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PHRAMA LEGAL ASPECT SANDESH BHOIR Project on, Legal Aspect in Pharma 1

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Page 1: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Project on

Legal Aspect in

Pharma

Done by

Sandesh Bhoir

PGDM-HCPM

IES Management College

Bandra

1

PHRAMA LEGAL ASPECT SANDESH BHOIR

KEY LEGISLATIONS

Introduction- Indian drug and pharmaceuticals is highly regulated given its

strategic importance and the degree of public interest involved India comes out

with policy statements periodically outlining its stand on various issues It last

came out with a policy statement in 2002 The Department of Chemicals and

Petrochemicals in the Ministry of Chemicals and Fertilizers supervises the

pharmaceutical industry through several acts and enforcing bodies The Drugs

Controller of India (DCI) is the enforcing body at the central level while each state

has a Food and Drug Administration Department to regulate at the state levels

National Pharmaceutical Pricing Authority (NPPA) meanwhile looks after pricing

related issues Import tariffs play a decisive role in shaping the competitive scene

in the country while excise duties impact margins and selling prices These issues

and more are covered in the following paragraphs

2

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drugs and Cosmetics Act 1940

This act deals with manufacture and sale of drugs It regulates import

manufacture distribution and sale of drugs and cosmetics In 1937 a bill was

introduced in Central Legislative Assembly upon recommendations of a Drugs

Enquiry Committee to regulate import of drugs into British India The Drugs and

Cosmetics Bill was passed by the Central Legislative Assembly and after receiving

the assent (agree) of the Governor General on 10th April 1940 became Drugs and

Cosmetics Act 1940 Between then and now there have been many amendments

to the original act The latest amendment in 1986 is called The Drugs and

Cosmetics (Amendment) Act 1986 This legislation applies to the whole of India

and governs (rule on) all notified drugs and cosmetics whether imported or made

in India It is enforced by the Department of Chemicals and Petrochemicals

Schedule Y of Drugs and Cosmetic Act 1945 was amended on January 20 2005

to make reporting of adverse events from clinical trials clear and unambiguous

Drugs and Cosmetic Rules 1995 contains the list of drugs for which license is

required by manufacturer importers and exporters Recently in vitro blood groups

sera and in vitro diagnostic devices for HIV HBsAg and HCV are also included in

schedule CI All imported drugs in indigenous manufacturers have to register to

control over the quality of imported as well as locally manufacturing kits

The Drug and Cosmetic Act is mainly aimed to regulate all medicines (Ayurvedic

Siddha and Unani) for internal or external use of human being or animals and all

substances (other than food) intended to be used for or in the diagnosis treatment

mitigation or prevention of any disease or disorder in human beings or animals

including preparation applied on human body or to destroy insects Even the

central or state governments have power to make rules and appoint inspector to

control or inspect any drug or cosmetic for its standardization and safety which can

3

PHRAMA LEGAL ASPECT SANDESH BHOIR

be tested in the central or state drug laboratory The government can prohibit

manufacturing importing or selling of any drug or cosmetic Violation of law by

any person or corporate manager or owner is liable for punishment for a term

which may extend to 3-10 years and shall also be liable to fine which could be Rs

500 or Rs 10000 or both

New Amendment- 2009

Drug controller general of India (DCGI) has taken special initiation for providing

better facilities which is dedicated for controlled environment and is named as

pharma Zone It is maintained within the cargo premises at airports and seaports

for proper storage of pharmaceuticals products The Central Drugs Standard

Control Organization (CDSCO) has initiated steps to facilitate the creation of a

Pharma Zone in all major Airports and Sea Ports

Pharma Zone A separate dedicated temperature and atmosphere controlled

area to maintain the safety efficacy and quality of imported and export

drugs Pharmaceutical products in line with the product requirements and

GMP compliances with the cargo (shipment goods) premises of ports

The Medicinal amp Toilet Preparations Act 1955 with Rules 1956

This act enables levy and collection of duties of excise on medical and toilet

preparations containing alcohol opium Indian hemp or other narcotic drug or

narcotic The rules deal with manufacture warehousing licensing and interstate

movement of medicinal and toilet preparations and other narcotics drugs It lists

medicines and toilet preparations containing alcohol that are liable to be used as

