A. Introduction: Over the last few weeks there have been an increasing number of media reports on the Free Trade Agreement (FTA) that is being negotiated by the governments of the European Union and India. While there are several hurdles that are yet to be cleared before the signing of this Treaty that is expected to bring huge trade benefits to both countries, the focus in the recent past seems to be on the IP-related provisions that are allegedly going to affect the thriving generic pharmaceutical industry in India. In particular, generic industry lobbies like the Indian Drug Manufacturer Association, Non-Governmental Organizations like MSF are pressing the government to be wary against any attempt to include data-exclusivity provisions in the FTA, as the same, in their opinion, is not mandated by TRIPs.
A data exclusivity provision would prohibit generic pharmaceutical companies from depending on the clinical data submitted by innovator pharmaceutical companies to receive marketing approval for their product. The Drugs and Cosmetics Rules, 1945 currently allows for generic pharmaceutical companies to depend on clinical trial data submitted by innovator companies instead of requiring generic pharmaceutical companies to execute their own clinical trials. If generic pharmaceutical companies were required to carry out their own clinical trials, the cost of their product would likely increase, since clinical trials are usually an expensive affair. The only data required to be submitted by generic pharmaceutical companies is a bio-equivalence report, establishing that the generic drugs demonstrates biological activity i.e. similar to the original innovator drug. Therefore when the law mandates the innovator pharmaceutical company to submit expensive clinical data which will then be used by other generic pharmaceutical companies, for their marketing approvals, it is in a sense acquiring the 'clinical trial data' (property) of the innovator company for a 'public purpose'.
Before I continue I would like to clarify that the aim of this post is not to examine whether data exclusivity/protection is required by TRIPs. Instead this post aims to examine a hypothetical scenario wherein an innovator company challenges certain provisions of the Drugs and Cosmetics Act & Rules, on the basis of Article 300A of the Constitution of India, in order to protect the clinical trial data submitted by them to the regulator. I am sure that many of our readers will dis-agree with most of what I have to say – I only request that any such criticism remains constructive and in good humour.
B. A brief history of property rights in Independent India: The history of property rights in India is way too complicated for me to provide for a detailed account herein. I'll instead just aim for a very brief summary of the same.
When independent India first adopted its Constitution, the Right to Property, as enshrined in Article 19(1)(f), was a fundamental right and therefore placed at a high pedestal. Article 19(1)(f) had to be read along with Article 31 of the Constitution in order to prevent the Government from depriving a person of his property without the “authority of the law” and further that such law should provide “for compensation for the property taken possession of or acquired and either fixes the amount of compensation, or specifies the principles on which, and the manner in which, the compensation is to be determined and give”.
Both Article 19(1)(f) and Article 31 proved to be a substantial headache to the Indian Government, as these provisions made it very difficult for the Government to proceed with its socialist agenda of land reforms and nationalization schemes, as the Government simply could not afford to pay reasonable compensation for the lands and corporations acquired by it. Initially the Congress Party which was in power at the Centre aimed at maintaining the legality of its action by introducing new provisions such as Article 31A,B & C along with Schedule IX to the Constitution to protect, from judicial review, all those legislations which offended the fundamental rights enshrined in Part III of the Constitution. At last count there were at least 285 legislations, most of them land reform legislations, locked up under the safety of Schedule IX.
In 1977, the grand coalition of the Janata Party, had just wiped out the Congress Party, in the elections held after the lifting of the internal emergency imposed by then Prime Minister Indira Gandhi in the year 1975. A year later in 1978, the Janata Party passed the 44th Amendment to the Constitution of India. As a part of these Amendments both Article 19(1)(f) & Article 31 were deleted from the Constitution. Article 31 however was only party deleted in the sense that Article 31(1) which provided that “no person shall be deprived of his property, save by the authority of the law” was transferred out of the fundamental rights chapter and shifted to Chapter IV of Part XII, in the form of Article 300A.
Article 300A now reads as follows: Article 300A. Persons not to be deprived of property save by authority of law.- No person shall be deprived of his property save by authority of law.
The constitution of India can be accessed here.
This amendment had two immediate implications:
(i) The Right to Property would now be a Constitutional Right and not a Fundamental Right. A legislation violating the constitutional right to property could now be challenged only in High Courts and not directly in the Supreme Court.
(ii)Due to the deletion of Article 31 the Government was no longer under an obligation to compensate persons whose land had been acquired as per a law passed by Parliament.
As of now, it is, beyond the scope of my research and understanding as to whether Proposition (ii) i.e. deprivation of property without compensation is still legally tenable especially in light of the Supreme Court's ruling, in the Maneka Gandhi case, which held that each and every provision of the Constitution had to be interpreted in a just, fair and reasonable manner. Therefore any law depriving a person of his property shall have to do so in a reasonable manner. It could be argued that the only reasonable manner to deprive a person of his property would be to offer him, reasonable compensation for the same. This discussion however is not completely relevant for the purpose of this post. The only relevant point is the fact that under the Constitution no person can be deprived of their property without the authority of law.
The two relevant concepts that now require to be examined are (i) 'property' & (ii) 'authority by law'.
C. 'Property' as understood in Article 300A: The obvious first question is as to whether or not 'intellectual property' such as 'clinical trial data' would fall within the definition of 'property' as understood in Article 300A. There seems to be enough authority to support the proposition that 'property' as understood in Article 300A is wider than just 'immovable property'. One such authority in the context of 'intellectual property rights' is the judgment of the Supreme Court in the case of Entertainment Network India Ltd. (ENIL) v. Super Cassette Industries Ltd. (SCIL). In pertinent part the Court held the following:
The ownership of any copyright like ownership of any other property must be considered having regard to the principles contained in Article 19(1)(g) read with Article 300A of the Constitution, besides, the human rights on property.
