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The EU-India free trade agreement and access to medicines

The free trade agreement which India is negotiating with the European Union threatens to jettison some of the health safeguards in India's patent legislation which make possible the production of cheap generic medicines. Kajal Bhardwaj identifies the draft treaty provisions which raise serious concern.

SINCE 2007, India and the European Union (EU) have been negotiating a free trade agreement (FTA) that has attracted global concern over its potential impact on the manufacture, supply and distribution of generic medicines from India.

Till recently, the EU had not figured among the developed nations that aggressively pursue intellectual property protection in excess of the World Trade Organisation (WTO)'s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). These so-called TRIPS-plus provisions, which are known to have an adverse impact on generic production, typically featured in FTAs negotiated by the United States such as the North American Free Trade Agreement (NAFTA), the Central American Free Trade Agreement (CAFTA) and a host of other US FTAs negotiated with developing countries.

However, leaked versions of the EU-India FTA negotiation texts in 2009, 2010 and 2011 show that the EU, in a stark departure from its traditional model of trade negotiations, is now demanding ambitious TRIPS-plus measures of developing countries (Bilaterals.org). In the case of India, the demands, if accepted, would have an impact not just on patients in India but also on those across the developing world.

Patents and access to medicines in India

Between 1975 and 2005, India built up its capacity to produce safe, effective and affordable generic medicines. The country's 1970s patent law played an important role in the development of the Indian generic industry as it did not allow 'product patents' on pharmaceuticals and enabled Indian companies to make their own generic versions of medicines.

The clearest impact of India's generic production has been in the case of antiretrovirals (ARVs) for the treatment of HIV/AIDS. Competition from and between Indian generic producers has resulted in reductions in the prices of first-line AIDS medicines from as much as $15,000 to as little as $60 per person per year (Medecins Sans Frontieres, 2011). In addition, the lack of product patents on each separate drug allowed Indian generic manufacturers to combine three different AIDS medicines in one single pill. The availability of these generic fixed-dose combinations has dramatically simplified AIDS treatment in resource-limited settings and has resulted in government treatment programmes across the developing world. Over 6.6 million people living with HIV are now on treatment in developing countries, the majority on Indian-made generic ARVs. A 2010 study which examined the purchase of donor-funded HIV medicines found that, 'among paediatric ARV and adult nucleoside and non-nucleoside reverse transcriptase inhibitor markets, Indian-produced generics accounted for 91% and 89% of 2008 global purchase volumes, respectively' (Waning et al., 2010).

Changing scenario: India starts granting patents on medicines

In 2005 India had to amend its patent law to become compliant with its obligations under the WTO's TRIPS Agreement. As opposed to its 1970s patent regime, TRIPS required India to start granting 20-year product patents on medicines. Product patents give patent holders exclusive rights over the manufacture, sale, use, offer for sale and import of the patented medicine. This allows them to exclude competitors or generic companies from producing the medicine and the lack of competition results in high prices and restricted availability.

While debating the impact of complying with these requirements of the TRIPS Agreement, the Indian Parliament recognised that the WTO rules could pose a significant barrier to generic production and access to medicines. They turned to the 2001 Doha Declaration on the TRIPS Agreement and Public Health signed by all WTO members that states categorically that TRIPS 'can and should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all' (World Trade Organisation, 2001).

The Indian Parliament thus included multiple health safeguards in the amendments to India's patent law, including a provision restricting 'evergreening', i.e. the practice of pharmaceutical companies extending their exclusive rights on a medicine by making minor or obvious changes to the medicine and applying for additional patents. Section 3(d) of India's patent law accordingly prohibits patents on new forms of existing medicines unless the patent applicant can show a significant increase in efficacy. The law also allows health groups to challenge patent applications, and people living with HIV, cancer and hepatitis C have used these provisions to ensure that frivolous patents are not granted on key medicines in India (Chaudhuri et al., 2010).

Beyond TRIPS: The EU-India FTA negotiations

Several of the health safeguards included by the Indian Parliament in the Indian patent law are now at risk of being overturned or undermined by the TRIPS-plus demands of the European Commission - the executive arm which negotiates on behalf of the EU - in the EU-India FTA negotiations. There are three distinct areas of concern in the ongoing negotiations that could adversely impact India's generic production capacity and, consequently, the ability of patients in India and across the developing world to access safe, effective and affordable generic medicines from India. These are the intellectual property chapter, the investment chapter and the regulatory standards chapter.

Although the regulatory standards chapter is not discussed for the purposes of this article, demands that India harmonise its drug regulatory standards with those of the EU have caused concern regarding the ability of Indian generic companies to meet such standards and whether these standards could also become a barrier to generic production. More vocal critics of the attempts by developed countries and the multinational pharmaceutical industry to promote the upward harmonisation of regulatory standards have pointed out that such standards are designed only to be met by well-resourced companies and would ultimately squeeze generic companies out of production (Essential Drugs Monitor, 2001).