ordinary alcohol beverages by consumers

4

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drug Policy 1986

Drug Policy of 1986 titled lsquoMeasures for Rationalization Quality Control and

Growth of Drugs and Pharmaceuticals Industry in Indiarsquo aims at ensuring easy

availability of essential and life savings drugs of good quality at a reasonable price

and strengthening the quality and quantity of drug production through policy

interventions Drug Policy prescribes a framework for quality control and rational

use of drugs Broadly the policy covers all facets of the pharmaceutical industry

such as quality investment pricing Research amp Development (RampD) and

licensing

The Essential Commodities Act 1955

The Essential Commodities Act 1955 ensures easy availability of essential

commodities to the consumer and protects the consumer from exploitation of

unscrupulous traders This act covers production and supply of essential

commodities for maintaining or increasing supplies and for securing their equitable

distribution and availability at fair prices Essential Commodities Act is

implemented by State Government or Union Territory Administrations under

active supervision of the Central Government

Indian Patents Act 1970

This Act covers patent rights and exclusivity (distinctiveness) of the patent holders

to manufacture sell and distribute the products in India Till now only process

patent were granted under this Act for foods medicines drugs and substances

prepared or produced by chemical processes There are several amendments in this

Act to bring it to international standards

bull The Patents (Amendment) Act 1999 [Act 17 Of 1999] With Patent Rules 1972

bull The Patents (Amendment) Act 2002

5

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull The Patents (Amendment) Bill 2003

bull The Patents (Amendment) Ordinance 2004

bull The Patents (Amendment) Act 2005

From January 2005 product patent is adopted in accordance with Trade-Related

Aspects of Intellectual Property Rights (TRIP) provisions under WTO agreement

The Drugs Price Control Order 1995

Drug Price Control Order (DPCO) 1995 is an order issued by the Government

of India under Section 3 of the Essential Commodities Act 1955 to regulate the

prices of drugs The order lists price-controlled drugs procedures for determining

drug prices method of implementing prices fixed by government and penalties for

contravening provisions among other things

DPCO is implemented by National Pharmaceutical Pricing Authority (NPPA)

Good Manufacturing Practices-

Good Manufacturing Practices (Schedule M) prescribes standards for

manufacturing facilities and processes It lists requirements that facilities such as

premises plants equipments and materials need to follow The government has

issued a notification on December 11 2001 making cGMP mandatory under

schedule M of the Indian Drugs and Cosmetics Act 1940 and finally fixed July 1

2005 as the deadline for the compliance of the norms This ensures that the drugs

manufactured in India are of world standards

6

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Pharmacy Act 1948

This Act regulates the profession of pharmacy It deals with various pharmacy

issues such as professional education and requirements for registration

Regulatory Bodies

1 The Drugs Controller of India

The Drugs Controller of India (DCI) comes under the purview of Ministry of

Health It is a major body in the pharmaceutical industry governing issues such as

product approval and standards clinical trials introduction of new drugs and

import licenses for new drugs Its major functions include

Controlling quality of imported drugs

bull Coordinating activities of State Food and Drug Administration

bull Enforcing new drug legislation

bull Granting approval to new drugs

2 State Food and Drug Administration

The State Food and Drug Administration (SFDA) monitor manufacture and sale of

pharmaceuticals in their respective states They control clinical trials carried out by

companies in their jurisdiction However approvals for setting up manufacturing

facilities and obtaining licenses to sell and stock drugs are provided by the state

governments only

7

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 2: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

KEY LEGISLATIONS

Introduction- Indian drug and pharmaceuticals is highly regulated given its

strategic importance and the degree of public interest involved India comes out

with policy statements periodically outlining its stand on various issues It last

came out with a policy statement in 2002 The Department of Chemicals and

Petrochemicals in the Ministry of Chemicals and Fertilizers supervises the

pharmaceutical industry through several acts and enforcing bodies The Drugs

Controller of India (DCI) is the enforcing body at the central level while each state

has a Food and Drug Administration Department to regulate at the state levels

National Pharmaceutical Pricing Authority (NPPA) meanwhile looks after pricing

related issues Import tariffs play a decisive role in shaping the competitive scene

in the country while excise duties impact margins and selling prices These issues

and more are covered in the following paragraphs

2

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drugs and Cosmetics Act 1940

