Insider Analysis From Finnegan Henderson: India's Indecision - How To Provide Pharma Companies With Clinical Trial Data Exclusivity

By: Nathan A. Evans and Seth I. Heller, Finnegan, Henderson, Washington, D.C.

This article is for informational purposes only and is not intended to constitute legal advice. The views in this article represent the authors' personal thoughts on the subject matter at the time the article was written and should not be attributed in any manner to Finnegan Henderson, any of its clients, or any of its other attorneys.

The cost of bringing a new drug from the lab to the market is enormous, due in large part to the expensive and time-consuming clinical trials necessary to prove the safety and efficacy of the product. Because of these high costs, regulatory safeguards for clinical trial data are extremely important to innovative pharmaceutical companies.

Although many countries have enacted provisions that specifically protect such data under certain conditions, India is struggling to find a data protection position that meets its economic and political needs, as well as the needs of the pharmaceutical industry.

Need for Data Exclusivity

When a company files a new drug application to gain market approval for an innovative drug, it wants to ensure exclusive rights not only to its intellectual property, but also to the clinical data it generates from the drug trials required for regulatory approval.

Understanding that the risk-reward ratio must be somewhat balanced to encourage the research and development of new drugs, most developed countries - including the United States, Canada, Japan, China, and the European Union - have added what has become known as "data exclusivity" to their incentives.

Clinical data normally are confidential and remain with the regulatory authority, but data exclusivity provides additional protection beyond this safeguard. It precludes other pharmaceutical companies not only from viewing such data, but also from even relying on the application holder's clinical data when applying for approval of a bioequivalent version of the approved drug.

Accordingly, if a generic company cannot rely on the successful results from the application-holder's trials, it would have to perform - and fund - its own independent clinical trials. Because establishing a sufficient body of data to meet safety and efficacy standards is prohibitively expensive and time-consuming for most generic firms, data exclusivity essentially creates a market barrier that most generic drug manufacturers cannot overcome.

The questions of whether to incorporate data exclusivity into a nation's regulatory scheme for pharmaceuticals and how to implement such a program are contentious issues that many countries, such as India, are addressing. For example, the United States currently grants a five-year term of data exclusivity from the date of marketing approval (also called a fixed-term data exclusivity approach) to drug companies that submit applications for market approval of chemicals never before approved by the U.S. Food and Drug Administration.[1]

India recently made substantial changes to its intellectual property regime, particularly with respect to the pharmaceutical industry. Generally considered a country with a booming generic drug industry, India now is in a position to cultivate a sophisticated drug industry for new products due to business advantages inherent to India's economy and drug market, coupled with recent reforms to India's patent laws under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

In light of these changes, and because the Indian regulatory authority requires that applicants hoping to market new drugs in India provide sufficient clinical safety and efficacy data for approval, the Indian government has been considering whether, and how, to establish data exclusivity.[2]

I. FORMAL CONSIDERATION OF DATA EXCLUSIVITY BY THE INDIAN GOVERNMENT

On Feb. 10, 2004, the Indian government commissioned a group of experts to draft a report exploring India's obligations under TRIPS regarding data exclusivity. The report, titled 'Report on Steps to Be Taken by Government of India in the Context of Data Protection Provisions of Article 39.3 of TRIPS Agreement,' was published on May 31, 2007.

The authors of the report were tasked with answering two major questions:

(1) What steps does the Indian government need to take in light of TRIPS Article 39.3 (which sets forth the World Trade Organization's minimum clinical trial data protection standards)?; and

(2) Can data exclusivity be implemented under India's current laws or are new laws necessary?[3]

After meetings with interested parties on both sides of the issues, the authors determined that Article 39.3 provided flexibility in how India implemented data exclusivity.[4] The ultimate decision must “ensure rapid and timely response to public health needs by facilitating timely entry of generics and encouraging competition," the authors concluded, while also "adequately promot[ing] innovation and R&D in pharmaceuticals ... by utilizing the rich human capital and the infrastructure available in the country ... [to] help build India's strength in these areas on a long term sustainable basis."[5]

A. TRADE SECRET APPROACH

Two different approaches to complying with Article 39.3 were discussed in the report. First, the authors discussed a "trade secret" approach, under which the regulatory authorities would keep the innovator's clinical trial data confidential in order to protect against unfair commercial use by a generic firm.

However, and quite contrary to the protection employed by countries like the United States, under this approach another company and the regulatory authority could rely on this data when determining the safety and efficacy of a generic version.[6]

Further, and likely worrisome for multinational pharmaceutical companies, the authors discussed a limitation of this trade secret-like protection to only New Chemical Entities (NCEs).

Although the authors stated the need for a more clear definition of an NCE by the Indian government, they seemed to suggest that an NCE should not include “new indications [new uses], new dosage forms, new combinations, crystalline forms, isomers, etc."[7] This appears to reflect the position of the generic drug industry in India, as well as the controversial Indian patent law amendments on this issue, namely Section 3(d), a discussion of which is outside the scope of this article.

