“An interview with Ayushi Singhal, Editor, Legally India”

Legally India, November 22, 2016

Conversation with Mr. Pradeep S Mehta, Founder Secretary General of Consumer Unity & Trust Society (CUTS International).

Mr. Pradeep S Mehta is the founder Secretary General of the Jaipur-based Consumer Unity & Trust Society (CUTS International), a leading economic policy research, advocacy and networking, non-governmental group in India, with offices in Nairobi, Lusaka, Accra, Hanoi and Geneva.

In April, 2012, Mehta has been nominated to the High Level Stakeholders Panel of WTO on Defining the Future of Trade. He has been Honorary Adviser to the Commerce & Industry Minister of India and NGO Adviser to the WTO Director General from 2002 to 2005.

Recently he has been a Member of the Planning Commission’s Steering Committee on Industry and Chairman of its Task Force on National Competition Policy. Further, he has also Chaired Ministry of Road Transport and Highways’ Working Group on Road Safety Education.

A detailed profile of his can be found here.

He kindly agreed to an interview with me [Ayushi Singhal, Editor]. Following are the excerpts from the interview. Special thanks to Ms. Saniya Mirani, Mr. Ananya Kumar and Mr. Chaitanya Sundriyal (Associate Editors), for their assistance in conducting this interview.

Q: CUTS has now been in existence for nearly 30 years, please tell us something more about it. Do you think it has been able to perform and achieve the aims you had planned for it?

A: We have been in existence for over 33 years, having been established in 1983-84. Please see our Vision Document on our website which speaks about our past and imagination for the next twenty years i.e. fifty years. Much of our growth has been organic and demand driven, rather than envisaged as such when we were founded. We have ensured that whatever we did was in harmony with our Mission and Vision Statements.

We are currently preparing a document which captures all our achievements over the past 33 years, but that will take few more weeks.

Q: In your opinion, is competition law in India keeping pace with the country’s economic development?

A: Yes, but the implementation could have been better. The implementing body, Competition Commission of India suffers from various handicaps. The biggest one is that it has to recruit staff from other government services, and even its members and chairman are former government servants. This affects its ability to think afresh and deal with market failures effectively.

There are other problems also, but that would need a whole chapter to detail.

Q: The Competition Act provides for exhaustive forms of combinations under Section 5, namely, acquisition of shares or voting rights; acquisition of control; merger or amalgamation. However, we have seen in the past that the Competition Commission has included other forms of combinations such as Joint ventures and Strategic Alliances, under the said section. In your opinion, is it a step in the correct direction?

A: Yes.

Q: The introduction of ‘data exclusivity’ in India as a separate intellectual property right from patents, forms one of the most contentious debates considering that India is one of the leading exporters of pharmaceuticals. The precursor to data exclusivity’s introduction, Article 39.3 of the TRIPS Agreement states:

“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, shall protect 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.”

This protection provided in TRIPS can be interpreted in two ways. First, it can be interpreted to include a minimum standard of protection against unauthorised use or disclosure. This standard is accepted by most developing nations and the generic industries. The second interpretation includes a higher standard of introducing a ‘data exclusivity’ provision wherein even the regulatory authority cannot rely on the testing data submitted by the first applicant to approve subsequent applications, even if the latter products have equivalent chemical composition and effects in body. This interpretation is accepted by most developed countries and multinational pharmaceutical companies.

In 2007, the Satwant Committee gave its view that India needs to only abide by minimum data protection i.e. non-disclosure of test data and protection against fraudulently obtained data. With respect to higher standards, it was stated that it could be done in the longer run. Post the committee gave its views; after EU-FTA India received pressure talks and by US government as well to introduce a higher standard.

In this scenario, do you think that the recommendations given by Satwant committee for the ‘transitional period’ have been fairly implemented since then, and whether 9 years hence it is time for India to consider introducing Data Exclusivity with respect to pharmaceuticals?

A: According to a plain reading of Article 39.3 of the TRIPs Agreement, Members (read national regulatory authority) are obliged to protect against unfair competition the undisclosed test or other data, which are required to be submitted in order to obtain marketing approval for pharmaceutical (and agro-chemical) products that have utilised New Chemical Entities and origination of which has involved considerable effort. Members are also obliged to protect such data against disclosure, except where it is necessary to protect the public, or unless steps are taken to ensure that such data are protected against unfair commercial use upon such disclosure.

In other words the Article 39.3 of TRIPs provides data protection subject to the following:

1. Data submitted at time of obtaining marketing approval, qualifies for protection.
2. Data should pertain to a product which utilises New Chemical Entities (NCEs).
3. The data should be undisclosed i.e. if it is already disclosed elsewhere in the world, no protection can be provided.
4.The origination of data should have involved considerable effort.