This act deals with manufacture and sale of drugs It regulates import

manufacture distribution and sale of drugs and cosmetics In 1937 a bill was

introduced in Central Legislative Assembly upon recommendations of a Drugs

Enquiry Committee to regulate import of drugs into British India The Drugs and

Cosmetics Bill was passed by the Central Legislative Assembly and after receiving

the assent (agree) of the Governor General on 10th April 1940 became Drugs and

Cosmetics Act 1940 Between then and now there have been many amendments

to the original act The latest amendment in 1986 is called The Drugs and

Cosmetics (Amendment) Act 1986 This legislation applies to the whole of India

and governs (rule on) all notified drugs and cosmetics whether imported or made

in India It is enforced by the Department of Chemicals and Petrochemicals

Schedule Y of Drugs and Cosmetic Act 1945 was amended on January 20 2005

to make reporting of adverse events from clinical trials clear and unambiguous

Drugs and Cosmetic Rules 1995 contains the list of drugs for which license is

required by manufacturer importers and exporters Recently in vitro blood groups

sera and in vitro diagnostic devices for HIV HBsAg and HCV are also included in

schedule CI All imported drugs in indigenous manufacturers have to register to

control over the quality of imported as well as locally manufacturing kits

The Drug and Cosmetic Act is mainly aimed to regulate all medicines (Ayurvedic

Siddha and Unani) for internal or external use of human being or animals and all

substances (other than food) intended to be used for or in the diagnosis treatment

mitigation or prevention of any disease or disorder in human beings or animals

including preparation applied on human body or to destroy insects Even the

central or state governments have power to make rules and appoint inspector to

control or inspect any drug or cosmetic for its standardization and safety which can

3

PHRAMA LEGAL ASPECT SANDESH BHOIR

be tested in the central or state drug laboratory The government can prohibit

manufacturing importing or selling of any drug or cosmetic Violation of law by

any person or corporate manager or owner is liable for punishment for a term

which may extend to 3-10 years and shall also be liable to fine which could be Rs

500 or Rs 10000 or both

New Amendment- 2009

Drug controller general of India (DCGI) has taken special initiation for providing

better facilities which is dedicated for controlled environment and is named as

pharma Zone It is maintained within the cargo premises at airports and seaports

for proper storage of pharmaceuticals products The Central Drugs Standard

Control Organization (CDSCO) has initiated steps to facilitate the creation of a

Pharma Zone in all major Airports and Sea Ports

Pharma Zone A separate dedicated temperature and atmosphere controlled

area to maintain the safety efficacy and quality of imported and export

drugs Pharmaceutical products in line with the product requirements and

GMP compliances with the cargo (shipment goods) premises of ports

The Medicinal amp Toilet Preparations Act 1955 with Rules 1956

This act enables levy and collection of duties of excise on medical and toilet

preparations containing alcohol opium Indian hemp or other narcotic drug or

narcotic The rules deal with manufacture warehousing licensing and interstate

movement of medicinal and toilet preparations and other narcotics drugs It lists

medicines and toilet preparations containing alcohol that are liable to be used as

ordinary alcohol beverages by consumers

4

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drug Policy 1986

Drug Policy of 1986 titled lsquoMeasures for Rationalization Quality Control and

Growth of Drugs and Pharmaceuticals Industry in Indiarsquo aims at ensuring easy

availability of essential and life savings drugs of good quality at a reasonable price

and strengthening the quality and quantity of drug production through policy

interventions Drug Policy prescribes a framework for quality control and rational

use of drugs Broadly the policy covers all facets of the pharmaceutical industry

such as quality investment pricing Research amp Development (RampD) and

licensing

The Essential Commodities Act 1955

The Essential Commodities Act 1955 ensures easy availability of essential

commodities to the consumer and protects the consumer from exploitation of

unscrupulous traders This act covers production and supply of essential

commodities for maintaining or increasing supplies and for securing their equitable

distribution and availability at fair prices Essential Commodities Act is

implemented by State Government or Union Territory Administrations under

active supervision of the Central Government

Indian Patents Act 1970

This Act covers patent rights and exclusivity (distinctiveness) of the patent holders

to manufacture sell and distribute the products in India Till now only process

patent were granted under this Act for foods medicines drugs and substances

prepared or produced by chemical processes There are several amendments in this

Act to bring it to international standards

bull The Patents (Amendment) Act 1999 [Act 17 Of 1999] With Patent Rules 1972

bull The Patents (Amendment) Act 2002

5

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull The Patents (Amendment) Bill 2003