The intellectual property (IP) chapter

The IP chapter that is being negotiated between the EU and India is comprehensive and covers a broad range of IP issues including copyright, geographical indications and patents (including as they impact agro-chemicals and seeds). However, this article focuses on the demands by the EU in the IP chapter as they relate to access to medicines. Among the primary demands of the EU in this regard are:

Patent term extension: Since 2005, when India changed its patent law to comply with the TRIPS Agreement, it has been granting 20-year patents on products and processes as required by TRIPS. Also known as 'supplementary protection certificates', patent term extensions would require India to extend the patent term beyond 20 years if there is any delay in the granting of a patent or in obtaining marketing approval for the medicine.

A longer patent term would mean that the monopoly period enjoyed by the patent holder would get extended and delay the entry of generic medicines. A study by the Korean National Health Insurance Corporation on similar demands for patent term extension by the US in the context of the South Korea-US FTA negotiations concluded that the extension of patent term could cost the Corporation $529 million for extending drug patents for three years and $757 million for a four-year extension. In addition, critics argue that such a mechanism can place undue pressure on the patent office to grant a patent or on the drug regulator's office to grant marketing approval without due consideration.

Data exclusivity: Generic manufacturers, when seeking marketing approval for their products, do not have to conduct clinical trials on medicines already introduced in the market. Duplicate clinical trials on human populations for a medicine whose safety and efficacy is already proven are considered unethical. They would also add considerably to the cost of generic production. Instead, under the regulatory laws of most developing countries, generic manufacturers have to show that their generic versions are 'bioequivalent' to the medicine already approved and on the market.

Data exclusivity as demanded by the EU in the FTA negotiations would require generic manufacturers to conduct their own clinical trials to get marketing approval or wait till a specified exclusivity period is over (five to 11 years) before a generic product is approved. This measure creates exclusivity over medicines separate from patents and applies even to medicines that are off-patent or where a compulsory licence is issued. In Guatemala, price differences in the same therapeutic class of medicines range up to 845,000% because of data exclusivity (Shaffer and Brenner, 2009). In Jordan, a 2007 study by Oxfam showed that of the 103 medicines registered and launched since 2001 that had no patent protection in Jordan, at least 79% had no competition from a generic equivalent as a consequence of data exclusivity (Oxfam, 2007). Both Jordan and Guatemala impose data exclusivity as a result of their FTAs with the US.

Enforcement measures: A key area that the leaks of the IP negotiation chapter have highlighted is the EU's interest in aggressive IP enforcement, widely considered the latest front in the IP battle between the North and the South. Best reflected in the secretly negotiated Anti-Counterfeiting Trade Agreement (ACTA), IP enforcement entails measures that significantly alter how IP holders like multinational pharmaceutical companies can use public resources, money and authorities to enforce their private rights. The impact of such aggressive IP enforcement measures has been seen in 2008 and 2009 when generic medicines on their way from India to Africa and Latin America were seized at European ports (Health Action International et al., 2009). Under the EU Customs Regulations, customs officials did not require proof of patent infringement or even that the generic medicines would enter the European market before they took these actions.

Several of the provisions of ACTA feature in the EU-India FTA negotiations. Among these are provisions that increase the ability of patent holders to get court orders stopping generic medicines from reaching the market before even having proven that their patents are being infringed. Indian courts have held that in the case of medicines, courts would be extremely careful before granting such 'injunctions'. However, the EU's demands would broaden the circumstances in which patent holders can ask courts for such orders and upset the fine balance the Indian courts are seeking to establish between patent rights and public interest. In addition, the EU is also seeking what is known as 'third party liability', which would allow patent holders to involve the entire manufacture, supply and distribution chain in patent disputes. This could include API (active pharmaceutical ingredient) manufacturers, truckers, pharmacies and even NGOs that are treatment providers. TRIPS-plus IP enforcement measures are thus likely to have a chilling effect on generic production and supply. 

The investment chapter

In 2011, the European Commission received a mandate from the European Council to include an 'investment' chapter in the EU-India FTA negotiations. The investment chapter would contain provisions designed to protect the interests of European investors in India and would be similar to provisions contained in bilateral investment treaties or BITs. In recent years, more and more examples of how investment provisions are used by investors to prevent governments from adopting pro-public-interest regulations related to health, environment, development, etc. have come to light.

