This article is written by Karthik Venkataramana from NALSAR University of Law.
Table of Contents
Introduction
“We can all agree on the fact that it is very human to anticipate recognition and returns for their efforts. This expectation is supposed to be the crucial factor which drives human beings to further innovation and technology. Considering these aspects, it is pertinent to ask whether exclusive rights can be asserted to a person or a company over a product which is so crucial for society’s interest at large. The current pandemic that we have been facing has caused significant damage to the world in just a matter of weeks. An essential topic of discussion is that of finding a cure for the disease. The attempts by different nations anticipating a combined effort to find a cure as soon as possible are very evident. Globalisation might have taken a big hit due to the Corona Virus Disease – 2019 (“Covid-19”), but there has been a growing need for countries to come together and cooperate in sharing data and resources to find a cure.
It is well-known that the majority of medicines and medical tests are not accessible to a large number of people as a result of the pharmaceutical companies who abuse their monopoly accrued by way of Intellectual property rights. Patents are a kind of Intellectual Property rights which create a monopoly for a certain period of time in order to foster innovation and recover costs involved in the process of research and development. The main focus under this paper would be on the aspect of data exclusivity under the United States – Malaysia free trade agreement (“FTA”) and the manner in which it has impacted the availability of medicines in Malaysia. Data Exclusivity is a form of Intellectual Property Rights where the data regulatory authorities are obligated to protect the innovator’s data for a certain number of years from generics manufacturers. The generic manufacturers are prohibited from using this data to manufacture or market a similar product, instead they would have to conduct their own trials in order to do the same.
From the early days of neoliberalism, the wealthy northern countries have played a significant role in aggravating public health systems and the general welfare of the global southern countries or developing countries. Increasing regulations under the Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) and TRIPS + rules have worsened access to medicines in many developing countries.
Scope
This paper aims to look at the impact of the data exclusivity law that came into effect due to the negotiations between the United States and Malaysia as a part of signing a free trade agreement between the two countries. Keeping in mind the cultural and societal background of Malaysia, the author seeks to explore the possible effects of the data exclusivity law on the access to medicines and to the public health in Malaysia.
Body of the Project
Joseph Stiglitz, the Nobel laureate noted that the poor countries are affected three times more due to trade restrictions than their total “official development assistance (“ODA”).” While discussing the world trade regime it is pertinent to note that the wealthier nations use the disguise of “free trade” in order to seek reciprocity in terms of regulations with the developing or poorer nations. One of the ways to achieve this objective is by way of regional or bilateral Free Trade Agreements (“FTAs”).
The aspect of trade regimes affecting the access to medicines and public health and welfare in the global south is well known. Granting of patent rights for pharmaceutical products rested solely with the national governments before the inception of Trade-Related Aspects of Intellectual Property (“TRIPS”). Prior to this many countries including India did not have a patent regime in place thereby handing drug companies which manufacture generics a free license to produce major life-saving drugs at prices that were affordable by many. It is important to note that this practice was quite essential for the public health and welfare of people residing in these countries. But after the induction of TRIPS, all members of the World Trade Organisation are bound to protect patents registered domestically and all over the world, for a minimum period of twenty years.
An FTA will definitely aid in increasing the economic activity of a country but the same does come at many costs to the public welfare. One such aspect of the FTAs signed by the United States of America has a clear pattern of rewarding the drug innovators with great protection by way of a strict IP regime. This creates a huge burden on the healthcare systems of the developing countries.
The pharmaceutical companies often engage in what may be called as Intellectual piracy. Developing countries such as Malaysia, India and others do not have a robust structure to check the monopolistic tendencies of the pharmaceutical companies. This can be attributed to these nations lacking a strong antitrust regime and enforcement agencies. These companies indulge in the practices of monopolising the traditional knowledge systems of the developing countries by way of repacking the medical products and processes and thereby securing the patents on the same. These practices have also involved instances where biologics or naturally occurring substances were sought to be secured by way of patents.
