Clinical Trials and Data Exclusivity: In Search of a Fine Balance

Bhavik Narsana,
Partner, Khaitan & Co

Soumyadri Chattopadhyaya,
Senior Associate, Khaitan & Co

Yashashree Mahajan,
Associate, Khaitan & Co

Data Exclusivity refers to a practice whereby, for a fixed period of time, drug regulatory authorities do not allow the test data of the innovator company to be used to register an equivalent generic version of that medicine. This article analyses the concept of data exclusivity and addresses the question of how data exclusivity laws should be introduced in India balancing the competing interests of drug innovators and generic manufacturers.

Presently, Rule 122E of the Drugs and Cosmetics Rules, 1945 recognises a drug as a "new drug" for a period of 4 years from the earlier of its first approval by the Indian regulators or its inclusion in the Indian Pharmacopoeia. All applications to manufacture generic versions of such “new drug” during such 4 years period are required to be made to the central licensing authority (i.e., Central Drugs Standard Control Organization (CDSCO)). Along with such application, the applicant is also required to submit fresh data collected from clinical trials conducted by the applicant.

Some media reports in the past had suggested that the Indian government was mulling a revision in the definition of a "new drug" in the Drugs and Cosmetics Rules, 1945 whereby a drug will be considered to be a ‘new drug’ for a period of 10 years from the current period of 4 years.

While this proposal was lauded by the Organisation of Pharmaceutical Producers of India , it triggered a severe back lash from Indian generic manufacturers who branded this move as ‘back door extension’ of “data exclusivity” norms, with India buckling to pressure from the US. They claimed that this would further delay access to clinical trial data and defer introduction of generics and adversely impact the Indian generics industry. The debates clearly reflected palpable tension between the research-based pharmaceutical companies and the generics manufacturers, at the heart of which lies data exclusivity.

The process of launching a new drug in the market starts in the research laboratory and culminates with four phases of clinical trials to prove efficacy and safety of the drug to domestic regulators and can be a very costly affair. Generics players, on the other hand, can bring competitor drugs for a fraction of this cost primarily because regulators were able to rely on the pre-submitted clinical trial data while approving applications for generic drugs instead of having to run independent clinical trials. The contours of data exclusivity, therefore, has significant policy implications.

What is Data Exclusivity
Internationally, data exclusivity is a protection given to the clinical trial data generated by pharmaceutical manufacturers which prevents the regulator from relying on such clinical data submitted by a manufacturer of a drug for seeking approval of an equivalent generic product. In other words, data exclusivity is a recompense or reward for innovation that enables pharmaceutical companies as a means to recoup its investment by not only monetizing the successfully developed drug but also preventing competitors from using the same data to launch a competing drug. As we will see below, data exclusivity is available so long as a drug qualifies as a “new drug” in terms if Rule 122E even where such new drug does not qualify for patent protection. A longer data exclusivity period would mean generic manufacturers would have to carry out longer clinical trials and incur higher costs to come up with generic versions. This will, therefore, make it more difficult for the generic manufacturers to launch generic versions.

The protection provided by data exclusivity is separate and distinct from the protection granted under the Indian patent regime. In terms of the Patent Act, 1970, a patent may be granted for an invention which is a new product or new process, involving an inventive step and capable of industrial application. While a new form of an existing drug may not be patentable, it would still qualify as “new drug” under Section 122E of the Drugs and Cosmetics Rules, 1945. Accordingly, any other manufacturer of such new drug would be required to provide independent clinical data while seeking marketing approval for such drugs during the 4 year period. Thus, data exclusivity and the patent regime are mutually exclusive and separate protections. To illustrate, while patent protection for a new drug would be for a period of 20 years, data exclusivity for the clinical test data would be for 4 years. Even where a new drug is deemed non-patentable, data exclusivity protection would still be available for the customary 4 year period.

