TRIPS and Safeguard Mechanism: Impact of Mailbox Applications on Affordability and Accessibility of Essential Medicines in Post 2005 Phase:

A Note on the Impact of Open Definition of NCE(New Chemical Entities) in the WTO Somesh K. Mathur i Abstract On January 1st 2005, countries which were yet to grant patents for pharmaceutical products, such as India, opened the mailbox, started examining the pending patent applications - together with other new patent applications filed after January 1st 2005 and began deciding whether to grant or reject patents in accordance with their own patentability conditions. Following the full

implementation of the TRIPS Agreement in 2005 in India and the few other developing countries, access to new and essential drugs may be expected to become more difficult because of higher cost of producing (higher R&D Cost) and delivering medicines and also all new drugs may be subject to at least 20 years of patent protection. The apprehension is that 20-year monopolies will drive up the price of treatment in India and in hundreds of importing countries, and the worlds source of supply of generic HIV medicines may disappear. This note gives some answers on how to promote the pharmaceutical investments in the post TRIPS era and yet make them useful for common citizens around the world, including India.

India was given a ten year transition period from January 1, 1995 to make their laws TRIPS compliant ii . India has complied with all the TRIPS provisions since January 1, 2005 iii . This was done through series of amendments in its Patent Act of 1970; first in 1999 iv , then in 2002, and finally in 2005. However, in the intervening period, India, in accordance with the mailbox provisions in TRIPS

Art. 70.8, had to provide a means by which patent applications in drugs & pharmaceutical substances and agrochemicals could be filed during the transitional period. The mailbox provision allowed applicants to file for patents and thereby establish filing dates, while at the same time permitting India to defer the granting of the patent for pharmaceutical products. The date of filing (or, in some cases, the date of priority) is important, as it is used to assess whether or not the application meets the necessary conditions for patenting a product, i.e. novelty, inventiveness and being capable of industrial application. The apprehension and the concern are that once the patent applications are reviewed for acceptability after January 1,1995, the new product-process regime may put access to life-saving drugs for diseases like AIDS, drugs on essential drug lists, and anti-cancer drugs out of elsewhere in the world. Estimates of the current number of pending patent applications range from 4,700 to 12,000, and nearly 80% are foreign applications (refer to Figure I below). Since patents are often filed at an early stage in the development of medicines, the majority of patent applications pending in the mailbox are likely to relate to medicines not yet marketed, or only recently marketed, i.e. medicines for which generic firms have not yet produced their own versions. Most of the new launches are expected to come from R&D innovations like line extensions, combination drugs, and improved dosage forms of drugs v . Already 32 patents had been given to new drugs in India by January 2006. the reach of poor people; both in India and

Figure I: Number of patent pleas in India's "mailbox" by country

Source: Narendranath, The Financial Express, March 21 2005

Patent protection will be of 20-year duration. It will give an inventor the right for the above period to stop others from making, using or selling an invention without the permission of the inventor. TRIPS provides for patent protection for all inventions provided that they are new (not a prior art), involve an inventive step (are of economic significance or technologically superior or both and that makes the inventions not obvious to a person skilled in the art), and are capable of industrial application. The latter is how India interprets the new patentability conditions laid down in the WTO. The bone of contention in TRIPS seems to be the open ended definition of patentability. This means countries can lower the standards for new drug formulations using the open definition given in the WTO (as in India).

The new Patent Act aims to curb me-too product patent applications by requiring one or more inventive steps and excluding derivatives such as salts, esters, ethers, polymorphs and similar forms and combinations of known substances, unless their properties differ significantly in the context of efficacy. This is likely to decrease the likelihood of ever - greening or giving patents to incrementally modified medicines. However, the inexactness of some of the language (main thrust of this note) leaves scope for interpretation of giving patents to new drugs and, therefore, expensive and time-consuming litigation is likely to ensue. 3

