Enigma of Data Exclusivity


‘Data Exclusivity’ has emerged as a contentious and a hotly debated issue in bilateral / multilateral trade agreements and the imbroglio turns out to be a tussle between developing countries’ interests vis-à-vis the powerful pharmaceutical and agro-chemical innovator companies backed up by their Governments in USA and EU. It seems inevitable that the countries caught up in this ongoing war of words would have to provide some form of legal provision of data protection and exclusivity as being sought the satisfaction of the other block.

We focus our attention in this article on what actually is ‘data exclusivity’ and / or ‘data protection’ and how these are related to new drug / chemicals development which are also usually protected with patents for long enough periods in most countries. And more importantly, what issues and claims of various interest groups confront us in harmonising legal provisions around this at par with international norms.

Data Requiring Protection / Exclusivity

The discovery of a new molecule (chemical moiety) follows a rigorous schedule of laboratory and field testing before the same could be regarded as usable as a drug or pesticide. Most of these tests are carried out on animals, plants or in the field for pharmacological, toxicological and environmental studies. The proof of safety and efficacy as a drug requires additional testing of the new substance in varied formulations and dosages on human volunteers known as clinical trials with appropriate evaluation of any side effects. The required number of tests and the manner in which these are required to be carried out are governed by rules set by the regulatory authorities in each country. These regulatory authorities are statutory bodies and prescribe the data and results mentioned above for submission to their satisfaction before marketing permission of the new substances (drugs / agrochemicals) can be granted to the applicant companies.

In the United States the regulatory authority for medicines and vaccines is the Food and Drug Administration (FDA) and in India, it is the Drug Controller General of India (DCGI). Similarly, the Environmental Protection Agency (EPA) is the regulatory authority for agrochemicals in USA and the Central Insecticides Board, Faridabad is its counterpart regulatory authority in India.

Meeting statutory requirements to the satisfaction of such regulatory authorities is necessary for grant of permission to place the new products on the market in the country in question and these involve considerable costs. It has been estimated that these development costs alone could be of the order of US$800 and US$180 million for a new drug or vaccine and agrochemicals respectively which are additional to the costs incurred for carrying our research and development for making the discoveries.

These test results generated for such statutory requirement are the key elements that are being sought for data protection and / or exclusivity against any (unlawful commercial) use. The objective of getting introduced such legal provision is to prohibit the use of this data by the regulatory authority and others for a given period of time as permissible under the law that ensures extension of market monopoly for the originator company that much more.

The Article 39(3) of TRIPS

It is important to refer to Article 39(3) of TRIPS which precisely deals with this issue and is a usual reference point for divergent arguments on either side of the wedge. It says -

Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shallprotect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public or unless steps are taken to ensure that the data are protected against unfair commercial use.

Thus this Article devolves several obligations on the member governments which essentially requires i) providing protection to test data for marketing new chemical entities, the collection of which involved considerable effort, ii) protecting such data against disclosure, except where necessary to protect the public and iii) protecting such data against disclosure, unless steps are taken to ensure that the data is protected against unfair commercial use.

Clearly much has been left on the member countries, with substantial flexibility in their command to determine the scope and kind of protection of undisclosed test data of the originator company. It must also be remembered that TRIPS agreement does not set forth a uniform law on intellectual property or on data protection / exclusivity; rather it stipulates a set of minimum standards that may be differently implemented in member countries in conformity to their own national laws.

Patents versus Data Exclusivity

The protection of new inventions is now provided through ‘patents’ which in most countries are for a maximum of 20 years from the date of submission of final specifications. Patent protection is available for products and processes having convincing inventive steps that are new and useful. This protection does not extend to the test data generated for commercial and marketing purposes as statutory requirement. Thus the concept of patents and exclusivity of propriety test data are distinctly different, but complement each other.

The concept of granting monopoly rights through grant of patents is now well established, the prime objective of which is to provide incentive to companies to invent and innovate. Most successful companies take full advantage of the patent regimes that are getting more and more harmonised after the issue of ‘intellectual property rights’ brought under the aegis of World Trade Organisation through TRIPS. These originator companies which are responsible for introduction of new products in the global market with the active support of their respective Governments justify introduction of legal provisions to exclude the subsequent use of their test data on the grounds that the data essentially is ‘proprietary’ in nature and they invested enormous sums for their generation in the first place.

New Drugs versus Generic Drugs

The regulatory authorities usually call for all mandatory test data only when the product is a new drug (not previously known or in use). Such new drugs are often protected through grant of patents, so that when permitted to market, only Originator Company or its licensee can produce and market. When the new drug of the originator company becomes off-patent, any competitor company could produce the same drug without any risk of patent infringement. Nonetheless, the competitor company is still required to obtain marketing approval from the regulatory authority.

Most often, in such cases, the regulatory authority admit applications from competitor companies without detailed test data (as with the originator company) and requires only test data that establishes bio-equivalence of the generic drug with the original new drug to ensure that the generic version is fully comparable to the original for continued therapeutic use.

