India: PhRMA Special 301 Submission Report To United States Trade Representative: Focus On India

On February 08, 2018, the Pharmaceutical Research and Manufacturers of America (PhRMA) submitted its annual submission to the United States Trade Representative (USTR) in the form of Special 301 Report, 20181. The Special 301 review gives the Administration a critical tool to address damaging market access and intellectual property barriers abroad that harm America's leading innovative and creative industries. The report identifies trade barriers to U.S. companies and products due to the intellectual property laws, such as copyright, patents and trademarks, in other countries2.

The Office of the United States Trade Representative (USTR) is the United States' government agency responsible for developing and recommending the United States Trade Policy to the President of the United States, conducting trade negotiations at bilateral and multilateral levels and coordinating trade policy within the government3.

PhRMA, in its report, has highlighted unpredictable patent environment, regulatory data protection failures, high tariffs and taxes on medicines, discriminatory and non-transparent market access policies, and unpredictable environment for clinical research as the key challenges before the US companies which operate or wish to tap the Indian market. For these reasons the lobby group wants India to remain on the Priority Watch List in the 2018 Special 301 Report of USTR until India addresses these concerns.

Special 301 Submission 2018

The PhRMA 2018 report says that it supports the Indian Government's efforts to create a stronger business, innovation and healthcare environment through the "Make in India" initiative, the National Intellectual Property Rights (IPR) Policy and the new National Health Policy. These efforts can improve access to healthcare for Indian patients, while driving economic growth by enhancing India's global competitiveness and improving ease of doing business. However, despite some positive signs, PhRMA's members remain concerned about the challenging policy environment in India.

The report goes on to highlight that:

  • Market access challenges persist; and
  • Despite important announcements to expand healthcare programs, Indian Government has not increased investment in this critical area, leaving public healthcare spending at a meagre 1.5 % (approx.) of GDP during the year 2016-17.
  • Delays and cumbersome procedures prevent India from becoming a part of global clinical trial programs, thereby, limiting patient access to innovative medicines in India.
  • The report also highlights data from the Indian drug regulator which shows that since 2011, a total of only 41 new medicines were approved; the number continues to remain significantly low, with only 22 new approvals in 2016.

Key Concerns:

  • Unpredictable Patent environment: The report highlights that India's legal and regulatory systems pose procedural and substantive barriers at every step of the patent process, ranging from impermissible hurdles to patentability posed by Section 3(d) of India's Patents Act, narrow patentability standards applied in pre-grant and post-grant opposition proceedings, to onerous patent application disclosure requirements that disproportionately affect foreign patent applicants. This a concern not only in the Indian market, but also in other emerging markets which may see India as a model to be emulated. Between May and December 2017, at least 149 patent applications faced rejections under Section 3(d), infringement due to state-level marketing authorization for generic versions of on-patented drugs and the threat of compulsory licenses (CLs), all of which demonstrate that much work needs to be done to improve the patent environment in India.
  • Regulatory data protection failures: The Indian Regulatory Authority relies on test data submitted by originators to seek approval in India and/or another country when granting marketing approval to follow-on pharmaceutical products. This reliance results in unfair commercial use prohibited by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and discourages the development and introduction into India of new medicines for unmet medical needs.
  • High tariffs and taxes on medicines: Medicines in India face high effective import duties for active ingredients and finished products. The basic import duties for pharmaceutical products average about ten percent, and when combined with the Integrated Goods and Service Tax the effective import duty can exceed 20%. This is in addition to the recently initiated 5-12% General Sales Tax (GST) on medicines.
  • Discriminatory and non-transparent market access policies: The recent price control orders on coronary stents and knee implants and the threat of an existing recommendation to implement price controls on patented medicines, represent an effort to significantly reduce the benefits of patent protection and create an unviable government pricing framework and business environment for medicines in India. In addition, the National Pharmaceutical Pricing Authority (NPPA) recently revised price controls on medicines for which prices were already fixed under the Drug Price Control Order (DPCO) 2013. The DPCO 2013 discriminates against foreign pharmaceutical companies by exempting new medicines developed through indigenous research from price controls. These pricing decisions, as well as the broad authority granted to NPPA, do not adhere to the need for transparency, predictability and trust in the decision-making process, which hinders industry's ability to further invest in India.
  • Unpredictable environment for clinical research: While the Government is keen to reinvigorate clinical research in India, ambiguities in the Indian regulatory space prevail. In particular, the definition of "trial related injury" is not well defined and the determination of local clinical trials requirements is highly subjective and perpetuates a burdensome environment for clinical research that undermines the availability of new treatments and vaccines for Indian patients.

Citing these above reasons, PhRMA has requested that India remain on the Priority Watch List in the 2018 Special 301 Report, and that the U.S. Government continue to seek assurances that the problems described herein are quickly and effectively resolved.