The judgment goes on further to say that:
But the right of property is no longer a fundamental right. It will be subject to reasonable restrictions. In terms of Article 300A of the Constitution, it may be subject to the conditions laid down therein, namely, it may be wholly or in part acquired in public interest and on payment of reasonable compensation.
The fact that the Supreme Court recognizes 'copyright' to fall within Article 300A is indicative that even 'clinical trial data', collected after extensive experimenting, should in all likelihood fall within the definition of 'property' as understood in Article 300A.
D. 'Authority by law' as understood in Article 300A: The term 'law' as defined in Article 300A is understood to mean only a legislation or a statutory rule or order. The term 'law' as understood by Article 300A will not include executive fiats. The source of the 'law' depriving a person of his property has to be necessarily traced, through a statute, to the legislature. The question therefore is whether the relevant provisions of the Drugs and Cosmetics Rules, 1945 qualify as 'law' for the purpose of Article 300A or whether the same would be struck down as having no basis in the Act:
(i) The relevant provisions of the Drugs & Cosmetics Rules, 1945: I've always been slightly intrigued by the weak regulatory architecture of the Drugs and Cosmetics Act, 1940 since it has left the bulk of the regulation, especially essential policies pertaining to clinical trials etc., to the vagaries of delegated legislation i.e. the Drugs & Cosmetics Rules, 1945. The relevant provisions on the nature of data that is needed to be submitted for regulatory approval is laid out in the following Rules and Schedules:
(a) Rule 122 E – Definition of 'new drug': Any drug which has not been used within the territory of India for any significant extent under the conditions prescribed by the Act shall be deemed to be a 'new drug' for a period of 4 years after its approval by the relevant authority, which is now the DCGI/CDSCO.
(b) Schedule Y, Appendix 1 to the D & C Rules, 1945 (approval for new drugs) – These provisions prescribe the data that is to be submitted to the DCGI along with the application to manufacture a 'new drug'. The clinical data that is required is as follows:
(i)Phase 1 & Phase 2 – Clinical Trial studies;
(ii) Phase III – Confirmatory Clinical Trial studies, which involves large scale testing on human beings (These studies would include mandatory Phase III trials on at least 100 Indian patients in India);
These requirements however are significantly diluted by the first proviso to Rule 122(B)(3) and Rule 122(A)(2), which states that local clinical trials need not be conducted if in case the Licensing Authority so decides to waive the requirement in light of tests carried out in foreign countries.
(c) Schedule Y, Appendix 1A (Approval for generic drugs) – These provisions prescribe the data that is to be submitted to the DCGI along with the application to manufacture a 'new drug' already approved for manufacture in India. Not surprisingly these provisions do not require the submission of any 'clinical studies' – the only requirement is that the application be accompanied by bio-equivalence studies along with sub-acute animal toxicity studies for intravenous infusions and injectables. Bio-equivalence studies are a relatively inexpensive affair and are aimed at establishing that the biological efficacy and safety of the generic drug in relation to the innovator drug. These studies save generic manufacturers the cost of executing expensive clinical trials and are in fact the primary reason for the low cost of generic drugs.
The long and short of this provision is that the approving authority of the Central Government, in effect depends, on clinical trial data submitted by the innovator company for the first approval of its new drug product. In a sense the Government 'acquires' the data for a 'public purpose' in a manner which directly affects the business of the innovator company.
Most importantly however this dependence on the innovator's data is not mandated by the Act but instead by the Rules, which are delegated legislation.
(ii) Do 'the relevant provisions' of the D & C Rules, 1945, fall within the definition of 'law' as understood in Article 300A?
There is enough authority to support the proposition that Statutory Rules & Orders would fall within the definition of 'law' as understood in the context of Article 300A. For example an Order made under the procedure laid down by the Land Acquisition Act would qualify as 'law' for the purpose of Article 300A since it has been promulgated under the procedure prescribed by the Act. The 'relevant provisions' of the D & C Rules, 1945, that have been discussed above, may not qualify as 'law' since such delegated legislation, in my opinon, is beyond the scope of the Act.
As discussed by a Seven Judge Bench of the Supreme Court in the In Re Delhi Laws case, delegated legislation is permissible, to the extent that it does not allow for the delegation of an essential legislative function i.e. a question of policy cannot be delegated. The decision to 'acquire' valuable property, i.e. expensive clinical data, for a public purpose is an essential function which can be carried out only through an Act of the legislature. At the time when the United States of America decided to curtail the data exclusivity period of innovators drugs from perpetuity to 5 years it had to do so through a legislative action which was known as the Hatch-Waxman Act and not through FDA regulations.
Moreover each and every rule that is formulated in the guise of delegated legislation has to find its source in the Parent Statute. In the present case I have, either rightly or wrongly, not be been able to locate the source of these 'relevant provisions' in the Drugs and Cosmetics Act. While it is true that the Act provides the Central Government with a mandate to regulate the manufacture of drugs, it does not provide the Government with the power to deprive a person of his property.
It would therefore be difficult for the Government to defend these provisions on the basis of Article 300A of the Constitution.
Having said that, I would also like to clarify that the rights under Article 300A are always capable of being restricted by Parliament. It would thus be completely legal for Parliament to pass an amendment expressly allowing for generic companies to depend on the clinical data submitted by the innovator company, provided the innovator is reasonably compensated for sharing the same.
Conclusion: While I'm aware that this post may come across as a mindless academic fantasy, I am half convinced that if the 'relevant provisions' of the Drugs and Cosmetics Rule, 1945 were to be challenged, before a Court of Law, they would be struck down therefore allowing innovator companies to have de facto data exclusivity in perpetuity, until Parliament states otherwise through a legislation.