Generics Dispute EU-India Trade Negotiations

February 11, 2011
Nathan Jessop
Pharmaceutical Technology Europe
Volume 23, Issue 2

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.

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.

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.

The author says...

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.

Hidden agenda?

Indian companies believe that resentment from multinational companies stemming from a number of legal decisions going against them in India has led to them seeking other ways to decrease the competition by lobbying governments in their home markets.5 During 2009, Indian companies were angered by frequent seizures of their products at EU transit points by European authorities under the pretext of patent protection.

One such incident in 2009 led to the Dutch authorities detaining a shipment of Indian generics destined for Brazil and Colombia. The reason given by the Dutch authorities was that the products infringed EU patents, even though the companies pointed out that the products were off patent in India and not meant for sale in the EU. The Indian government became involved and commented that developing countries lacked the capability to manufacture these essential medicines and could not afford the patented alternatives. The Dutch Foreign Minister, on a trip to India, was drawn into the dispute and admitted that patent protection should not have been used to interfere with the distribution of generic drugs to poor patients across the world.7

Although the Dutch government and other EU officials promised to try and resolve the issues prompting the seizures, this did not stop Brazil and India from filing complaints against the EU at the WTO over the shipment seizure.8 According to EU officials the dispute centred on how member states interpreted EC Regulation 1383, which allows a rightholder to ask customs to detain shipments under suspicion of being counterfeits, pirated goods or goods infringing intellectual property rights.9,10 The rules permit detainment even where goods are in transit through the EU. According to the Indian media, complaints from sanofi aventis SA, Novartis AG and Eli Lilly led to the European seizures.9

By associating the Indian generics with patent infringement, critics of multinational pharma argue that the EU is effectively labelling the products as counterfeits, which was considered insulting in India, as the products came from wellestablished domestic companies such as Dr Reddy's and Aurobindo Pharma. Critics believe that special interest groups, supported by the multinationals, are content for there to be confusion over the concept of counterfeiting, as defined by law, and what constitutes legitimate generics.11

Meanwhile, Indian companies have little faith in EU promises to address its legislation.12 Initially, the EU offered to send notes to all customs authorities to refrain from making seizures of Indian generics, but it was only when the Indian government insisted on stronger action that it considered amending EC Regulation 1383.9 The Indian media has now reported that domestic companies are rerouting their products through ports in South Africa rather than using Europe for transit. Although this route is more expensive, it is believed to be more secure.12

No resolution

Although EU and Indian negotiators say that a deal regarding the transit of Indian generics was reached at the December 2010 summit, this has not satisfied concerns about the impact on access to medicines in developing countries.2,5 Furthermore, despite the statements from Indian officials, the complaint to the WTO has not been withdrawn. Another issue that has not been addressed by the EU is how to deal with the separate complaint from Brazil.13 In the past, Brazil has taken a strong line with pharma multinationals over their prices and has favoured its own active generics sector to provide cheap medicines to patients.

MSF continues to take a highprofile stance in the EU–India dispute, arguing that the transit issue cannot be considered in isolation of other discussions around the future FTA framework. It holds the view that pressure is being exerted behind the scenes by multinational pharma manufacturers to introduce measures that prolong data exclusivity for their products.5 EU officials have insisted that the FTA will not restrict India's right to produce generic drugs and have suggested that MSF and its supporters are spreading irresponsible rumours.13 In response, MSF has asked the EU negotiators to specifically state that data exclusivity and other related intellectual property details are not being considered as part of the FTA discussions. EU officials have refused to do this because they are still negotiating the terms of the FTA. To exert further pressure, MSF has launched a high profile campaign called Hands Off Our Medicine.14 In December 2010, to coincide with the EU–India summit, MSF organised protests in Nairobi (Kenya), Bangkok (Thailand), Jakarta (Indonesia), India and Brussels (Belgium) in opposition to the impact of EU's trade policies on access to medicines.

The EU needs to tread carefully. Considering its usual role in battling with the pharma industry for better pricing for patients in Europe, it would be highly embarrassing if the EU were to be seen as having a different opinion when it comes to patients in developing regions. It also has much to lose by annoying major trade partners such as India and Brazil. The pharmaceutical industry must also be wary because its image has been heavily tarnished in the past regarding patient access issues. In 2001, for instance, it was at the centre of a battle with the South African government, which was examining ways to source generics to help tackle its HIV crisis.15 Public opinion was firmly against the pharmaceutical multinationals.

Although a provisional timeframe of Spring 2011 has been set for the EU–India FTA, it is unlikely that the side issues concerning generics will have been resolved. It seems likely though that EU officials and representatives of the pharmaceutical multinationals will be forced to reveal their position on global access to medicines by MSF and others supporting its views.

References

1. European Commission, "Bilateral Relations: India" (2010). http://ec.europa.eu

2. Securing Pharma, "EU aims to appease India with softened customs law" (2010). www.securingpharma.com

3. Business Standard, "India, EU expect FTA by spring of 2011" (2010). www.business-standard.com

4. Indian Drug Manufacturers' Association (2010). www.idma-assn.org

5. Médecins Sans Frontières, "At EU-India Summit, European Negotiators Urged Not to Block Access to Affordable Medicines" (2010). www.msf-me.org

6. AIDS News, "India Changes Patent Law to Meet WTO Treaty, Making New Medicines Less Available to Most Citizens, Other Countries" (2004). www.aidsnews.org

7. Henry J. Kaiser Family Foundation, "India's Trade Minister Says EU Will To Take Steps To Prevent Seizure Of Generic Medicines" (2010). http://globalhealth.kff.org

8. DNA India, "Netherlands assures India to sort out drug seizure issue" (2009). www.dnaindia.com

9. EU Business, "Brazil, India take EU to WTO over generic drug seizures" (2010). www.eubusiness.com

10. The Economic Times, "Indian generics to be safe from seizure while passing through EU" (2010). http://economictimes.indiatimes.com

11. HM Revenue & Customs, "European Community (EC) legislation. HMRC Reference: Notice 34" (2010). http://customs.hmrc.gov.uk

12. Indian Express, "Indian pharma cos shun EU, route goods via SA ports" (2010). www.indianexpress.com

13. BBC News, "India-EU generic drug row 'resolved' at Brussels summit" (2010). www.bbc.co.uk

14. Europe! Hands off our medicine. https://action.msf.org/en_CH

15. The Guardian, "ANC urged to deliver Aids drugs" (2010). www.guardian.co.uk