The report also has a detailed section on Intellectual Property Protection in India which highlights various challenges with the IP regime like:

Restrictive Patentability Criteria

The report highlights that TRIPS, an agreement on Trade-Related Aspects of Intellectual Property Rights, requires that an invention that is new or involves an inventive step and is capable of industrial application, be entitled to patent protection. However Section 3(d) of the Indian Patents Act as amended by the Patents (Amendment) Act 2005 adds an impermissible hurdle to patentability by adding a fourth substantive criterion of "enhanced efficacy" to the TRIPS requirements. Moreover, this additional hurdle appears to be applied only to pharmaceuticals. Under this provision, salts, esters, ethers, polymorphs and other derivatives of known substances are presumed to be the same substance as the original chemical entity and thus not patentable, unless it can be shown that they differ significantly in properties with regard to efficacy. Further, indiscriminate and routine use of Section 3(d) in patent applications by the Indian Patent Office even for a novel compound or a derivative with onus of proof on the applicant to prove otherwise, poses unnecessary burden on the innovators.

The report opines that additional substantive requirements for patentability, beyond those enumerated in the TRIPS Agreement, are inconsistent with India's international obligations. From a policy perspective, Section 3(d) undermines incentives for biopharmaceutical innovation by preventing patentability for improvements that do not relate to efficacy, for example an invention relating to the improved safety of a product. Further, Section 3(i) of the Indian Patents Act excludes method-of-treatment claims preventing U.S. biotechnology companies with needed treatment methods from entering the Indian market and providing life-saving products.

India's pre- and post-grant patent opposition system

The report also highlights the lack of clear rules regarding pleading and evidentiary standards during pre-grant opposition proceedings which further create uncertainty relating to the patentability of inventions. Further, pregrant opposition procedures under Section 25 of India's Patents Act have created significant uncertainty and delayed the introduction of new inventions by undermining patent office efficiency and delaying patent prosecution – exacerbating India's already significant patent examination backlog of approximately 6 years.

Weak Patent Enforcement

The report also highlights that Indian law permits state drug regulatory authorities to grant manufacturing approval for a generic version of a medicine four years after the original product was first approved. State regulatory authorities are not required to verify or consider the remaining term of the patent protection on the original product. Therefore, an infringer can obtain marketing authorization from the state government for a generic version of an on-patent drug, forcing the patent holder to seek redress in India's court system, which often results in irreparable harm to the patent holder.

Compulsory Licensing (CL)

The report also focuses on the area of Compulsory Licensing (CL). The report says that the grounds for issuing a CL in India are broad, vague and appear to include criteria that are not clearly related to legitimate health emergencies. While the Indian Government continues to take a more measured and cautious approach in responding to recent CL cases, the Ministry of Health (MOH) continues to entertain potential recommendations to impose CLs on certain anti-cancer medicines under the special provisions of Section 92 of India's Patents Act, which would make it even more difficult for patent owners to defend their patents.

The report concluded that CL is not a sustainable or effective way to address healthcare needs. Voluntary arrangements independently undertaken by member companies can better ensure that current and future patients have access to innovative medicines. India should at least ensure that CLs are exercised with extreme caution and only as a measure of last resort. India should also clarify that importation satisfies the "working" requirement, pursuant to TRIPS Article 27.1.

Administrative Burdens

Another challenge highlighted in the report is the administrative burden and inordinately long time taken by the Indian authorities in Patent examination. Backlogs undermine incentives to innovate and hinder timely patient access to valuable new treatments and cures. Because the term of a patent begins on the date an application is filed, unreasonable delays can directly reduce the value of granted patents and undermine investment in future research activity. PhRMA however said that it welcomes the Indian Government's ongoing work to address India's patent examination backlog including the commitment to reduce examination periods from up to six years to 18 months.

High Tariffs and Taxes on Medicines

The report highlights that PhRMA member companies operating in India face high effective import duties for active ingredients and finished products. Though the basic import duties for pharmaceutical products average about ten percent, due to the Integrated Goods and Service Tax imposed on imports, the effective import duty can exceed 20%. Compared to other Asian countries in similar stages of development, import duties in India are very high. And while certain essential and life-saving medicines may be granted exemptions from some of the taxes, the eligibility criteria are vague and subject to constant revision and debate. The report recommends that proposals to exempt certain life-saving drugs from Goods & Service Tax (GST) and customs duties should be expanded to all medicines.

Conclusion:

PhRMA in its annual submission to the United States Trade Representative has raised various concerns with India's regulatory framework and pharmaceutical policies, requesting USTR to keep India in the India Priority Watch List until India addresses their concerns. PhRMA report also highlights that greater clarity and predictability are needed for administrative procedures of drug registration applications and drug review standards and procedures in order to make the latest research products available in India.

Footnotes

1. http://phrma-docs.phrma.org/download.cfm?objectid=50939AE0-0D22-11E8-B0560050569A4B6C

2. https://en.wikipedia.org/wiki/Special_301_Report

3. https://en.wikipedia.org/wiki/Office_of_the_United_States_Trade_Representative

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