bull The Patents (Amendment) Ordinance 2004

bull The Patents (Amendment) Act 2005

From January 2005 product patent is adopted in accordance with Trade-Related

Aspects of Intellectual Property Rights (TRIP) provisions under WTO agreement

The Drugs Price Control Order 1995

Drug Price Control Order (DPCO) 1995 is an order issued by the Government

of India under Section 3 of the Essential Commodities Act 1955 to regulate the

prices of drugs The order lists price-controlled drugs procedures for determining

drug prices method of implementing prices fixed by government and penalties for

contravening provisions among other things

DPCO is implemented by National Pharmaceutical Pricing Authority (NPPA)

Good Manufacturing Practices-

Good Manufacturing Practices (Schedule M) prescribes standards for

manufacturing facilities and processes It lists requirements that facilities such as

premises plants equipments and materials need to follow The government has

issued a notification on December 11 2001 making cGMP mandatory under

schedule M of the Indian Drugs and Cosmetics Act 1940 and finally fixed July 1

2005 as the deadline for the compliance of the norms This ensures that the drugs

manufactured in India are of world standards

6

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Pharmacy Act 1948

This Act regulates the profession of pharmacy It deals with various pharmacy

issues such as professional education and requirements for registration

Regulatory Bodies

1 The Drugs Controller of India

The Drugs Controller of India (DCI) comes under the purview of Ministry of

Health It is a major body in the pharmaceutical industry governing issues such as

product approval and standards clinical trials introduction of new drugs and

import licenses for new drugs Its major functions include

Controlling quality of imported drugs

bull Coordinating activities of State Food and Drug Administration

bull Enforcing new drug legislation

bull Granting approval to new drugs

2 State Food and Drug Administration

The State Food and Drug Administration (SFDA) monitor manufacture and sale of

pharmaceuticals in their respective states They control clinical trials carried out by

companies in their jurisdiction However approvals for setting up manufacturing

facilities and obtaining licenses to sell and stock drugs are provided by the state

governments only

7

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 3: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drugs and Cosmetics Act 1940

This act deals with manufacture and sale of drugs It regulates import

manufacture distribution and sale of drugs and cosmetics In 1937 a bill was

introduced in Central Legislative Assembly upon recommendations of a Drugs

Enquiry Committee to regulate import of drugs into British India The Drugs and

Cosmetics Bill was passed by the Central Legislative Assembly and after receiving

the assent (agree) of the Governor General on 10th April 1940 became Drugs and

Cosmetics Act 1940 Between then and now there have been many amendments

to the original act The latest amendment in 1986 is called The Drugs and

Cosmetics (Amendment) Act 1986 This legislation applies to the whole of India

and governs (rule on) all notified drugs and cosmetics whether imported or made

in India It is enforced by the Department of Chemicals and Petrochemicals

Schedule Y of Drugs and Cosmetic Act 1945 was amended on January 20 2005

to make reporting of adverse events from clinical trials clear and unambiguous

Drugs and Cosmetic Rules 1995 contains the list of drugs for which license is

required by manufacturer importers and exporters Recently in vitro blood groups

sera and in vitro diagnostic devices for HIV HBsAg and HCV are also included in

schedule CI All imported drugs in indigenous manufacturers have to register to

control over the quality of imported as well as locally manufacturing kits

The Drug and Cosmetic Act is mainly aimed to regulate all medicines (Ayurvedic

Siddha and Unani) for internal or external use of human being or animals and all

substances (other than food) intended to be used for or in the diagnosis treatment

mitigation or prevention of any disease or disorder in human beings or animals

including preparation applied on human body or to destroy insects Even the

central or state governments have power to make rules and appoint inspector to

control or inspect any drug or cosmetic for its standardization and safety which can

3

PHRAMA LEGAL ASPECT SANDESH BHOIR

be tested in the central or state drug laboratory The government can prohibit

manufacturing importing or selling of any drug or cosmetic Violation of law by

any person or corporate manager or owner is liable for punishment for a term

which may extend to 3-10 years and shall also be liable to fine which could be Rs