For instance, the widely known and used commodity of Turmeric was subject to a huge controversy. Turmeric is used in a wide range of applications in our country ranging from food to health. The University of Mississippi Medical Centre applied for and secured successfully a patent for the administration and use of turmeric in healing wounds in the United States. This ensured that the medical centre had the exclusive rights for the distribution and sale of turmeric. This, however, was later on revoked after an objection by the Indian Council for Industrial and Scientific Research (“CSIR ”) which cited the use of turmeric by Indians from many centuries. It is important that we ensure that there is a system in place which acts as a check for pharmaceutical companies while claiming such innovations.
The global scientific community has come together in order to find a cure against the pandemic. There has been a significant willingness by everyone to share the research conducted in areas of finding a potential treatment and to coordinate clinical trials. This is quite opposite of the normal practices of these pharmaceutical giants who have been exploiting the public health and welfare of the common public by way of monopolising the life-saving essential drugs and lobbying against the generic manufacturers. This could be a good moment for the proponents of a strict IP regime to introspect on the effect it has on millions of people who cannot afford these medicines as a result of monopolistic practices of pharmaceutical companies.
It is worthwhile to note the considerable rise in the number of nations adopting the data exclusivity provisions over the span of the last two decades. This is achieved either through national legislation or under a trade agreement. For instance, Malaysia adopted data exclusivity provision under the free trade agreement signed with the United States. There is a huge concern among the developing countries with respect to the implications of this provision on the access to medicines and the overall effect it will have on the public health and welfare of the people living in such nations.
Background
With the onset of the World Trade Organisation (“WTO”), there was a creation of a strict set of Intellectual Property regime and protections which were to be followed mandatorily by all the members of the WTO. These sets of rules were imposed by way of an Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”). After the inception of the TRIPS Agreement, countries who were a part of WTO were obligated to follow strict Intellectual Property protections, mostly in countries which did not have similar national legislation that provided such protections. It needs to be noted that during this time there was already a debate around the possible impact these protections, especially the patent rights under the TRIPS Agreement would have on the access and affordability of medicines. These set of rules granted greater protection in terms of obtaining exclusive rights to sell and manufacture drugs that were invented by them and thereby preventing the generic manufacturers from manufacturing and marketing the same. These set of rules directly resulted in high prices for the medicines.
After the TRIPS Agreement came into force, the countries that were a part of WTO engaged themselves in signing many numbers of free trade agreements (“FTAs”) which were both bilateral and regional in nature. These FTAs usually afford higher protection than what has been mandated by way of the TRIPS Agreement. It can be observed that some of the rules included under these agreements are those that were previously discarded during the negotiations for TRIPS.
By way of FTAs, the stronger countries with greater bargaining power tend to make the developing countries or countries with lesser bargaining power to accept terms and conditions that are favourable to them and which may cause severe impact to the socio-economic condition of the country with less bargaining power. With stricter Intellectual property regimes, all the countries except the developed ones tend to take a hit on the public health and welfare part. The US used its bargaining power to impose data exclusivity on Malaysia.
Data exclusivity under the TRIPS Agreement
It is important to note that the TRIPS Agreement was the first international agreement which incorporated rules regarding the protection of trade secrets. There is no concrete mention of data exclusivity under the TRIPS but the article 39.3 of TRIPS is usually interpreted in a way to favour data exclusivity.
Article 39.3 states that “Members when requiring, as a condition for 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.”
The important aspects to note under Article 39.3 are that the above-mentioned protection is only available for the data which is submitted to the national drug regulatory authorities to seek market approval. The same protection is not available for the data submitted voluntarily or as an accessory requirement. The concerned data must be dealing with a new chemical entity (“NCE”), however, it is pertinent to note that the TRIPS agreement does not define what constitutes as “new” under this article. It is the discretion of the member states whether to include the novelty as a standard while considering data exclusivity. Usually, the Data regulatory authorities consider a chemical as ‘new’ when prior applications do not exist for the same chemical. There is no fixed duration mentioned under Article 39.3 for the data exclusivity provision and it could be decided by the member states while implementing the same.
The Doha ministerial declaration of 2004 is important while discussing the provisions of data exclusivity. According to Doha declaration paragraph 4, the above-mentioned provisions are “to be interpreted and implemented in a manner supportive of the World Trade Organization (WTO) Members’ right to protect public health and, in particular, to promote access to medicines for all.”