It is also clear that the protection of data is against “unfair commercial use” and mere reliance on the data by drug regulator to grant subsequent marketing approvals to other generic manufacturers shall not constitute breach of data protection. In India, the drug regulator (i.e. Drug Controller General of India (DCGI)) relies on bio-equivalence and bio-availability data, which cannot be termed as “unfair commercial use” in terms of Article 39.3. Therefore, Article 39.3 is virtually a non-obligation.

The ToR for the Satwant Committee says to “consider the steps to be taken by the Government in the context of the provisions of Article 39.3 of the TRIPs Agreement and to examine the issue as to whether data protection can be offered under the existing legal provisions or an appropriate new dispensation is required for this purpose”. Therefore, any recommendation by the Committee that is beyond Article 39.3, would also be beyond its mandate. Thus, with due respect, the Committee while recommending “data exclusivity” (i.e. data protection with non-reliance for a certain period) is beyond its mandate and should be treated as void ab initio.

Notwithstanding the above-said and leaving aside legal interpretations of Art39.3, India is free to adhere to data exclusivity if it wants to do so. Is the time ripe enough for India to do so?

To answer this, I would like to go with the following view undertaken by the CIPIH (Commission on Intellectual Property Rights, Innovation and Public Health) in 2006:

“Developing countries need to decide in the light of their own circumstances, what provisions, consistent with the TRIPs agreement, would benefit public health, weighing the positive effects against the negative effects. A public health justification should be required for data protection rules going beyond what is required by the TRIPs agreement. There is unlikely to be such a justification in markets with a limited ability to pay and little innovative capacity. Thus, developing countries should not impose restrictions for the use of or reliance on such data in ways that would exclude fair competition or impede the use of flexibilities built into TRIPs.”

So, in my view, before India goes for “data exclusivity” approach, it must first establish a “public health justification” for the same. This seems difficult because the ability to pay by a vast number of people still remains low; though India’s innovative capacity might have increased a bit.

Having said that, if India has to adopt data exclusivity in last resort or say because it gets a quid pro quo that is in the national interest, then care must be taken to provide some ‘safeguards’ and also to define the term “New Chemical Entity” narrowly. NCE, which is not defined either in Drugs and Cosmetics Act or the Patents Act, should be defined taking into account the spirit of S.3(d) of the Patents Act (i.e. entities that cannot be patented). In addition the definition of NCE should be ‘absolute’ in nature (i.e. chemical entity should be new to the world and not merely to India).

It would be better, however, if some novel pro-competitive methods are tried to compensate the originator of trial data instead of giving them ‘exclusivity’. For instance, the regulator while relying on originator’s data for granting approval to subsequent applicants, may ask such applicants to pay certain amount/royalty for a fixed term so that it is not a free ride for them but that the originators could recoup some of its costs incurred in generating such trial data.

Q: The introduction of Data exclusivity with regards to agro-chemicals was readily agreed by the Satwant committee. In furtherance of this, the government introduced the Pesticides Management Bill. Section 12(6) of the bill states

“The data submitted for the purpose of registration in respect of a pesticide under this section which has not been previously registered shall not be relied upon for grant of registration of the same pesticide in respect of any other person for a period of three years”. The standing committee has advised to increase this period from 3 to 5 years with a view that it would encourage the introduction of newer pesticide molecules in the country.

There exists an exception to this clause of non-reliance in cases of national exigency, urgency, public interest.

The bill is still pending for consideration in the Parliament. What would be your views with respect to the same?

A: The first question that arises is how India can differentiate between data protection approach in pharmaceuticals and agro-chemicals. Well, like every Member of the WTO, India also has right to implement TRIPs as per its requirements. Even USA has differential approach in data protection in pharmaceuticals and agro-chemicals.

Coming to the question, unlike the Ministry of Health, the Agriculture Ministry has been in favour of data exclusivity right from beginning either within the Satwant Committee deliberations or outside debates. Perhaps it is not damaging to agriculture sector and cost & benefit might be favouring data exclusivity. But such an approach could be detrimental to public health and Indian generic pharmaceutical industry.

One more reason could be the absence of vibrant local manufacturers of agro-chemicals, unlike that for pharmaceuticals where local manufacturers are vibrant and well organised. In addition, while pharmaceuticals are exported from India in large quantities, the same may not be true for agro-chemicals.

Q: Based on your experiences while working with WTO and its panels, what is your opinion about India’s stand and its position in WTO? Specifically in the context of Nairobi Ministerial conference, what could have been improved on India’s end?

A: A lot has already been said about the Nairobi Ministerial. Our minister, Nirmala Sitharaman did try her best and we could not have managed a better outcome. Having said that, India must accept and acknowledge that the Doha Round is dead and let us focus on what we should do now both at the domestic level and in the international arena so that we can take stock and strategise for the future.