500 or Rs 10000 or both

New Amendment- 2009

Drug controller general of India (DCGI) has taken special initiation for providing

better facilities which is dedicated for controlled environment and is named as

pharma Zone It is maintained within the cargo premises at airports and seaports

for proper storage of pharmaceuticals products The Central Drugs Standard

Control Organization (CDSCO) has initiated steps to facilitate the creation of a

Pharma Zone in all major Airports and Sea Ports

Pharma Zone A separate dedicated temperature and atmosphere controlled

area to maintain the safety efficacy and quality of imported and export

drugs Pharmaceutical products in line with the product requirements and

GMP compliances with the cargo (shipment goods) premises of ports

The Medicinal amp Toilet Preparations Act 1955 with Rules 1956

This act enables levy and collection of duties of excise on medical and toilet

preparations containing alcohol opium Indian hemp or other narcotic drug or

narcotic The rules deal with manufacture warehousing licensing and interstate

movement of medicinal and toilet preparations and other narcotics drugs It lists

medicines and toilet preparations containing alcohol that are liable to be used as

ordinary alcohol beverages by consumers

4

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drug Policy 1986

Drug Policy of 1986 titled lsquoMeasures for Rationalization Quality Control and

Growth of Drugs and Pharmaceuticals Industry in Indiarsquo aims at ensuring easy

availability of essential and life savings drugs of good quality at a reasonable price

and strengthening the quality and quantity of drug production through policy

interventions Drug Policy prescribes a framework for quality control and rational

use of drugs Broadly the policy covers all facets of the pharmaceutical industry

such as quality investment pricing Research amp Development (RampD) and

licensing

The Essential Commodities Act 1955

The Essential Commodities Act 1955 ensures easy availability of essential

commodities to the consumer and protects the consumer from exploitation of

unscrupulous traders This act covers production and supply of essential

commodities for maintaining or increasing supplies and for securing their equitable

distribution and availability at fair prices Essential Commodities Act is

implemented by State Government or Union Territory Administrations under

active supervision of the Central Government

Indian Patents Act 1970

This Act covers patent rights and exclusivity (distinctiveness) of the patent holders

to manufacture sell and distribute the products in India Till now only process

patent were granted under this Act for foods medicines drugs and substances

prepared or produced by chemical processes There are several amendments in this

Act to bring it to international standards

bull The Patents (Amendment) Act 1999 [Act 17 Of 1999] With Patent Rules 1972

bull The Patents (Amendment) Act 2002

5

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull The Patents (Amendment) Bill 2003

bull The Patents (Amendment) Ordinance 2004

bull The Patents (Amendment) Act 2005

From January 2005 product patent is adopted in accordance with Trade-Related

Aspects of Intellectual Property Rights (TRIP) provisions under WTO agreement

The Drugs Price Control Order 1995

Drug Price Control Order (DPCO) 1995 is an order issued by the Government

of India under Section 3 of the Essential Commodities Act 1955 to regulate the

prices of drugs The order lists price-controlled drugs procedures for determining

drug prices method of implementing prices fixed by government and penalties for

contravening provisions among other things

DPCO is implemented by National Pharmaceutical Pricing Authority (NPPA)

Good Manufacturing Practices-

Good Manufacturing Practices (Schedule M) prescribes standards for

manufacturing facilities and processes It lists requirements that facilities such as

premises plants equipments and materials need to follow The government has

issued a notification on December 11 2001 making cGMP mandatory under

schedule M of the Indian Drugs and Cosmetics Act 1940 and finally fixed July 1

2005 as the deadline for the compliance of the norms This ensures that the drugs

manufactured in India are of world standards

6

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Pharmacy Act 1948

This Act regulates the profession of pharmacy It deals with various pharmacy

issues such as professional education and requirements for registration

Regulatory Bodies

1 The Drugs Controller of India

The Drugs Controller of India (DCI) comes under the purview of Ministry of

Health It is a major body in the pharmaceutical industry governing issues such as

product approval and standards clinical trials introduction of new drugs and

import licenses for new drugs Its major functions include

Controlling quality of imported drugs

bull Coordinating activities of State Food and Drug Administration

bull Enforcing new drug legislation

bull Granting approval to new drugs

2 State Food and Drug Administration

The State Food and Drug Administration (SFDA) monitor manufacture and sale of

pharmaceuticals in their respective states They control clinical trials carried out by

companies in their jurisdiction However approvals for setting up manufacturing

facilities and obtaining licenses to sell and stock drugs are provided by the state

governments only

7

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 4: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

be tested in the central or state drug laboratory The government can prohibit

manufacturing importing or selling of any drug or cosmetic Violation of law by

any person or corporate manager or owner is liable for punishment for a term

which may extend to 3-10 years and shall also be liable to fine which could be Rs