The investment chapter can impact access to medicines and the use of TRIPS flexibilities by India in several ways. Investment rules typically define investment to include intellectual property rights and prohibit the 'expropriation' of such investments by the government or require 'fair and equitable treatment' for EU investors. These terms are not defined anywhere and companies use these provisions to challenge pro-health or pro-environment laws and policies. In addition, where a company alleges such expropriation, it can sue the Indian government in secret, private international arbitration instead of local courts. The clearest examples are the cases filed by tobacco company Philip Morris against Uruguay and, more recently, Australia. Philip Morris is alleging that tobacco warnings on cigarettes or rules for plain packaging amount to infringements of its trademarks, which are considered to be 'investments'. The investment provisions have also been used to challenge, for instance, Poland's attempts to regulate its health insurance industry or the ability of Canada to regulate chemicals that can cause health problems.

Experience has shown that, regardless of the soundness of these legal actions, the fact that they are in private international arbitration, the exorbitant compensation awarded to investors and the high legal costs for defending such cases have had a chilling effect on government regulations. Moreover, these private arbitration panels do not take human rights or Constitutional obligations of governments into account in making their decisions and are increasingly under scrutiny for reflecting institutional biases within the international investment regime (Van Harten, 2010).

In addition, unlike existing bilateral investment treaties between some European countries and India, the investment chapter in the FTA would also contain so-called 'market access' or 'performance requirements' that essentially prevent governments from imposing conditions or restrictions on foreign investors. In the case of companies producing essential products like medicines, this is a cause for concern. The market access provisions would make it extremely difficult for the Indian government to ensure, for instance, that pharmaceutical companies continue to produce key essential medicines or to impose safeguards in the takeover of Indian pharmaceutical companies by multinational companies.

State of play

In April 2011, the Indian Prime Minister's Office issued a press release stating that nothing in the EU-India FTA would go beyond TRIPS or India's domestic law (Prime Minister's Office, 2011). Sources indicate that the European Commission has now shifted negotiation tactics to argue that several of its demands are within the TRIPS framework or are already present in Indian law. For instance, the EC's position on whether data exclusivity is required by the TRIPS Agreement has been vague and any attempt to replicate the provisions of the TRIPS Agreement in the EU-India FTA may be used by the EC at a later stage to argue that TRIPS requires data exclusivity. Under the WTO framework, the EU would have to take the Indian government to the WTO's dispute settlement body to settle this issue in a public dispute. But under the FTA, these discussions would be subject to secret arbitration between the EU and India. In addition, the EC also appears to be arguing that the IP enforcement measures it is demanding are within the scope of the Indian law.

In February 2012, the 11th EU-India Summit was held in New Delhi. One of the key areas identified by the EC to be discussed at the Summit was to speed up negotiations on the FTA. According to news reports from the Summit, it appears that both India and the EC stuck to their stands on various contentious issues in the FTA (Alexander, 2012). Although the European side announced after the Summit that the FTA would be ready for signing by the end of 2012, similar public enthusiasm for a quick resolution of the FTA on the Indian side is noticeably lacking.

Among the specific TRIPS-plus demands of the EC that are of concern, the EC claims that it is no longer demanding patent term extension or EU-style data exclusivity. However, as the negotiation texts continue to be secret, it is difficult to ascertain the actual shift in the position of the EC. Also, as noted above, even if the EC drops its demand for EU-style data exclusivity, it may still argue that data exclusivity of some sort is required by the TRIPS Agreement.

A bilateral agreement, a global movement

The negotiations between India and the European Union have sparked global protests.  With most developing countries dependent on India for their supply of medicines, the impact of the EU's demands will be felt across the South. In addition, several other developing countries are also negotiating FTAs with the EU and the FTA with India is widely considered to be the template for these negotiations. For several developing countries, India's ability to resist the EU's TRIPS-plus demands would create an important precedent. Protests against the EU-India FTA have taken place across the globe. The most recent round of protests was held around the EU-India Summit and demonstrations were held in Nepal, the UK, Kenya, South Africa and Malaysia (Delhi Network of Positive People, 2011). Concern over the impact of the EU-India FTA has also been expressed by the Joint United Nations Programme on HIV/AIDS (UNAIDS), the UN Development Programme (UNDP), the Global Fund to Fight AIDS, Tuberculosis and Malaria, and the UN Special Rapporteur on the Right to Health. 

A free trade agreement is a binding legal instrument and the Indian Parliament would have to amend India's laws while the government would have to make changes in policies to implement this trade agreement domestically. A change in India's patent laws that prioritises the interests of the multinational pharmaceutical industry over the right to health and access to medicines will impact millions in India and across the developing world who rely on Indian generic medicines to treat not just HIV, but also cancer, heart disease, blood pressure, mental illness, etc.

What the European Commission is demanding of the Indian government jeopardises the hard-fought-for balance between public interest and intellectual property rights that the Indian Parliament sought in 2005. The patent system is already having an impact on the availability of generic medicines from India. Patented hepatitis C medicines, for example, which are also required by people living with HIV who are co-infected with hepatitis C, cost anywhere between $7,000 and $10,000 for a treatment course (the treatment cost varies with the relationship between the doctor and pharmaceutical company). The TRIPS-plus demands of the EC threaten to make a bad situation worse.

