India: Data Exclusivity

Last Updated: 21 May 2009
Article by Jaya Bhatnagar and Vidisha Garg

This article was first published in APIC newsletter in Feb 2009.

Introduction

The concept of protecting undisclosed data having high commercial value has gained momentum to be protected as exclusive data or information under the TRIPS agreement in recent times. Conventionally this data was protected as trade secrets under the Common law.

Data Exclusivity is a transitional concept of protection of exclusive test data in the form of publicly undisclosed information which is in between the protection of the data in the form of trade secrets based on the principles of equity and good faith and the domain of patent protection which requires invention to be new, having an inventive step and capable of industrial application.

Thus while, every new invention is protected by patent, the need arises to evaluate the situation in developing countries where a generic drug manufacturer may develop drug at a cheaper prices by proving its bioequivalence with the drug of an innovator company. It seems that the concept of Data Exclusivity poses a conflict of interest between the innovator companies who have already availed of the protection under patent laws and public interest.

What Is Data Exclusivity

Data Exclusivity (DE) or exclusivity of registration data is the period of non-reliance and non-disclosure that is provided to new chemical entities, pharmaceutical compositions, and agrochemical registration data or test data. It is for a limited period of time when the drug regulatory authorities do not allow the test data of the originator to be used to register the generic version. Data exclusivity is an independent intellectual property right and should not be confused with the protection provided by other rights, especially patents.

Clinical trial data and other test data are the proprietary data resulting from scientific discovery and development conducted by the originator with investment of time and cost, to demonstrate the efficacy and safety of new chemical entities, formulations and their new uses. While the discovery and development of a new molecule takes about 8 to 10 years and costs millions of dollars, generating the test data takes about 50% of the time and expense. This data becomes very important at the time of obtaining marketing approval from regulatory authorities.

Data exclusivity provides the originator with rights to preclude third parties from relying on the data to obtain marketing approval for a specific period of time. However, it does not prevent third parties from generating their own data.

Second entrants may apply for their formulations or products, but always must obtain authorization from the originator's data and prove bioequivalence according to international standards. Otherwise, by merely making reference to the originator's submitted data, they obtain an undue advantage, as they have not performed any of the expensive and time-consuming tests or submitted any data to demonstrate the safety and efficacy of their product.

Thus, data exclusivity ensures that

  1. the originator obtains market exclusivity for a specified period which in turn enables him to recover the costs incurred in obtaining the marketing approval;
  2. for a specified period, the regulatory agency must not access the originator's data, without his consent, when reviewing an application from a second entrant seeking approval of a copied product.

Generic manufacturers can also apply for marketing approval provided that they conduct their own tests to prove the efficacy and safety of their product.

In the absence of a data exclusivity period, second registrants can introduce copycat products into the market merely on the basis of bioequivalence tests without conducting time consuming and expensive trials that are required to demonstrate safety and efficacy of the product. This would result in ultimate disadvantage to the originator, having made valuable investment to their findings.

International Obligations

Test data protection gained international attention when it was made necessary to restrict unfair competition under the Paris Convention and thus the obligation arose to protect undisclosed information.

Data exclusivity again came into the limelight in 1994 with the Agreement on Trade-Related Aspects of Intellectual Property Rights. TRIPS advocated for such exclusivity to the registration data under Article 39(3), which states as follows:

"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 other 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 the data are protected against unfair commercial use."

Thus the obligation of data exclusivity entails that there exist a predefined period where no second entrant into the market may prove bioequivalence and avoid a full battery of tests for efficacy, safety and other properties. A compromise is struck where the originator is allowed a certain period of time to recoup the expenses involved in the testing process; and the public interest goal of availing safe and efficient products in the marketplace, whilst enabling second entrant products to enter the market albeit after a defined period. The second entrant may not be allowed during this period to be totally or partially exempt from filing original testing data by proving bio-equivalence. This is an obligation of non-reliance, both by the authorities and by third parties.

Global Scenario

A review of the national laws relating to the protection of registration data in the major WTO member states reveals that most of these countries have recognized and appreciated the role of data exclusivity. Although there is no uniform standard that is followed by the countries while enacting and implementing the laws related to data exclusivity, the period for which the originator can enjoy the exclusivity after the marketing approval is generally between 5 to 10 years.

