to parallel import (unrestricted rights to buy patented medicines previously produced and sold elsewhere at a lower cost). These two flexibilities were clarified and confirmed in the Doha Declaration on the TRIPS Agreement and Public Health of November 2001 and expanded further in the Aug. 30, 2003, WTO decision for countries unable to produce medicines domestically. This allowed India to prioritize public health and to promote universal access to medicine even while it struggles to comply with TRIPS's mandates.

India Enacts TRIP-Plus Patent Protections

Unable to garner sufficient parliamentary support by Jan. 1, 2005, India passed a temporary patent ordinance in late December 2004, which, resulting from domestic and international politics and pressure was more restrictive than TRIPS required.

An intense period of lobbying and social mobilization by AIDS activists worldwide resulted in the adoption of mitigating amendments in the final patent act enacted in March of this year. These included the tightening of standards for granting patents and restoring procedures for opposing patents, protecting existing producers of 1995-2005 medicines, allowing parallel importation, limiting time periods for negotiating voluntary licenses, and expanding rights to export post-1995 generic medicines produced pursuant to a compulsory license. But these improvements left intact many glaring deficiencies.

1. Instead of limiting patent protection to the newest and most innovative pharmaceutical inventions, i.e. "new chemical entities," the act creates rights to patent certain new uses, formulations, delivery systems, combinations of existing products, and minor variations of existing chemical entities.

2. The act leaves in place India's procedurally laborious and inefficient compulsory licensing scheme.

3. The act fails to specify guidelines for setting modest royalty rates (2-4 percent) for compulsory licenses and, except in a government-declared emergency, it requires applicants for compulsory licenses to wait three-years before applying.

4. The act grants Ôpatent-like' rights for patent applications between the publication and approval of the patent deterring generic entry even in cases where the patent application may later be denied.

Restricting India's ability to manufacture the newest generations of low-cost essential medicines leaves poor consumers in India and elsewhere in a procedural labyrinth and with long delays in access. Moreover, trade negotiators are seeking a second line of intellectual property protections in the form of new data exclusivity rules.

Data Exclusivity Looms as an Additional Threat

Currently, India allows generic companies to rely on clinical trials and other data filed by research and development firms in seeking marketing approval for an equivalent product. Under pressure from the U.S., however, India is considering whether to grant five years of "data exclusivity" for this proprietary data even though this is not required by TRIPS.

This TRIPS-plus exclusivity would prevent a generic producer and the drug regulatory authority from relying on previously submitted data. The generic producer would be required to duplicate costly, time-consuming and ultimately unethical clinical trials to prove what is already a matter of record. Five years of data exclusivity will effectively prevent marketing approval of a generic drug, even if that drug is lawfully produced.

Easing intellectual property standards in the interest of generic production and wider access pose no threat to global research and development or to India's industrial policy objectives. Accounting for only 1.3 percent of global sales in dollars, India is still a relatively small consumer of drugs. Heightened profits in this tiny portion of the global market will not create incentives for research and development, which is one of the main arguments used by drug companies to justify patent protections and higher prices. In fact, major Indian producers like Ranbaxy are looking to the rich markets of North America, Japan and Europe for their future growth. Although drug companies understandably want strong patent protections in rich country markets where they sell 87 percent of their drugs, they don't need such aggressive protections in poor country like India.

Given Indian companies' cost advantages in conducting clinical trials and manufacturing medicines, softening its intellectual property protections will have negligible impact on pharmaceutical investment. As major drug producers look to lower research and development and formulation costs, they will increasingly turn to Indian companies which operate at one-seventh the cost of U.S. companies. Exploitation of these cost advantages does not require heightened patent and data protections.

Death by Patent or Universal Access?

Millions of lives are at stake as India implements its new patent act and considers new rights to data exclusivity. Yet, if the impending crisis is to be avoided and India is to continue playing its essential role in providing widespread access to future generations of low-cost ARVs, both its government, its generic industry, and the international activist community must respond forcefully to these challenges of the post TRIPS era.

The government must pave the way by asserting the legal authority granted by TRIPS to enact mitigating amendments and/or new administrative rules that comply with TRIPS and to take advantage of its allowances. Even more critical is for India to tighten its pharmaceutical patent protections to new chemical entities. And finally, the government should ensure that compulsory licenses are routinely and quickly available for second-line AIDS medicines, which will otherwise be even more expensive in the absence of generic competition.

Generic drug companies need to weigh in with parallel and complementary commitments. This includes researching and formulating important second-generation ARVs like Tenofovir and Ritonavir/lopinavir (Kaletra); researching and developing new, user-friendly pediatric formulations; and making new fixed-dose combinations of both second-line therapies and improved first-line therapies. In addition, they should begin seeking compulsory licenses for production of therapeutic equivalents of on-patent medicines. Finally, they must register their products in all developing countries markets while simultaneously seeking prequalification at the WHO and new approval by the U.S. Food and Drug Administration.

Activists must apply pressure „Ÿ on Big Pharma and the U.S. government to relax their pursuit of ever-greater intellectual property protections, and on the Indian government to prioritize generic production of second- and third-generation AIDS medicines.

The needs of 40 million people living with HIV/AIDS necessitate immediate and future strategic action. Within TRIPS, it is still possible to reduce barriers and to maximize flexibilities ensuring sustainable supplies to life-saving medicines.

As the South's leading supplier of affordable AIDS medicines, India stands at a crucial crossroad. In implementing the most important patent legislation in the developing world, the Indian government and the generic drug industry, with strong support from the large and growing international activist community, must resist trade pressures and drug company threats. Only by organizing themselves legally and economically, will they reject death by patent and embrace the possibility of universal access to treatment by 2010.