Suggestions for Dealing with TRIPS Matters Related to Pharmaceutical Industry The idea is to define the scope of patentability. If we narrow our definition of patentability we can deal with the existing problem of dealing with excess applications in the context of limited invention of new medicines. No incrementally modified medicines should be given patents. Also, the second line of medicines may become out of reach for common citizens of not only India but of the rest of the World because of rising costs of R&D. It may not be a problem immediately in India as around 97 % drugs are off patented, but may happen in the future if (a) the scope of patentability is not limited, and (b) governments are not able to devote substantial funds for R&D. For India and other developing countries which have larger populations, it is recommended that the utility patents (lower forms of property rights) be promoted in context of traditional medicines, traditional knowledge, new plants, industrial goods, accessibility of internet material and software, and geographical indications, but not for the Pharmaceutical industry as it involves the serious business of dealing with the health of humans. We are not in a position to lower our property rights in the context of pharmaceutical industry for promoting small scale manufacturers as this is likely to promote foreign investments in incrementally modified medicine in the post-TRIPS regime. There are other ways and means to promote investments in the small-scale pharmaceutical industry, such as giving subsidies for promoting R&D and giving space in the clusters for availing the benefits of spillovers. In any case, in India small scale industries are more in the business of providing generics to markets. However, this statement does not in any way undermine the role of R&D in the drug industry which, one can say, is a panacea for many of the problems it may encounter in the future.

Secondly, the government, acting in the interest of consumers should more often use compulsory licenses in case the rise in price is beyond the reach of consumers, and also if the medicines are not accessible to common citizens in

numbers. The government on the other hand needs to also see the interest of producers who,, we are given to understand, invest substantial money in researching and bringing new drugs to the market. It makes sense to give them (producers) protection in the form of patents if the producers are authentically involved in bringing abstract ideas into practice and are not pursuing their interest for maintaining monopoly positions. Therefore, Governments have a larger regulatory role to play in the context of the latter and they need to further see that the medicines reach the needy. In the context of global governance, India should support not only public/ private programmes of R&D in dealing with the accessibility and affordability of medicines related to life style diseases (diabetes, blood pressure problems, among others) & malaria, polio, tuberculosis etc, but also support R&D programmes for dealing with diseases pertaining to those of the developing countries. Competition should be generated in the generic market as soon as the drug is off-patented and is ready to be made available in the market. This would mean creating the necessary infrastructure for generic entrants before the patent period is over. This can be done through providing access to pre clinical and clinical data to generic counterparts for research purposes during the protected period. This can help them to bring out the generic counterpart as soon as the off patent drug comes into the market to generate competition and reduce prices. However, the producers may be hesitant to share the clinical and pre-clinical data with other producers. The downside is that the deal takes place between companies and governments of the South wherein producers from the West outsource pre clinical experiments to developing countries and in turn allow the same data to be used by other producers. This would require strengthening of multilateral rules on regulations (compensation) which do not allow people of developing countries to be used as easy targets for experimentation of new drugs. Also, it is in the interest of countries ( both producers and consumers) to see that the egregious obligations, like extending data protection period (not sharing research data with others), are not incorporated in the free trade agreements.

There is also enough flexibility in the TRIPS agreement, like parallel imports and Articles 7 and 8 of the TRIPS agreement, which can deal with the problem of price rise of drugs in the future and price controls. The idea is to generate the right conditions for firms to invest in new ideas where governments are able to promote R&D in their own institutions and also create the right conditions for private firms (including small firms) to prosper in the free environment. The Competition Law should be designed in such a way that the egregious impact of TRIPS is dealt with in the future and it further balances the rights of producers and consumers. The latter can be done by supporting drug producers by creating markets for their new inventions and simultaneously strengthening the existing delivery mechanisms for accessibility and affordability of new medicines to common citizens. What needs to be done? Research Inputs Being able to say something concrete on this matter will involve more research on the following issues. It is up to future research to: 1) Prepare an inventory of those drugs and pharmaceutical applications in the mailbox from 1995-2005 which are candidates for patent approval; 2) Study the impact of such drugs and pharmaceutical applications in the mailbox on the Indian pharmaceutical market, market entry and availability of generic versions, access to and affordability of medicines with reference to ARV drugs, life saving drugs, HIV medicines, anti-cancer drugs, and other life saving drugs; 3) Suggest measures, safeguards and challenges for addressing public health concerns through the in built flexibilities in the TRIPS regime like parallel imports, and compulsory licensing, among others, and the Doha mandate on Public Health; 4) Analyze how the amended process/timelines for examination and grant of patent claims is functioning with special focus on areas of concern. Conclusion Health care in India should be the core focus of the central and state governments in India. The disease profile is as follows: 80 million cardiac patients, 80 million afflicted with mental illness, 60 million diabetics, 50 million

asthmatics, 50 million hepatitis B cases, and one in three Indians is a latent carrier of TB. The World Bank has said that India will have 35 million HIV cases by 2015, or approximately half of all the AIDS cases in the world. Given these facts, the patent regime in this country should be devised so that the utmost priority is granted to securing the people's rights of access to affordable and quality healthcare, without monopoly.