Going forward, India should actively engage in discussions on investment, government procurement, trade in services as joining the negotiations at inception will allow us to influence the negotiations. Importantly, we must raise our level of ambitions while negotiating trade and investment deals. At the bilateral and plurilateral level, we must swiftly conclude the negotiations with the EU, the European Free Trade Association (EFTA) and Australia, and the Regional Comprehensive Economic Partnership.

In conclusion, our international trade policy must be proactive, and not be defensive.

Q: In your opinion, how successful Regional Comprehensive Economic Partnerships will be in mitigating India’s exclusion from other multilateral agreements like TiSA and TPP. As many negotiations are moving outside the WTO framework partly due to India’s obstruction, what else/more can India do to ensure that the stalemate in the WTO doesn’t undermine its progress in the global trade framework?

A: TiSA is not a multilateral agreement and the modalities of non-participants benefiting from the TiSA are not known yet. The agreements that are being negotiated outside the WTO are happening for many reasons, most important one being the ease of finding like-minded trading partners, or as said in trade jargon: coalition of the willing.

The mega-regional agreements like the TPP are bound to have an impact on non-members. CUTS has done a full study on the impact of such agreements on the Indian economy and it is available on our website.

To answer your question, India needs to swiftly move forward with the RCEP Agreement to reduce the impact from trade distortions, explore new markets for exports, and undertake domestic reforms to eventually comply with the high standards of the TPP. I believe that because there are seven countries common to RCEP and TPP, so gradually, the standards of TPP will creep into the RCEP.

Moreover, in the absence of RCEP concluding soon, some critical members of RCEP may get attracted to TPP and the geo-economic importance of RCEP will reduce. Given its rising clout, China may too join TPP. If that happens, then US will find it easy to attract other Eastern and South East Asian countries to join up, thus leaving India out in the wilderness. All this is subject to what the new Presidency, under Donald Trump, in the US has in mind, when it comes to power in January. 2017.

Yet, despite all these developments, India’s best interests are protected through the multilateral framework under the WTO. To keep it relevant, member countries, including India must acknowledge the changing global environment and take up issues that are important for the future and stop living in the past.

Q. In what ways do you think trade agreements will change post-Brexit?

A: Brexit to some extent owes to the fact that the benefits of globalisation have not been distributive enough and have, in general, not reached in rural areas particularly farmers. It has also adversely affected manufacturing jobs in the west, who are no longer able to compete with imports from developing countries. It also has had some adverse effect on certain social sectors like health and environment. It calls for greater domestic reforms to ensure that the benefits of free trade are more equitably distributed in society.

It is likely that post-Brexit, trade negotiations would include social-economic agenda with more vigour and countries (including developed) demanding suitable policy space. However, we must watch the developments very closely.

Q: The WTO is considered one of the more democratic of the International Organizations, considering it gives an equal say to all members, at least formally. This equality is often not manifested in practice, as the Western Economies get the longer end of the stick in most situations. Do you think it is possible for the WTO to be more inclusive?

A: Yes, it is true that at least formally, WTO is a consensus based, democratic organisation. The advanced economies have always tried to arm twist other countries to have their way. However, the times are changing. Countries like China and India are extremely important players in global trade and assert their relevance in every forum. WTO can be and should be more inclusive. At CUTS, we, as an organisation, have been voicing to make the system more inclusive, transparent and predictable for over two decades and will continue to do so.

In fact, after the collapse of the Cancun Ministerial in 2003, a new quad was born which included India and Brazil along with USA and EU, with China on the side but inside. This has become difficult for the US and EU to digest and hence they are trying to create a new differentiation of membership i.e. rich, emerging, developing and least developed countries. Their argument is that emerging economies like China and India should not enjoy the same privileges as developing countries.

Q: What is your opinion on US’ veto on reappointment of Judge Seung Wha Chang to the WTO’s dispute settlement body?

A: Vetoing Judge Chaang’s reappointment to the Appellate Body risks politicising the dispute resolution system and can endanger its independence. Many member countries, including India and the EU have rightly criticised US’ actions.

Q: What would be your suggestions to the students planning to work for trade and competition policy related think tanks?

A: My suggestions to such students would be:

1. To approach this subject area positively and dispassionately, and not sceptically.
2. It is a rapidly evolving area and student must keep up with the developments to remain relevant.
3. Visualise a multilateral competition framework arrangement that could inter alia help curb cross border market abuses and also reduce inequality between and within countries.
4. Keep the ambition of negotiating multilateral agreement on trade & competition policy and in this regard keep drafting an agreement keeping ‘public interest’ in mind, and keep improving upon such a draft. Perhaps there could be inter/intra institution competition in such drafting.

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