[Ip-health] S. Srinivasan in the Hindu Busines Line: A European pill best avoided

Thirukumaran Balasubramaniam thiru at keionline.org
Wed Jan 4 04:20:23 PST 2012


A European pill best avoided

S. Srinivasan

The more stringent intellectual property regime under consideration will impact generics producers.
The proposed India-EU FTA will compromise our generics segment and health security.

Even as India's generic pharma industry establishes itself as a major supplier for developing countries, barriers are being put up to inhibit the free flow of trade. The WTO was set up to ensure that trade flows “as smoothly, predictably and freely as possible.” Its multilateral dispute-settling mechanism has been functioning reasonably well, though it has its share of critics.

All this is set to change with bilateral free trade agreements (FTAs). Secret negotiations have been on — since 2007, with early 2012 as the deadline — between the Government of India and EU for finalising the India-EU FTA. Indeed, one needs to ask why these negotiations are conducted without consulting Parliament and State Governments.


The basis of bilateral FTAs is reciprocity, but reciprocity between unequal partners never works — well, it always works against the interests of the less equal party. To illustrate how unequal: India's GDP is 3 per cent of the EU's GDP; while India accounts for just 1.8 per cent of the external trade of EU, the EU accounts for 20 per cent of India's trade; India's largest source of FDI is EU, while India accounts for 1 per cent of EU's total FDI.

The India-EU FTA aims to liberalise “substantially all trade” between the two trading blocks on a “reciprocal” basis and apart from trade in goods, the FTA will have substantive provisions on services, investment, public procurement, intellectual property (IP) rights and some other areas.

The proposals on IP are likely to create new hurdles for generic medicine manufacturers in particular. The IP measures demanded are ‘TRIPS Plus' — that is beyond what is mandated by TRIPS/WTO. These include data exclusivity, patent term extensions, enforcement measures, border measures, increase criminalisation of IP infringement under the guise of acting against “counterfeit” medicines.

Acceding to data exclusivity measures would delay entry of generics in India. It will require generic manufacturers to repeat the clinical trials already done by the originator company. Such an act would be a violation of human rights, where proving bio-equivalence to the originator's products would have sufficed.

In Guatemala, a study published in 2009 in Health Affairs concluded that IP measures on data exclusivity and patents of the CAFTA (Central American Free Trade Agreement) were “responsible for the removal of several lower-cost generic medicines from the market in Guatemala and for the denial of entry to a number of others.”

Another way to delay entry of generics — and this was being demanded earlier in the EU-India FTA talks — is the extension of patent term beyond the TRIPS-mandated 20 years, calculated usually from the date of filing of the patent. The move is to “compensate” for the time taken by the patent office to examine the patent and by the Drug Controller General of India to approve for marketing and manufacture.


Closely allied to these are IP enforcement measures: injunction provisions, border measures, and third party liability. Border measures in the proposed FTA legitimise the seizure of goods on visual inspection/mere suspicion of IP infringement, and even destroy seized goods — this is what happened in the several seizures of medicine exports from India to Africa/South America while transiting Amsterdam. This interferes with India's freedom to export generic medicines to countries in need and the right of such countries to import such medicines.

TRIPS allows for seizure only on violation of copyright/trademark and, that too, at the border only. The proposed TRIPS-Plus border measures applies not only to import, but to export, re-export, goods in transit and the duty of intermediaries to disclose information.

Also on the anvil is a proposal — called third party liability — to hold to task everybody involved in the supply, sale and manufacture of “counterfeit” goods. And this would make liable those in the trade chain as well as suppliers of bulk medicines and excipients used to make the medicine.

Injunction provisions being suggested in the FTA will make it incumbent on the Indian judiciary to give preference to IP status of medicines over the health rights of the poor, sometimes giving injunctions even before patent validity is established.


Investment in EU-India FTA is being sought to be defined to include “IP rights, goodwill, technical processes and know-how as conferred by law.” Foreign investors, if the investment proposals go through, would be able to sue the Government of India if any measures (say price control or compulsory licensing) taken by the Government, are seen not to protect their investments (read IP / patent rights, or profits or “goodwill”).

The resulting arbitration will be before secret arbitral tribunals in places like London or Singapore. The decisions arrived at are binding and cannot be challenged under national laws.

Till date, at least 81 governments have been sued in more than 400 investment treaty arbitration claims. Millions, and in some cases billions, have been paid by governments to investors, as a result of such arbitration. Chapter 11 of the North American Free Trade Agreement (NAFTA) has helped North American investors sue Mexico, a developing country, and of course helped US investors sue the Canadian government and the other way around.

Investment proposals, first conceived in then West Germany, in 1957, are a “legal monster” that refuses to go away. Finally, the chickens have come home to roost with recent news of Germany's nuclear phase-out being challenged by the Swedish energy company, Vattenfall.

A Government of India that is reluctant to issue compulsory licenses will be further inhibited, when such draconian investment proposals are in place, to use TRIPS flexibilities for public health reasons.

Additional investment proposals are being sought in the name of “fair and equitable treatment” and “full protection and security” to investors. These terms are undefined as the case law on this is still a work in progress and it is left to the arbitral tribunals to determine what is “fair and equitable”. Arbitral decisions often aren't concerned with the public health motivations behind any regulatory action.

A related requirement that is being put forward is granting European investors the same treatment as domestic investors. This isn't fair, as governments giving preferential treatment to local stakeholders, say SSIs, can be sued. Indeed, some of the proposed “performance requirements” provisions make it illegal to ask foreign investors to use local inputs and local personnel.

At stake is access to low-priced medicines for millions of poor patients in Africa and Latin America who source medicines from India's generic medicine industry.

The EU Parliament routinely instructs the European Commission on what stands are to be taken on various contentious issues in the FTA. We would wish our Parliament and our courts take suo moto action to take the India-EU FTA out of the closet and put it in public domain, before letting the Government sign on the dotted line — and sign away, perchance, our health security, and the livelihoods of the poorest.

(The author is associated with LOCOST, Medico Friend Circle and All India Drug Action Network.)

(This article was published on January 3, 2012)


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)

thiru at keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997

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