Even as global public opinion and the activism of people living with HIV across the developing world appear to have forced some manner of retreat by the European Commission on its most aggressive demands, the Indian government must continue to remain vigilant and resist all EU demands that may have an adverse impact on access to medicines. This also applies to other FTA negotiations as well as other methods being used by the multinational pharmaceutical industry and developed countries to introduce TRIPS-plus measures in India, including through litigation, lobbying and the training of law and policy makers and judges.

Equally important is the resistance of other developing countries to similar TRIPS-plus demands in FTAs they are negotiating with developed countries. If India resists the EU's demands but importing countries impose TRIPS-plus provisions, their ability to access Indian generics or even produce their own would be severely restricted. The EU-India FTA negotiations are taking place at a time when the US has also restarted its FTA project with an ambitious Trans-Pacific Partnership Agreement (TPPA) aimed at covering several developing countries in Asia and Latin America.

While the EU, the US and even Japan appear to have a co-ordinated strategy promoting TRIPS-plus measures in the name of trade that will adversely impact generic competition, developing countries appear unable or unwilling to create a common platform for resisting these efforts. As more and more developing countries grapple with the adverse impact of the TRIPS Agreement and the calls for its review get louder, the frenzied pace at which FTAs with TRIPS-plus measures are being negotiated contradicts the increasing evidence that heightened intellectual property protection risks the lives and health of millions across the South.

Since the imposition of TRIPS on developing countries, public interest and health groups and communities of people living with HIV, cancer and other diseases have taken the lead, through the use of legal measures or activism, to ensure that trade rules do not hamper access to medicines. As developing countries struggle with shrinking budgets and expanding universal access to healthcare, it is time that these governments band together behind the vision best expressed by Indian Prime Minister Indira Gandhi at the 1981 World Health Assembly which adopted the Global Strategy of Health for All - that the idea of a better ordered world is one where medical discoveries are free of patents and there is no more profiteering from life and death.                                                

Kajal Bhardwaj is a lawyer based in India working on HIV, health and human rights issues.

References

Alexander, J. (2012), India, EU stick to earlier stands on health sector as high level summit gave momentum for FTA, Pharmabiz, 14 February 2012, available at http://pharmabiz.com/NewsDetails.aspx?aid=67520&sid=1Bilaterals.org, Texts of Free Trade Agreements: EU, available at http://www.bilaterals.org/spip.php?rubrique52

Chaudhuri, S. et al. (2010), Five Years into the Product Patent Regime: India's Response, UNDP, December 2010, available at http://www.undp.org.in/sites/default/files/reports_publication/UNDP_IndiaStudy.pdf

Delhi Network of Positive People (DNP+) (2011), EU-India FTA negotiations: DNP+ protest, December 2011, available at http://www.bilaterals.org/spip.php?article20741

Essential Drugs Monitor (2001), Global Harmonization and the ICH, Issue No. 30, World Health Organisation, 2001, available at http://apps.who.int/medicinedocs/en/d/Jh2977e/4.html

Health Action International et al (2009), Another seizure of generic medicines destined for a developing country, this time in Frankfurt, 5 June 2009, available at http://haieurope.org/wp-content/uploads/2010/11/5-Jun-2009-Press-release-Seizure-of-generic-medicines-in-Frankfurt.pdf

Medecins Sans Frontieres (MSF) (2011), Untangling the web of antiretroviral price reductions, July 2011, 13th edition, available at http://utw.msfaccess.org/

Oxfam (2007), All costs, no benefits: how TRIPS-plus intellectual property rules in the US-Jordan FTA affect access to medicines, Oxfam Briefing Paper, March 2007

Prime Minister's Office (PMO) (2011), Trade Negotiator's Given Guidelines, Press Information Bureau, Government of India, 30 April 2011, available at http://pib.nic.in/newsite/PrintRelease.aspx?relid=71881

Shaffer, E.R. and Brenner, J.E. (2009), A Trade Agreement's Impact on Access to Drugs, Health Affairs (web exclusive), 2009

Van Harten, Gus (2010), Five Justifications for Investment Treaties: A Critical Discussion, Trade, Law and Development, Vol 2, No. 1, p.1, 2010, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1622928

Waning, B. et al. (2010), A lifeline to treatment: the role of Indian generic manufacturers in supplying antiretroviral medicines to developing countries, Journal of the International AIDS Society, 2010, 13:35, available at http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2944814/

World Trade Organisation (WTO) (2001), Declaration on the TRIPS Agreement and Public Health, WT/MIN(01)/DEC/2, 14 November 2001, available at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm

*Third World Resurgence No. 259, March 2012, pp 15-19


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