Data exclusivity in Malaysia
It is pertinent to understand the terminologies associated with the concept before we move to discuss the concepts of data exclusivity. The term “innovator” refers to the “person who invented the drug first.” “Generics manufacturer” refers to the “person who produces the identical drug after the innovator.”
Data exclusivity is a form of Intellectual Property Rights where the “data regulatory authorities are obligated to protect the innovator’s data for a certain number of years from generics manufacturers.” The generic manufacturers are prohibited from using this data to manufacture or market a similar product, instead they would have to conduct their own trials in order to do the same.
The negotiations for a free trade agreement between the United States and Malaysia around the year 2006 led to protests across the streets of Malaysia. These protests were staged in order to showcase resentment towards the initiation of talks for a free trade agreement between the countries.
After significant deliberation on the issues coupled with severe backlash from different activist groups, the provisions for data exclusivity came into effect in Malaysia on March 11, 2011, by way of a government directive which was issued under the Regulation 29 of the Control of Drugs and Cosmetic Regulations, 1984.
Data exclusivity under the Malaysian law applies to the undisclosed, unpublished, non-pharmaceutical test data relating to the following:
- New drug product containing a new chemical entity.
- The second indication of a registered drug product.
The concept of Data Exclusivity can be seen as a deal that involves a trade-off where the pharmaceutical companies are supposed to provide all the data regarding the safety and efficacy of the medicine invented. The other part of this trade-off involves the obligation of the regulators to keep this data confidential from the generics manufacturer or anyone else for the matter.
The National Pharmaceutical Control Bureau (“NPCB”) is the drug regulatory authority in Malaysia. NPCB is equipped with the responsibility to ensure the safety and efficacy of a particular drug prior to its approval for marketing in Malaysia. The assessment that was used by NPCB earlier placed reliance on clinical trial results submitted by the innovator company to obtain marketing approval. Once the originator drug received the approval for marketing, generic manufacturers could then obtain marketing approval from the NPCB on the trial data submitted by the innovator, without having to conduct their own trials for proving the safety and efficacy of the drug intended to manufacture. With the introduction of data exclusivity laws, the above-mentioned practice is no longer available. The generics manufacturers have to mandatorily conduct their own clinical trials to prove the safety and efficacy of the drug that they intend to produce and sell.
The determination of the data exclusivity is carried out by the director of the pharmaceutical services. The term of data exclusivity is usually no longer than 5 years. Malaysian law does not provide for patent term extensions based on the regulatory delays. Patents which were filed before August 01, 2001, are given patent terms which could range from 20 years since the date of filing or 15 years after the date of issue, whichever is longer among these two.
Compulsory licensing
Malaysia was the first country to introduce the system of compulsory licensing in the year 2004. Under compulsory licensing, a country can allow a generics manufacturer to manufacture and sell drugs in the market even when there exists a valid patent. This extended many benefits to the public health system of Malaysia by bringing down the cost of medicines to a great extent both for generics and the originator drugs.
Compulsory licensing is well defined under Article 31 of TRIPS. This is usually employed in situations where the patent owner does not provide a license to manufacture the drug they invented, the government can step in and give permission for manufacturing these drugs to some other party. TRIPS mandates that the party seeking a license to manufacture under the compulsory licensing should make “efforts to obtain authorization from the right holder on reasonable commercial terms and conditions before a compulsory license is granted.” If this does not manifest then the countries can issue compulsory licenses as per the conditions set under the TRIPS agreement.
The procedure followed by the pharmaceutical manufacturers applying for registration of a new drug involves the submission of the following:
- Administrative data
- Product Information
- Clinical Test data
- Quality data
- Non Clinical test data
For generics manufacturers who seek to manufacture a drug only the Administrative data, product information and quality data are necessary. They are also required to showcase that the generic drug is equivalent to the innovator drug in terms of therapeutic value. Generic manufacturers do not have to perform clinical tests and obtain the same results as that of the innovator. In case of a free trade agreement with the US, clinical tests would be necessary even for generic manufacturers to register their drug. As the process of conducting clinical trials is expensive most of the generic manufacturers tend to not burden themselves with the same as investing so much on a generic drug would not yield the desired results. The generic manufacturers would then have to wait until the expiry of the exclusivity period and then seek approval for their drug. This delays the entry of cheap generic drugs to the market by years and impacts the lives of people in developing countries such as Malaysia by making medicines unaffordable to a large section of the society as the innovator would seek to capitalise on their drug before the expiry of the exclusivity period.