In 1984 the US became the first country to enact data exclusivity legislation. The Drug Price Competition and Patent Term Restoration Act, commonly known as the "Hatch-Waxman Act", actually relaxed the level of protection afforded to testing data in the US. Under the Hatch-Waxman Act, applications for approval of new drugs receive 5 years of data exclusivity. Applications for the approval of new indications for an existing drug receive 3 years of data exclusivity.

Many developed countries in the EU, Australia, New Zealand and the Andean Group countries have a system for providing data protection whereby the results of the invention for which a patent has been granted would not be available to public and R&D agencies for a period of five years. In some countries a provision has been introduced to extend the term of a patent by a maximum of five years if the market approval authority takes unduly long time to give the approval. China grants data exclusivity for 6 years; Philippines 8 years; Brazil 10 years; Korea 8 years and Taiwan 6 years. Japan provides the data exclusivity from 4 to 10 years. However, there is a group of countries which deny the TRIPS mandate, and India is one amongst these countries.

Indian Scenario

The Indian law has no statutory protection for the data that is submitted to regulatory authorities for testing for approval of any manner of products. Although India is a signatory to the TRIPS Agreement, no new provisions of law have been introduced to protect test data. The existing legal provisions are inadequate and compensation-focused. The requirements of data protection and exclusivity obligations are proactive in nature, i.e. focused on preventive mechanisms. There is no legislation corresponding to the "Hatch Waxman Act".

Relevant Indian Laws

The Official Secrets Act, 1923, is a legislation binding public servants from disclosing or using any confidential information in an unauthorized manner, so as to affect the security, sovereignty and integrity of the country. Under Section 5 of the Act, a government officer disclosing any information that is entrusted to him for official purpose without due authorization is guilty of an offense. An aggrieved party may sue the Government in a Civil Court and claim damages. However, the scope of this legislation is very limited as it does not ensure data protection, but is limited to protection against disclosure of the data which is only one of the elements of data protection. There is no provision to address protection against unfair competition caused by third party to unlawfully rely on the originator's proprietary data. Although, this statute acurrantly grants an aggrieved party the right to claim damages in a civil suit and receive civil remedies for stolen test data submitted to the regulatory authorities, it does not proactively ensure protection against unfair commercial use of the data. Thus, the Official Secrets Act, 1923 does not ensure data protection pursuant to TRIPS Article 39.3 standards.

Trade secret protection is a common law remedy to prevent the disclosure of information, but it is a private remedy that is untested against regulatory authorities in India. Furthermore, even if such a tool may be employed to restrain the misuse of test data, it again does not prevent the regulatory authorities from relying on it themselves for the purpose of granting approvals to second registrants.

The Insecticides Act, 1968 is the most relevant legislation in India, from the point of view of crop-protection chemicals. Under section 5 of the Act a registration committee is established which is empowered to scrutinize the formulae of insecticides and verify claims relating to its efficacy and safety for human beings and animals, and as such is the regulatory body that sets rules, procedures and controls the testing process. Under this Act, the registration committee requires data relating to chemistry, bio-efficacy, toxicity, packaging and labeling.

The Indian Patents Act, 1970 is another important legislation. However, the Patent Act is applicable only to patentable inventions and does not protect new use of a known substance or formulations by combinations. Further patent protection extends only to the invention but not to the data generated by the originator.

In a nut shell there is no specific law for the protection of undisclosed information in India and a third line of protection, beyond patent protection and confidentiality is the need of the hour.

India's Stand On Data Exclusivity

There has been tremendous pressure on India from the countries like the United States and the European Union, in the form of trade sanctions on the issue of data exclusivity, unsurprisingly because most of the pharmaceutical giants belong to these countries. According to them, after the expiry of the first transition period in 2005, India has an obligation to incorporate data exclusivity in its domestic legislation. While the originators make a strong case for data exclusivity, the domestic sector has very mixed views ranging from supporting the MNC position to one which is against the government conceding the demand for data exclusivity, including market exclusivity. Generic manufacturers in the country are gripped with the fear that granting this right would lead to ever greening of patents. For example if data exclusivity in the country is allowed for, five years, and a patented drug is introduced in the 19th year of the 20-year life of a patent, it could effectively extend the patent protection to 19 plus 5 equaling 24 years. This has triggered many companies to advocate that data exclusivity must run concurrently with the term of the patent.