After expiry of the 4 year period, the requirement to submit fresh clinical data no longer applies and subsequent manufacturers may seek approval from state licensing authorities (as opposed to the CDSCO as required during the data exclusivity period) to manufacture the formulation while relying on existing data that has been submitted by the original manufacturer. This enables subsequent manufacturers to bring competing drugs into the market cheaper and faster which is one of the drivers of the growth of the generics drugs business in India as well as a key contributor to improving the access to healthcare, globally.

International Standards in Data Exclusivity
Article 39(3) of the TRIPS Agreement requires member nations to protect unfair commercial use of clinical research data submitted by manufacturers of pharmaceuticals and agricultural chemical products for procuring market approval. The protection accorded to member nations is in consideration for the efforts and expenses incurred by the pharmaceutical companies for research and development of the product. The clause in its ambiguity has been a source of academic and political debate among member nations.

The developed nations in its aggressive IP maximalist view insists that data exclusivity is a necessary component of the Article 39(3) of the TRIPS Agreement since allowing generic drug manufacturers to free ride on research data submitted by innovators/manufacturers would violate the essence of Article 39(3).

The developing nations, on the other hand, while recognising the need to protect innovators and the clinical trial data generated by them, argues that reliance on clinical research data by regulators while approving application by generic manufacturers should not amount to unfair competition. The adverse impact of TRIPS Agreement on access to medicine led to the Doha Declaration in 2001 where member countries resolved to give primacy to health over private commercial interest.

While TRIPS prescribes minimum conditions to be followed by member countries to protect intellectual property rights, countries have entered into bilateral or multilateral trade treaties which require countries to strengthen their IP regimes that go beyond the TRIPS mandate. The Trans-Pacific Partnership Agreement (TPP) , for instance, requires member countries to introduce market exclusivity for biopharmaceutical products which requires countries to provide for data exclusivity prohibiting third parties from relying on clinical data submitted by originators without approval from the originator for a period of 8 years or for a period of 5 years plus other market access barriers for additional 3 years. The US has also been making the case for enhanced data exclusivity protection globally using the TPP plank.

The European Union Data Exclusivity Directive 2005 requires countries to introduce data exclusivity for new drugs for a period of 11 years of data exclusivity which includes 8 years of data exclusivity, 2 years of market exclusivity with a possibility of a 1 year extension. The US Hatch-Waxman Act requires data exclusivity to be granted to innovators for a period of 5 years and for 12 years, in the case of biologics.

Perspectives on the Data Exclusivity Debate
The primary debate around data exclusivity centres around the need to protect the clinical trial data generated by a prior manufacturer from being free-ridden on by generic manufacturers, hence being an impediment to sustained investment in innovation.

Traditionally, manufacturers and innovators enjoyed unlimited exclusivity over research data generated by them. It was observed that the lack of access to existing research data was a major impediment in growth of generic drug manufacturers in US, who were unwilling to undertake steep expenses of conducting independent research trials. In 1984, Congress introduced the Hatch-Waxman Act in order to promote competition among generic drug manufacturers by reducing the data exclusivity granted to innovators to 5 years. The Hatch-Waxman Act eased the process of a drug approval by allowing generic manufacturers to demonstrate bioequivalence of their drug to that of an existing drug. Further, by granting exclusivity for a specified period to the first generic drug manufacturer who demonstrates bioequivalence, the Hatch-Waxman Act incentivizes further competition among generics. Commentators attribute the increased competition and innovation among generics manufacturers as one of direct impacts of the Hatch-Waxman Act.

Data exclusivity in India cannot be debated without reference to the Indian pharmaceutical sector which is dominated by generic drug manufacturers, enjoying a market share of about 70%. A vibrant generics sector has led to India becoming a substantial pharmacy of the world with India’s exports accounting for 20% of the generic drugs consumed globally. Apart from contributing a large chunk of foreign inflows, the dominance of Indian generic drug manufacturers results in access to cheaper medicines which has a direct impact on public health, globally.