With the enactment of Patents (Amendment) Act 2005, the amending process of Indian Patents Act 1970 to bring it in line with the TRIPS Agreement has been completed by the government. The earlier two amendments were enacted by Parliament during 1999 and 2002. In the amending process some safeguard provisions have been incorporated. However, there are still some more possibilities in this direction within the framework of the TRIPS Agreement which have been ignored. In addition, there are a few others stipulations which need to be rectified to avoid legal disputes.

The present note shares the nature of drug patent applications and suggests safeguards and implementation measures to face the challenges posed by the new developments of TRIPS compliant phase of 2005 and beyond. Judicious and careful implementation of TRIPS is needed for its smooth application and balancing of rights and obligations of the patent holder in a manner conducive to social and economic welfare as stipulated in Article 7 of TRIPS Agreement.

India should amend its Patents Act in a manner that does not exceed the requirements of TRIPS, and prioritizes access to medicines and public health. Specifically, India should simplify and streamline its compulsory licensing procedure and look for other flexibilities and domestic regulations available, like parallel imports( within the ambit of the WTO) and price controls( outside the ambit of WTO), respectively to address the concerns of the general public. Routine issuance of compulsory licenses after January 1, 2005 in India is critical if the rapid entry of generic versions of important pharmaceuticals is to continue.

The process of compulsory licensing must be changed to facilitate routine and expeditous compulsory licensing of important medicines. A strictly enforced deadline of one to three months should be established for the grant of a compulsory license, and rights of appeal should not include permission for injunctive relief that would impede the use of the license. When patent applications in Indias patent mailbox are granted for important medicines, rapid compulsory licensing is particularly important in cases where low-cost generic versions of these retrospectively patented products are already available in India and in importing countries. One thing is for sure: in passing the Patent Ordinance, the Indian parliament is recognizing that India can take a leading role in global pharmaceutical R&D and should adhere to international agreements. Higher forms of property rights, appropriate regulations, strengthening of generic exports and promoting R&D are a few suggestions to make our industry competitive in the days to come. India should use more of the inbuilt flexibilities available in the TRIPS as one of the many ways to tackle the egregious impact of TRIPS on the welfare of people, rather than adopting alternative regimes (bilateralism) which call for higher form of protection in the form of data protection. India should go for higher forms of patentability for the new drugs though to reduce the menace of patenting incrementally modified medicines.

Assistant Professor of Economics, HSS Department, IIT Kanpur(www.iitk.ac.in). skmathur@iitk.ac..in TRIPS is divided into seven parts containing 73 articles1)Basic Provisions 2)Different Standards of IPR 3) Enforcements 4) Acquisition and Maintenance of IPRs 5) Dispute Settlement Process 6)Transitional Arrangements 7) Institutional Arrangements
ii

Developing countries generally had until 2000 to comply. However, in order to accommodate differing economies and the fact that a number of developing countries did not grant product patents in a particular area of technology (i.e. pharmaceutical products), a special transitional rule was included in the TRIPS Agreement: if a developing country did not provide product patent protection in a particular area of technology when the TRIPS transitional period for developing countries ran out, it had a further five years (until 2005) to introduce protection in that area(TRIPS Art. 65.4) iv Provisions with respect to the mailbox were incorporated in the Indian Patent Act,1970 vide the Patents (Amendment) Act,1999. In addition, the Patents (Second Amendment) Bill, 1999 has provided for an appeals process, before an Appellate Board, on any decisions by the Controller of Patents, including a grant of compulsory license ( non-voluntary licenses granted by the government to third parties to make the patented product, Clause 54) before approaching the Indian Courts. The Patents Law provides for compulsory license to avoid excessive pricing of products and to ensure that it is available adequately for public consumption. Government may use the threat of compulsory licences as leverage in litigation against a patent owner particularly in the case of drugs for the treatment of AIDS, cancer, certain

iii

cardiovascular diseases, ebola, and other fatal diseases .This provision meets a larger public interest, keeping in mind the specific Indian conditions and is in compliance with Article 31 of TRIPS. v Only 274 new chemical entities received marketing approvals from the US FDA between 1995-2003. This is a clear indication that many of the applications in the mailbox are for patenting of products with frivolous or marginal changes and, therefore, fall outside the requirement of protection required for patents by TRIPS. Also, a new use of a known substance remains unpatentable. The relevant Section of the Indian Patents Act,1970 has been amended to include a further explanation indicating that salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of a known substance would also be considered to be the same substance, unless they differed significantly in efficacious properties. Pre-grant opposition is also introduced in the new act. Overall, the policy is to limit the scope of patentability.