However, it is to be noted that the exceptions set out under the data exclusivity law in Malaysia include those situations where compulsory licenses are granted and other such measures in order to protect public health and in ensuring access to medicines for everyone. But this exception has done very little in solving the problems faced by the people in terms of access to medicines.
Effects of the data exclusivity on the access to low-cost generic drugs in Malaysia
There is an argument with regards to referring to the data exclusivity law and the idea of equity. This could be stemmed from the aspect as to how the subsequent manufacturers are “unfairly benefitting from the ‘sweat of the brow’ of the initial registrant.” There have been arguments presented with respect to how the presence of a data exclusivity regime will benefit Malaysia in terms of attracting investment from other countries and also to foster well-equipped research and development based industry at a national level.
Data exclusivity is awarded only after a patented product approved for sale to the public after proving the efficacy. Unless the drug enters the market after a period of fifteen (15) years of obtaining the patent rights, Patent and data exclusivity periods usually run parallel to each other. It is in these rare circumstances that the exclusivity term goes beyond the patent term. In cases where there is a very significant delay in releasing the drug to the market vis a vis near the date of expiry of the patent term, the pharmaceutical company might be not willing to release the drug considering the costs involved in the same. In such cases, the five-year protection afforded to the pharmaceutical companies comes to their aid in protecting them for a short period of time which would give them scope to release the drug in the market without the fear of competition by generic manufacturers.
The protection provided to the clinical test data in Malaysia is important because the same helps chemical compounds which are not protected through patents. It was noted that “as more and more chemical compounds which are not patent protected are being developed and in these instances of data exclusivity are the only available intellectual property protection”
If the innovator company faces competition with generic manufacturers as soon as the innovator’s drug enters the market, there is no incentive for the innovator to invest in the research for the purposes of new indications or new uses for off-patent substances which are not subject to any protection. Data exclusivity is seen as strong protection that provides a way for the originator company to recover costs invested in research and development before the generic manufacturers enter the market. When the data exclusivity period approaches the expiry, pharmaceutical companies can seek to obtain three more years of additional exclusivity period by claiming a new indication of the drug. This leads the originator companies to involve in further research and testing the drugs even when the patent term or exclusivity period is nearing an end. This research is hugely beneficial to the common public as there may be cases where the new indications may help cure more diseases or conditions over the already identified areas of indications. To conclude, We can safely assume that this additional period of exclusivity is a good incentive for the pharmaceutical companies to carry further research and invest in the same.
Conclusion
The author has so far discussed the issues regarding the access to medicines and public healthcare due to the onset of the Data Exclusivity through the Free Trade Agreement signed between the United States of America and Malaysia. Questions regarding the prevention of unfair use of the test data obtained by the company inventing the drug, the access to medicines and especially the lifesaving drugs are commonplace while discussing Data Exclusivity.
The ramifications of such provisions arising due to FTAs on developing countries like Malaysia can be severe as these agreements include IP protections that are much higher than the usual standard that is put in place by the TRIPS agreement. The negotiations that took place prior to the conclusion of the TRIPS Agreement included a set of accords between the developed and the developing countries. These set of compromises accorded were seen as a result of the collective bargaining power of the developing nations. But these become futile when countries like the United States which are strong in terms of economic and other capabilities impose additional and stricter IP protections on developing countries with the help of FTAs. There is little to no scope for the other country in such bilateral trade agreements to have any sort of bargaining power.
The plausible argument on behalf of having a data exclusivity law would be to use it as a factor to foster innovation and growth in the areas of research and technology. The Malaysian pharmaceutical industry is of the opinion that a data exclusivity law would “enable the country to have access to new therapies developed both locally and overseas that may have not been otherwise available and will create a favourable environment for biosciences investment on par with the other leading knowledge-based countries.”
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