At the same time, it is essential to recognise the importance of clinical trial data exclusivity in fostering innovation. While the initial research and development of drugs is expensive, a majority of cost is incurred by the manufacturer at the time of clinical trials which are pertinent to prove the safety of the drug. In the absence of data exclusivity, there would be little to no incentive to develop a new formulation of the existing drug or invest in further adapting an existing drug to make it more safe and effective. Indian patent laws have a high threshold for qualifying what is an invention, therefore, modifications or improvements to existing drug would not be able to seek patent protection. Thus, in the absence of data exclusivity, innovators may be disincentivized to spend on innovation and research which could lead to stagnation in the pharmaceutical market. This would lead to fewer new drugs being introduced which is detrimental to public health.

The success of the US Hatch-Waxman Act has demonstrated that access to clinical research data can lead to innovation among generic manufacturers who can rely on such research to introduce cheaper and safer drugs. Evidently, availability of multiple brands fosters healthy competition in markets and prevents monopolisation where the consumer is the winner. The crux of this debate is fixing the period of data exclusivity to strike a fine balance between incentivizing innovation and enabling generic manufacturers to also come with cheaper variants. To this end, the current data exclusivity period of 4 years in India, which is lower by international standards and the stance of the developed countries, can also be attributed for the development and success of the Indian generic pharmaceutical sector as well as alleviation of some of the access to medicine problems ailing the world.

The other, slightly nuanced perspective on data exclusivity is pivoted on the need to prove efficacy and safety of generic drugs through the conduct of independent and appropriate clinical trials including bioavailability and bioequivalence tests. This requirement is currently met under Indian laws which require generic manufacturers to provide bioavailability and bioequivalence of drugs manufactured by them with existing drugs in order to secure a regulatory approval. However, there are provisions that permit waiver of such tests in public interest. The concern here stems from the fact that waivers of the bio-availability and bio-equivalence requirements can, sometimes, prove to be counterproductive as the efficacy and reaction of the drugs to the local population may not be fully understood. In any event, bioequivalence studies are usually carried out on a very small set of subjects and at a fraction of the cost of a full-fledged clinical trial.

In 2012, a Parliamentary Standing Committee Report highlighted the worrying trend of CDSCO routinely providing approvals by waiving bioavailability and bioequivalence test requirements . Thereafter, in 2013, the Ranjit Roy Chaudhury Report has also recommended that bioequivalence studies should be made compulsory before market approval is granted for any generic drug except in case of highly soluble molecules in line with the practice in the US. However, these recommendations fell by the wayside as the Drugs Consultative Committee (DCC) was of the view that mandatory bioequivalence testing could not possibly be made mandatory by way of a rule to have uniform application since Indian generic manufacturers do not have the infrastructural capability to implement the proposal. The DCC decided that it was sufficient to require bioavailability/ bioequivalence tests only where there are issues relating to patient safety and variable bioavailability.

While the access to cheap generic medicine remains a primary goal, the same cannot be achieved at the cost of compromising on quality or safety of generic medicines. Clearly, lack of infrastructure cannot be reason good enough to waive bioequivalence tests for generic drugs. Further, irrespective of data exclusivity, there is a case for reconsidering the stance in relation to mandatory bioavailability/ bioequivalence tests for generic drugs in the post data exclusivity period.

A Fine Balance
The proposal to extend the period of clinical trial data exclusivity from 4 years to 10 years was placed before the Drug Technical Advisory Board (DTAB), the committee that advises the Government on all technical matters and debated. While, this proposal did not go through, the DTAB recommended that licensing authorities should ensure that proper research has been carried out and that the safety of the product has been established by carrying out bio-equivalence studies of the product. We must remember that data exclusivity not only balances the competing interests of drug innovators and generic manufacturers but also safeguards the consumers of medicines. Any policy initiative on this front in India must always seek to efficiently counterbalance these parallel interests to not unduly tip the balance in favour of one over the others. To this end, the decision by the DTAB to not disturb the existing data exclusivity equilibrium and instead focus on assessing drug safety through bio-equivalence tests is a step in the right direction.