Several other arguments have been advanced against data exclusivity protection and it has been often charged with being a superfluous form of protection. It is argued that it undermines genuine innovation as it encourages originator companies to focus their activities in changes in existing products rather than focus on developing new, innovative and beneficial products. Data exclusivity period is granted without the originator having to demonstrate any of the basic principles of novelty or inventiveness.

The advocates for data exclusivity put forward the following arguments:

  • Protection should be in the form of exclusivity for a period of atleast 5 years from the date of market authorization.
  • Since, data exclusivity is not related to patent protection, therefore it should be provided irrespective of the life of a patent.
  • Since a lot of money is spent in generating the data and information, it is not fair that other companies should be allowed to use that data, without going through the painful process of generating that information, for developing generic versions of the drugs.

The Indian government has consistently taken the stand that Article 39(3) does not oblige member states to introduce data exclusivity legislation in the country. In fact, the TRIPS agreement does not refer to any period of data protection, nor does it refer to data exclusivity. Article 39.3 of TRIPS says that WTO members should protect "undisclosed information and data" against "unfair commercial use" and "disclosure". Nowhere, does TRIPS state, that countries should provide exclusive rights to the originator of the data for a given period. Rather, TRIPS simply refers generally to the need for "data protection". Data protection against unfair commercial misuse as mentioned in TRIPS is totally different from data exclusivity. The use of data by the Drug Controller is a legitimate, non-commercial use and is TRIPS compliant.

However, succumbing to the mounting pressure from the United States and EU, on 10th February, 2004, the Department of Chemicals and Petrochemicals (DCPC), Ministry of Chemicals and Fertilizers, Government of India constituted an Inter-ministerial Committee as a Consultative group to suggest the steps to be taken by the Government in the context of Article 39.3 of the TRIPs Agreement as well as to determine whether data exclusivity to agrochemicals, traditional medicines and pharmaceuticals can be covered under the existing legal framework or if there was a need to have a new legislation in this regard.

Satwant Reddy Report On Data Protection Provisions Under Article 39.3 Of The TRIPS Agreement

After considerable deliberations, on 31st May 2007, the Satwant Reddy Committee presented its report on regulatory data protection under Article 39.3 of TRIPS. Its findings are that Article 39.3 does not require "data exclusivity" and that it may not be in India's national interest to grant "data exclusivity" to pharmaceutical drug data. It relied on paragraph 4 of the Doha Declaration to support this interpretation. The report noted that the flexibility in the provisions of TRIPS Agreement allowed a country to determine appropriate means of protecting test data. It was also realized that data requirements for registration of agro-chemicals differ considerably from those for pharmaceuticals.

The following recommendations were made by the Committee:

Agrochemicals And Traditional Medicines

The committee recommended data protection for a fixed period of three years and five years for agro-chemicals and traditional medicines respectively. In such fixed period, the Drug Regulatory Authority would not rely on the data submitted by the originator while granting marketing approval on second and subsequent applications.

Pharmaceuticals

The approach recommended for pharmaceuticals included a transitional period in which initial steps will be taken to implement the standards of minimum data protection i.e. to improve the system of data management in the Drug Regulatory Authorities to prevent unauthorized disclosure of data. This period will can be followed by a post transition period which will afford a fixed period of data protection for a period of 5 years in which the Drug Regulatory Authority would not rely on the data submitted by the originator while granting second and subsequent marketing approval.

The report also suggests certain safeguards in public interest to take care of adverse effects on public health or situations of health emergencies

Current Status

The report is under examination by the Government Authorities. So far, no formal communication has been made by any Government Authority in this regard. It is not clear whether the Government would adopt the suggestions of the Satwant Reddy report and implement provisions of data exclusivity.

The Indian Pharmaceutical Industry has however had a negative approach to the report's recommendation and have been lobbying for a "no data exclusivity" policy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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