The Indian pharmaceutical sector is booming and has become a global giant, ranked 3^rd in volume and 11^th in value. Further, it also provides 20% of the world’s supply of affordable medicines and 60% of life-saving vaccines. Pharmaceutical exports have increased to 27.85 billion USD in FY 2023-24. From life-saving medicine and vaccines to advanced Active Pharmaceutical Ingredients (APIs), the Indian pharmaceutical industry is evolving and continuously providing quality medicine and vaccines. This growth and leadership come from the ability to manufacture high-quality medicines at a lower price compared to the US or EU pharmaceutical industries. The manufacturing of life-saving drugs not only involves manufacturing, distribution, planning and research and development, but also involves Intellectual property (“IP”) rights in the industry, which helps in bringing the medicine to the market while protecting the company from unauthorised use.

Patents play a crucial role in the pharmaceutical industry since they protect inventions and restrict any unauthorised use or sale. Indian Patent Law provides a good balance between public health concerns and the mandates of the Agreements on Trade Related Aspects of International Trade (TRIPS). Indian patent law helps the Indian pharmaceutical industry by helping reduce the prices of drugs. This blog will critically analyse the influence of patents and how data exclusivity influences the pharmaceutical industry on national and international levels.

Data Exclusivity And Its Significance In India

The Indian patent system began in 1856 with the first introduction of the Act VI of 1856 on the protection of inventions based on the British Patent Law of 1852 under British rule. With the amendment in 2005 of the Patent Act after India signed the TRIPS agreement, it also made Indian patent law harmonious with international standards by allowing product patents and lengthening patent durations. It imposed mandatory protection of the product patent.

Data exclusivity, also known as “regulatory data protection”, grants protection to clinical data submitted by the innovator without authorisation by a generic pharmaceutical company. Data exclusivity doesn’t emerge from  IP Laws but from regulatory laws. Organisations such as the Organisation of Pharmaceutical Producers of India suggest up to 5 years of data protection provision for the data of the product approved in India. 

Generally, the protection granted is between 5 to 10 years. Data exclusivity relies on knowledge that was acquired during clinical trials that the drugs are safe and effective, and can further be allowed in the market. Knowledge is generally not considered property, but in this case, the innovator is granted exclusive rights over the clinical data/ knowledge acquired during the clinical trial.

Patent term extensions and data exclusivity are two common methods used for evergreening. In India, Section 3 (d) of the Patents Act 1970 restricts patents for known drugs and allows only if superiority in terms of efficacy is claimed. Further, it also bars any patents that are against public interest and do not show any increased efficiency over the present product. India has always resented it for its own reasons. In the case of Novartis AG v. Union of India, the court decided and emphasised that if a new form of product didn’t show any significant improvement in therapeutic efficacy, then it does not meet the threshold to grant a patent. This decision marked a significant shift towards balancing patent rights with the right to health. Generic drug-producing companies use the clinical data of existing drugs to manufacture and get approvals, which saves the cost of testing and approvals. This results in lower drug costs for consumers. Companies try to restrict this method using patents and data exclusivity, which affects generic companies. Such circumstances have resulted in the weaponisation of these regimes and the creation of a monopoly over life-saving drugs. The patent of the drug restricts generic companies from producing the drug. Further,  data exclusivity over the clinical data restricts generic companies from using the data to get approvals.

Data Exclusivity In The Eu And The Usa

European Union legislation restricts the use of clinical or preclinical data for a period of 8 years it also provides for market exclusivity for 10 years. This is also known as the 8+2+1 rule. Moreover, this rule allows no exception, which means no EU country can register a generic medicine or product during the said period. These regulations do not provide flexibility to produce generic products, waiving data and market exclusivity, even in a crisis such as the HIV/AIDS crisis in lower and middle-income countries. Thus, some EU countries struggle to create an effective response to the crisis due to the high price of patented medicines.

The United States of America provides up to 5 years of data exclusivity under section 21 USC 355. Further, the Food and Drug Administration grants exclusivity and can process the generic company’s application for drug approval if the company is able to challenge the applicant’s patent. Moreover, it can process the generic company’s application for approval after the 4^th year of exclusivity. Moreover, the FDA may grant regulatory exclusion to certain products upon approval or licensure. Manufacturers may be granted a market exclusivity period of 7 years for orphan drugs.

Challenges

Data exclusivity not only influences drug manufacturing, but it has far-reaching consequences on innovation, competitive dynamics and drug prices in the pharmaceutical sector. The major argument in favour of data exclusivity is that granting it to firms gives exclusive rights over the product, creates an incentive for the firms to invest in research and development, and is a method to recover the investment made in such research. Developing countries such as India have resisted data exclusivity due to concerns relating to drug prices and accessibility to cheap healthcare. Data exclusivity delays the arrival of generic medicines to the market due to the exclusive period granted to the pharmaceutical firms. When generic drugs are delayed, it might lead to an increase in the cost of care, leaving many patients unable to pay for the necessary treatments. Moreover, such exclusivity might violate the right to health under Article 21 of the Constitution of India. Recognition of Data exclusivity might harm the domestic generic industry and, in turn, diminish India’s export strength. Moreover, even when the patents are rejected or expired, companies might invoke the exclusivity of clinical data, leading to the evergreening of drugs.

Way Forward

Data Exclusivity plays a vital role in the pharmaceutical sector; therefore, it needs to be regulated, balancing both the concerns of public healthcare as well as the rights of the pharmaceutical companies over the drugs. A strong regulatory framework is required to strengthen and enforce regulations and create a clear approval process for generic drugs. Further Data Exclusivity can be introduced selectively to ensure accountability, but not restricting the affordability of generic drugs. Data Exclusivity can be granted to orphan and rare disease drugs or neglected and tropical disease drugs where demonstrable market failure exists, creating investment in the sector for research and development. Further, to ensure such exclusivity does not restrict the availability of life-saving drugs, governments may introduce compulsory licensing as a safeguard.

Conclusion

Data exclusivity might encourage innovation in the pharmaceutical industry, but if left unchecked and unregulated, it might cause risks, creating a monopoly over drugs, causing an inflation in prices of drugs, and a delay in the entry of generic drugs. India does not recognise Data Exclusivity in the Pharmaceutical industry. Thus, India must take balanced action to support research and development of drugs and the protection of the pharmaceutical firm without compromising the affordability of drugs.