With legal provision of excluding the subsequent use of its test data as in the above case, the originator company has the right to preclude third parties to obtain marketing approval for a specific period of time and hence delay entry of generic producers maintaining its monopoly. It is also possible for a company in certain cases to rely on ‘data exclusivity’ protection alone, if available without seeking any patent protection e.g., in case of biological which are sometimes difficult to get protected under patent system or when a patent application remains pending for grant of patent or is already off-patent. It is also important to realise that when a patent is in vogue for a certain invention, the right holder can exclude third parties for making, using, selling, offering for sale, or importing the patented product. However, with rights of ‘data exclusivity’, the right holder can prevent the regulatory authorities and generic competitors to rely on his propriety data, but the generic competitor is free to generate another set of data for regulatory purposes, if required. In practice, however, this is seriously discouraged to avoid unnecessary duplication of animal testing and clinical trials on humans already performed by the originator company besides unwarranted delays in expanding the market.

Those opposed to such extended monopoly beyond the patent validity period justify limiting the ‘data exclusivity’ provision on the grounds of global public health and development of market of generic drugs at the earliest. Thus the issue of ‘data exclusivity’ hinges upon the idea of balancing the interests of originator companies and the producers of generic drugs vis-à-vis the larger issue of making affordable life saving drugs to vast majority of poor people as soon as possible. This also appears an issue of balancing the interests of right holders and the wider public interest.

Global Scenario of Data Exclusivity Laws

Protection of data related to test results as undisclosed information gained international attention when it was desired to restrict unfair competition between the member countries of Paris Convention. However, data exclusivity law was first introduced in USA in 1984 and in the EU in 1987 to compensate for insufficient product patent protection in some countries. However, strong product patents are now available in all 27 EU Member States. The erstwhile rules on data exclusivity in EU (Directive 2001/83/EC) have been since amended vide Directive 2004/27/EC dated 31 March 2004 relating to medicinal products for human use. The data exclusivity period among the EU Members States is now harmonised to a 10 years period or more under a new scheme popularly known as ’8+2+1′ replacing a previously variable term between 6 -10 years.

The issue came into the limelight again in 1994 when it found mention in the garb of ‘data protection’ under Article 39(3), in the TRIPS agreement which sets out number of obligations that the member countries of WTO need to comply with when designing their intellectual property regimes. Several countries have introduced trade secret form of protection in compliance of Article 39(3). On the other hand most developed countries have adopted data exclusivity as the mode of protection complying with Article 39(3) obligation.

Most of the WTO Member States seem have recognized and appreciated the role of data exclusivity and implemented provisions for fixed periods protection for regulatory data generated both for pharmaceuticals and agro-chemicals – e.g., USA (5 years for pharmaceuticals and additional 3 years for new indications of existing drugs and 10 years for agro-chemicals), European Union (10 years for both pharmaceuticals agro-chemicals and 1 extra year for new indication in case of drugs). Similarly, both Japan and China chose to provide protection for a fix term of 6 years both in case of pharmaceuticals and agrochemicals, whereas Canada chose 8 years. Some countries like Brazil provide data exclusivity for agro-chemicals only and not for pharmaceuticals yet.

India at the Cross-Road

India provides data exclusivity or fixed period data protection neither to pharmaceuticals nor to agro-chemicals yet. India’s fledgling generic drugs industry, which has emerged as a major support to global public health programmes on HIV/AIDS and other similar intractable diseases is vehemently opposed to the notion of ‘data exclusivity’ of any kind in the wake of anticipated serious dent to supply of affordable drugs from India. Such sentiments have found a strong support from well respected global NGOs, such as MSF – also known as ‘Doctors without Borders’ who claim to obtain 90% of their inventory of drugs from India for distribution amongst the needy poor in other countries, i.e., Africa. Recent protests and violent demonstrations to EU-India Free Trade Agreement talks was a manifestation of this outcry.

Government of India is however otherwise keen to strengthen its regulatory process and concomitant data protection legal provisions. A high powered Government panel in its report submitted in 2007 recognises the need for tightening the regulatory process not just for pharmaceuticals but for agro-chemicals and also for ayurvedic products as well. It has also recognised the need for implementing higher standard of data protection regime to fulfil its obligations under Article 39(3) of TRIPS. It recommends a gradual process of achieving it simultaneously upgrading the physical infrastructure and technical skills of a proposed Central Drug Authority that will encompass the office of Drug Controller General of India (as of now) supported by appropriate high-level advisory boards / committees and cover monitoring, vigilance and enforcement of new drugs, vaccines, biological, diagnostics and medical devices as well as clinical trials besides regulatory affairs. It also suggests a brief ‘transition period’ before moving from the old order to a new one during which time it has been suggested to invoke the flexibility available in TRIPS agreement to comply with the minimum requirements of Article 39(3).

The Government of India clearly wants to adopt a cautious approach to fulfil its international commitments without hindering the growth of its home-grown generics industry. Interestingly, the opposition to ‘data exclusivity’ regime is not limited to Indian generics lobby but also from countries such as Turkey and even Canada.


It seems that India finds it prudent to wait for some more time before implementing a ‘data exclusivity’ regime at par with most developed countries. Hopefully, its innovative pharmaceutical companies that have begun investing in research and development for new drug development after the ‘product patent’ came into force would by then find themselves ready to benefit from the new dispensation of ‘data exclusivity’.

Further Reading