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Latha Jishnu: Choking India's generics exports

Latha Jishnu  |  New Delhi 

The EU and WHO are pursuing strategies that will have serious consequences for developing countries, warns Latha Jishnu

In bits and pieces news has been trickling in of different shipments of medicines and pharmaceutical from India being seized at ports of the European Union (EU). None of these consignments was destined for Europe; they were en route to Latin America. It was not till mid-January when news broke of a shipment from Dr Reddy’s Laboratories bound for Brazil being impounded in Amsterdam that all hell broke loose here.

Dr Reddy’s is India’s top pharmaceuticals exporter with annual sales in the region of $1.4 billion and the EU action fluttered the administrative dovecots. An incensed Commerce Secretary Gopala Krishna Pillai described it as “an act of piracy by the EU”. In an exceptionally strong statement, he called it “a dangerous thing” and “totally uncalled for”. Reflecting what industry lobbies and health activists have been claiming for long, Pillai said: “It is part of the strategy by these countries to target generic drugs from India.”

What the EU is doing is using Council Regulation (EC) No. 1383/2003 to impound drugs that are suspected of violating patents registered in member-countries even if these are simply in transit. The regulations permit customs to hold these goods for a minimum of 10 working days while informing the patent holder of the seizure. The patent holder then applies to a civil court to initiate legal proceedings in order to prove that infringement has taken place.

Dr Reddy’s told Business Standard that the impounded consignment consisted of 500 kg of Losartan potassium valued at $55,000 that was bound for Brazil. “Apparently, Losartan is protected in the Netherlands by a product patent of Merck/DuPont which is valid until September 2009,” says the spokesman for the Hyderabad-based company who questions the validity of the seizure. “We are sceptical that it can be called an act of patent infringement when goods are in trans-shipment and merely pass through the customs of an EU member-state, especially when there is no possibility that these goods could be sold on the market in these countries.”

This might seem like a singular attempt by the EU to show extreme zeal in protecting the rights of pharmaceutical patent holders in the EU. But it has to be viewed against the backdrop a of a host of moves initiated by the developed world to ramp up intellectual property (IP) protection, far in excess of what is required under the TRIPS regime of the World Trade Organization (WTO), under the guise of public health concerns. These initiatives to enforce ever higher standards of IP protection have roped in global organisations with completely different mandates, such as the World Health Organisation (WHO), the World Customs Organisation and Interpol among others.

Leading the charge is the EU which apart from Regulation on trans-shipments is also planning to amend another directive (2001/83/EC) that seeks to prevent the entry of “medicinal products which are falsified in relation to their identity, history or source” into the legal supply chain through a change in the definition of such products. Interestingly, the new definition is based on the proposal accepted at a 2007 meeting of the controversial WHO agency IMPACT or International Medical Products Anti-Counterfeiting Taskforce which critics claim is a cover for protecting IP rights of MNCs. The US and other Organisation for Economic Co-operation and Development (OECD) countries are not far behind in ratcheting up IP enforcement through a host of initiatives ranging from a secretive multilateral treaty called ACTA, or the Anti-Counterfeit Trade Agreement, to a purely regional arrangement like The Security and Prosperity Partnership of North America that brings together North American Free Trade Agreement (NAFTA) signatories (the US, Canada and Mexico). But more on these initiatives later.

For India, the immediate concern is the EU measures and the WHO-sponsored agency IMPACT. However, there was some reprieve in Geneva last Monday (January 26) when the WHO shelved a hotly-contested resolution to redefine counterfeit medicines. This would have put at risk exports of even quality generics from India because these could be termed counterfeit under the new definitions that were proposed on “false representation of identity, history or source”.

Big Pharma is very clearly setting the agenda for these changes, according to public health activists promoting access to medicines and domestic industry associations. This charge has been affirmed by trade analysts and academics who point out that recommendations made by Pharmaceutical Research and Manufacturers of America (PhRMA), the powerful lobby of the world’s biggest drug corporations, to the US Trade Representative on ACTA are identical to the ‘Principles and elements for national legislation’ endorsed by IMPACT. The latter is supported by the International Federation of Pharmaceutical Associations (IFPMA) and there are reports that suggest 8 per cent of the funding for the WHO agency is provided by industry.

Domestic industry is breathing a lot easier after Monday’s surprise decision by WHO which came about thanks to solidarity of the G20 partners in the WTO caucus. The seizure of Losartan (subsequently returned to Dr Reddy’s on January 8 after an agreement it reached with the patent holders) had a lot to do with the new solidarity in WHO. Diplomatic sources say that Brazil is backing India in challenging the EU directive at WTO and news reports have quoted Brazilian officials as saying they have decided to begin consultations at the WTO as a prelude to approaching its Dispute Settlement Panel. Commerce Secretary Pillai had indicated a fortnight ago that India would be taking its complaint to the apex trade body.

But that is just one battle that is being fought by developing countries. Dilip Shah, secretary-general of the Indian Pharmaceutical Alliance (IPA) which groups together the top dozen pharmaceuticals companies, says that India should seek the dismantling of IMPACT and help create a new agency that would focus purely on protecting health concerns and not the IP rights of MNCs. “We too have concerns about exports of counterfeit drugs from India and would whole-heartedly support an initiative that furthers WHO’s mandate on public health,” declares Shah who has been in the frontlines of the campaign to stop the EU and other trade blocs from erecting non-tariff barriers to the export of quality generics from India.

Costs are another worry. The EU measure is clearly a blow to Indian companies, most of whom use European ports to trans-ship pharmaceutical products to markets where the patent is not recognised or is off patent. “By forcing Indian companies to opt for a different route, it will have a serious impact on their ability to remain competitive,” points out Dr Reddy’s. This is specially relevant in the case of bulk exports of API (active pharmaceutical ingredient) because India is one of the largest exporters.

The competitiveness of India’s generics manufacturers is but a small issue in the trade assault mounted by rich nations. The larger issue is of free and fair trade.

First Published: Thu, January 29 2009. 00:00 IST