The authors considered the pros and cons of adopting the trade secret approach. Potential benefits could include greater competition and lower prices by denying monopoly rights on any non-patented new drug, the authors stated, as well as the promotion of greater availability of generic drugs due to reliance on parent data when considering subsequent bioequivalent generics.[8]

On the other hand, the authors foresaw several potential negative impacts, noting that international companies would be deterred by a perception that India does not sufficiently protect new drug data, and accordingly, that a trade secret approach would slow down the launch of some new drugs in India.[9]

This negative perception, the authors asserted, could hinder India's entry into important international conventions, as well as encourage bilateral free trade agreements between the United States and other countries that provide data exclusivity and intellectual property rights that are more vigorous than those provided by India.[10]

B. FIXED-TERM DATA EXCLUSIVITY APPROACH

The second approach discussed in the report included five-year, fixed-term data exclusivity, "along with safeguards,"[11] which include:

(1) protection only for NCEs that had not been previously approved;

(2) protection only for molecules discovered after Jan. 1, 1995;

(3) denial of data exclusivity that goes beyond the scope of the 20 years of patent protection afforded by India;

(4) a period of protection starting when the drug is approved anywhere else in the world;

(5) an allowance for generics to at least file for approval before the end of the data exclusivity period;

(6) government power to waive all data exclusivity in the event of a public health emergency;

(7) government right to implement a new plan "to ensure that the prices of new drugs are reasonable for fulfilling the affordability and accessibility criteria in the public interest";

(8) power in the regulatory body to waive its requirement for parent data (thus seemingly denying a right to data exclusivity); and

(9) a caveat that the provisions would not apply if the generic drugs were for export to countries without data exclusivity or if the exclusivity period in the importing country had expired.[12]

The report's authors described a number of positive and negative implications of adopting this fixed-term data exclusivity strategy, citing the potential benefits as follows:

• more elaborate safety and efficacy data would be available to the regulatory authority;
• Indian and foreign pharmaceutical companies would be encouraged to focus efforts on developing new drugs in India;
• more innovative drugs would be developed to treat diseases prevalent in India;
• the perception of India as an innovative country would increase;
• India would likely be more able to join international conventions; and
• India's economy would benefit.[13]

Conversely, data exclusivity could provide a barrier to generic companies, thereby slowing entry of the generic companies into the market, which could raise drug prices, according to the report. However, the authors suggested that the cited safeguards could allay these concerns "by keeping a check on the prices of the drugs."[14]

C. REPORT RECOMMENDATIONS

Regardless of which approach is taken, the experts recommended that the Indian government more explicitly provide for protection in already existing legislation touching on related topics. If the Indian government ultimately chooses fixed-term data exclusivity, the authors called for a transition period both to educate the public and the pharmaceutical industry and to establish necessary infrastructure.

To manage incoming data and maintain confidentiality during this transition, the minimum standards of Article 39.3 would need to be met, which, according to the committee, would require "non-disclosure of test data and non-acceptance of fraudulently obtained data."[15]

Some of the recommended measures to accomplish this were: improving the regulatory body's infrastructure, barring ex-employees from disclosing data, studying the safeguards employed by other countries, and providing the central government power to override the trade secret rules "in exceptional circumstances in public interest."[16]

In the post-transitional period, the five-year, fixed-term data exclusivity could be applied, although the authors withheld final judgment pending "further analysis of this model."[17]

The hallmark of the fixed-term plan is the reliance on many so-called "safeguards," which would include, in addition to the ones enumerated above: a six-month marketing requirement for entry into the market under which, if a drug is not marketed within six months of its grant, or for 12 consecutive months at any one time, the regulatory authority could allow other companies to market equivalent drugs; exemptions for life threatening diseases including HIV/AIDS[18]; an ability to override exclusivity under a compulsory license; a waiver of protection if repetition of the parent clinical trials is "not considered essential"; and a government right to price negotiations "to ensure that the prices of new drugs are reasonable for fulfilling the affordability and accessibility criteria in the public interest."[19]

The safeguards also would include a recommendation that the definition of NCEs exclude new uses, new dosage forms, new combinations, and other derivatives, which again reflects the views of India's generic drug industry and is contrary to the views expressed by multinational pharmaceutical companies.

II. CONCLUSION

In considering data exclusivity for India, the authors seemingly leaned in favor of views expressed publicly by Indian generic companies, although the need to balance affordability and accessibility with innovation was echoed throughout the discussion. More debate will follow this report, but real change is only likely to come in the distant future.

Nathan A. Evans is an associate in the Washington, D.C., office of Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., where he specializes in the areas of patent litigation and strategic counseling for clients in the pharmaceutical industry. He also is the co-chair of the American Bar Association subcommittee within committee 102 addressing the effects of recent patent law amendments in India on the global pharmaceutical industry.

Seth I. Heller is a summer associate in the Washington, D.C., office of Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., and currently attends Washington University School of Law in St. Louis, Missouri.

ENDNOTES

1. Center for Drug Evaluation and Research, Small Business Assistance Frequently Asked Questions, http://www.fda.gov/cder/about/smallbiz/exclusivity.htm (last visited Aug. 13, 2007).
2. Mrs. Satwant Reddy, Secretary, Department of Chemicals & Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India, and Mr. Gurdial Singh Sandhu, Joint Secretary, Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India, Report on Steps to Be Taken by Government of India in the Context of Data Protection Provisions of Article 39.3 of TRIPS Agreement (May 31, 2007).
3. Id. at 1.
4. Id. at 22. Due to the perceived flexibility of section 39.3 of TRIPS, India refers to potential data exclusivity as data protection. The term data exclusivity will be used herein to refer to both terms.
5. Id. at 6.
6. Id. at 31-33.
7. Id.
8. Id. at 32.
9. Id. at 31-33.
10. Id.
11. Id. at 33-35.
12. Id.
13. Id.
14. Id. at 35.
15. Id. at 44.
16. Id. at 44-46.
17. Id. at 46.
18. Id. at 52.
19. Id. at 51-52.