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Data Exclusivity A Necessary Evil

In the recent years, the phenomenon of protecting undisclosed data, which have a high monetary value or might have one in the future has gained tremendous importance as to be protected as exclusive data or information under the TRIPS agreement. Data Exclusivity is a concept of protection of test data in the form of publicly undisclosed information. In this way, while each new creation is ensured by patent, the need emerges to assess the circumstance in creating countries where a generic drugs producer may build up a medication at less expensive costs by demonstrating its proportionality with the medication of an innovator organization. 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.

Data Exclusivity refers to a practice whereby, for a fixed period of time, drug approval authorities do not allow the test data of the innovator company to be used to register equivalent generic version of that medicine.[1] To put it in simpler words, top pharmaceutical companies invest energy, cash and huge investments on research on innovative work to evaluate the viability, quality, and security of the new item. This procedure is known as clinical trial and it includes a tremendous measure of use, time and cash. For instance, the clinical trial procedure to test the viability, quality and security of another against malignancy medication may take 6-7 years or now and again even 15 years.[2]

The process of clinical trial is very hard and complex in nature and moreover time-consuming. These new drugs have to be first tested on animals and only then can human beings use it in order to determine its efficacy and safety. After the clinical trial period is over, regulatory boards from different countries study these data in order to ensure that these medicines have the safety and quality to enter the pharmaceutical market. These approval bodies seek data that are relevant to assess whether a particular drug is safe from the pharmaceutical companies. It is this data that these giants of pharmaceutical industry are trying to protect so that generic companies do not get to use these data as it contains years of hard work and heavy investments that have been undertaken for the clinical trials. These companies feel it would be unfair to allow a third party, such as a generic company to get hold of this data and use it for commercial exploitation. The originator company wants this data of reports to be protected only for a temporary period of time and want to preclude generic companies from using these reports.

International Law on Data Exclusivity

Article 39 of the TRIPS agreement give out the provisions for the protection of undisclosed information.
Article 39 of TRIPS agreement states out the following-
1. In the course of ensuring effective protection against unfair competition as provided in Article 10 of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3.

2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information:

(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

(b) has commercial value because it is secret; and

(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

3. 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.[3]

The Pharmaceutical organizations are requesting data exclusivity law by utilizing Article 39(3) of TRIPS. Article 39(3) of the TRIPS expresses that individuals while requiring, as a state of supporting the marketing of pharmaceutical or of agricultural chemical products which use new chemical entities, the submission of undisclosed test or information, the start of which includes a significant effort, might secure such information unfair commercial use. In any case, article 39(3) does not talk about data exclusivity. But multinational companies tend to use the phrase “unfair commercial use” while explaining data exclusivity. Thus the obligation of data exclusivity requires that there exist a defined period where no second manufacturer come into the market and avoid a full battery of tests for efficacy, safety, and other properties. A bargain is struck where the originator is enabled a specific timeframe to recover the costs engaged with the testing procedure.

Global Scenario
Apart from India, most of the countries such as United States of America, New Zealand, Australia, The European Union accepts the provisions of protection of undisclosed data or 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. This Drug Price Competition and Patent Term Restoration Act were also known as the Hatch-Waxman Act. 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.[4] In some countries, a provision has been introduced to extend the term of a data exclusivity 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.[5]

Indian Scenario
There is no statutory protection of data that is submitted to the regulatory authorities for testing for approval in India. Although India is a signatory to the TRIPS agreement, India has failed to comply with all the provisions of the TRIPS agreement, especially in the aspect of data exclusivity. The existing legal provisions are inadequate. There is no act corresponding the Hath-Watchman Act in India.

Some relevant Indian Laws and Provisions are-
1. Trade Secrets- In Mr. Anil Gupta and Anr. v. Mr. Kunal Dasgupta and Ors, the Court granted an injunction and held that a concept developed and evolved by the plaintiff was the result of the work done by the plaintiff upon the material which may be available in the public domain. However, what made the concept confidential was the fact that the plaintiff had used his brain and thus produced a unique result applying the concept.

2. The Official Secrets Act, 1923, is a legislation binding public servants from disclosing 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.

In short, India does not have any provisions as such that comply with article 39(3) of the TRIPS agreement.

Why Is Data Exclusivity Necessary In India?

The argument for data exclusivity that is put forward is 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 the huge and risky investment made by the innovator companies. According to Hitesh Gajaria, a partner in KPMG, it takes 8-10 years of intensive clinical research trials and high investments of billions to bring a new drug into the market. By giving out these reports of data exclusivity to the generic companies, the investments undertaken by the innovators in research and development are unprotected. According to Dr. Ranjit Sahani, the vice chairman and MD of Novartis, the second largest pharmaceutical company in the world today, Research and Development is a very risky business and the investments that go into it must be protected. This protection is possible only if the data that is provided by them to the approval board do not get exploited by the generic companies. The advocates of data exclusivity in India says that “unfair commercial use” phrase as stated under Article 39(3) of the TRIPS would include any commercial use of the data on the drugs carried out by the generic companies without the prior permission from the innovator companies. If this act by the generic companies is not kept under check, it would mean that India has failed to comply with the provisions of the TRIPS agreement. Another side of the argument is that protecting the data of clinical trials would mean better access to better and innovative products at a quicker rate. Moreover, India would miss out on major Foreign direct investments (FDI) in the pharmaceutical sector. Due to a lack of data exclusivity law in India, foreign giant pharmaceutical companies would not like to decide to use India as a location for their clinical trials research. If data exclusivity law was implemented in India, it would develop the technological and research and development aspect of the pharmaceutical industry. Another argument that can be advanced in their favour is that not all in the country are against such a law. For example, Confederation of Indian Industry (CII) favours data exclusivity for five years. Ranbaxy also supports CII’s view. The Department of Scientific and Industrial Research (DSIR) has recommended data exclusivity law for three years. 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.[6] The Satwant Committee said there was no need to change the registration process of a drug in the country, but the reports could be protected as trade secrets.

Lastly, if we take the Utilitarian theory of Intellectual property[7], protection of the products and the processes of production are would lead to increasing rate of innovation. With certain static inefficiencies, there is a rise in dynamic efficiency. If no static inefficiency is provided by the state to the innovators, i.e, protection of the invention by excluding other parties from using the product for a temporary period of time, there would be a fall in dynamic efficiency, i.e, there would be a fall and decline in the rate of innovation in the pharmaceutical industry.

End-Notes
[1] http://www.pharmabiz.com/article/detnews.asp?articleid=25566§ionid=46
[2] http://www.mitrasias.com/mitras-analysis-of-news-26-04-2017/
[3] https://www.wto.org/english/docs_e/legal_e/27-trips_04d_e.htm.
[4] http://www.allens.com.au/pubs/bt/24jun03/bio02.htm.
[5] http://www.allens.com.au/pubs/bt/24jun03/bio02.htm.
[6] The Hindu edition, June 04, 2007.
[7] William Fisher, Theories of Intellectual Property

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