Generics Dispute EU-India Trade Negotiations

The recent India–EU summit was expected to bring news about the upcoming Free Trade Agreement between the EU and India; however, a dispute regarding the supply of generic drugs from India to developing countries has taken centre stage.
Feb 11, 2011
Volume 23, Issue 2

India has become a major business partner for the EU and has been designated as one of its "strategic partners" since 2004.1 In 2009, EU goods exports to India were valued at €27.5 billion, with imports from India to the EU being valued at €25.4 billion.1 As a result of the growing ties, the two partners have been negotiating a Free Trade Agreement (FTA), which they hope will further boost trade. The EU and India already have in place an institutional framework, including an annual summit and various working parties, to look at technical issues that can improve business relations. Therefore, there was considerable interest in the 11th India–EU Summit, which was held at the end of 2010 in Brussels (Belgium), as positive news concerning progress on the FTA was expected to be announced.

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However, although the post-summit press conference did report that a conclusion to the FTA was expected by Spring 2011, this aspect of the meeting became overshadowed by an unrelated but ongoing dispute between India and the EU.2,3 During 2008 and 2009, a number of Indian generics exports were seized in the EU because it was claimed that they violated local patent laws. The issue is embarrassing for the EU because it concerns the supply of generic drugs from India to developing countries and ties into the emotive issue of access to medicines in these regions.

Generic potential

The Indian pharmaceutical industry is a major producer of generic drugs and routinely exports them to other countries. According to the Indian Drug Manufacturers' Association (IDMA), exports in 2009 reached $10 billion and are growing annually at 22%.4 India is ranked as the third largest country in terms of production volume and its export status is helped by the fact that 150 factories are approved by the FDA, the UK's MHRA, and agencies in Australia and South Africa. In addition, a number of other Indian facilities possess WHO-GMP certificates.

Due to price differentials, Indian generic products have become particularly popular in developing countries as a cheaper alternative to branded products; for example, Médecins Sans Frontières (MSF) estimates that more than 80% of the AIDS medicines used to treat more than 5 million people across the developing world come from Indian companies.5

Until 2005, India only allowed pharmaceutical patents for the manufacturing process used to produce a drug and not for the end product itself. This enabled Indian pharma companies to develop large numbers of cheap generics and by the start of 2005, there was an estimated 60000 generic brands in 60 therapeutic areas on the Indian market.6 Multinational pharma companies lobbied against the increasing availability of generic drugs, which are marketed at much lower prices than their products, but were particularly alarmed when it became apparent that some Indian companies were prepared to export their products to other markets.

In 1995, India joined the World Trade Organisation (WTO), which obligates its member countries to switch to a European/US style drug patent system that concerns chemical entities themselves. In line with a 2005 deadline, India changed its patent law accordingly. This did have some impact on the generics industry, as not only were patents allowed for new drugs whose development started in 2005, but they were also permitted for a number of other products considered patentable after 1995. Nongovernmental organisations such as MSF, however, were worried by the decision and claimed that it would restrict the availability of affordable medicines in poorer countries.5,6

Nevertheless, from the viewpoint of multinational pharma companies, the changes to Indian patent laws did not go far enough. While the Indian patent regime fulfils the basics required by WTO rules, it is still not considered as stringent as in the EU. This has resulted in Indian generics companies continuing to compete against multinational companies — with matters often ending up in court.