500 or Rs 10000 or both

New Amendment- 2009

Drug controller general of India (DCGI) has taken special initiation for providing

better facilities which is dedicated for controlled environment and is named as

pharma Zone It is maintained within the cargo premises at airports and seaports

for proper storage of pharmaceuticals products The Central Drugs Standard

Control Organization (CDSCO) has initiated steps to facilitate the creation of a

Pharma Zone in all major Airports and Sea Ports

Pharma Zone A separate dedicated temperature and atmosphere controlled

area to maintain the safety efficacy and quality of imported and export

drugs Pharmaceutical products in line with the product requirements and

GMP compliances with the cargo (shipment goods) premises of ports

The Medicinal amp Toilet Preparations Act 1955 with Rules 1956

This act enables levy and collection of duties of excise on medical and toilet

preparations containing alcohol opium Indian hemp or other narcotic drug or

narcotic The rules deal with manufacture warehousing licensing and interstate

movement of medicinal and toilet preparations and other narcotics drugs It lists

medicines and toilet preparations containing alcohol that are liable to be used as

ordinary alcohol beverages by consumers

4

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drug Policy 1986

Drug Policy of 1986 titled lsquoMeasures for Rationalization Quality Control and

Growth of Drugs and Pharmaceuticals Industry in Indiarsquo aims at ensuring easy

availability of essential and life savings drugs of good quality at a reasonable price

and strengthening the quality and quantity of drug production through policy

interventions Drug Policy prescribes a framework for quality control and rational

use of drugs Broadly the policy covers all facets of the pharmaceutical industry

such as quality investment pricing Research amp Development (RampD) and

licensing

The Essential Commodities Act 1955

The Essential Commodities Act 1955 ensures easy availability of essential

commodities to the consumer and protects the consumer from exploitation of

unscrupulous traders This act covers production and supply of essential

commodities for maintaining or increasing supplies and for securing their equitable

distribution and availability at fair prices Essential Commodities Act is

implemented by State Government or Union Territory Administrations under

active supervision of the Central Government

Indian Patents Act 1970

This Act covers patent rights and exclusivity (distinctiveness) of the patent holders

to manufacture sell and distribute the products in India Till now only process

patent were granted under this Act for foods medicines drugs and substances

prepared or produced by chemical processes There are several amendments in this

Act to bring it to international standards

bull The Patents (Amendment) Act 1999 [Act 17 Of 1999] With Patent Rules 1972

bull The Patents (Amendment) Act 2002

5

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull The Patents (Amendment) Bill 2003

bull The Patents (Amendment) Ordinance 2004

bull The Patents (Amendment) Act 2005

From January 2005 product patent is adopted in accordance with Trade-Related

Aspects of Intellectual Property Rights (TRIP) provisions under WTO agreement

The Drugs Price Control Order 1995

Drug Price Control Order (DPCO) 1995 is an order issued by the Government

of India under Section 3 of the Essential Commodities Act 1955 to regulate the

prices of drugs The order lists price-controlled drugs procedures for determining

drug prices method of implementing prices fixed by government and penalties for

contravening provisions among other things

DPCO is implemented by National Pharmaceutical Pricing Authority (NPPA)

Good Manufacturing Practices-

Good Manufacturing Practices (Schedule M) prescribes standards for

manufacturing facilities and processes It lists requirements that facilities such as

premises plants equipments and materials need to follow The government has

issued a notification on December 11 2001 making cGMP mandatory under

schedule M of the Indian Drugs and Cosmetics Act 1940 and finally fixed July 1

2005 as the deadline for the compliance of the norms This ensures that the drugs

manufactured in India are of world standards

6

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Pharmacy Act 1948

This Act regulates the profession of pharmacy It deals with various pharmacy

issues such as professional education and requirements for registration

Regulatory Bodies

1 The Drugs Controller of India

The Drugs Controller of India (DCI) comes under the purview of Ministry of

Health It is a major body in the pharmaceutical industry governing issues such as

product approval and standards clinical trials introduction of new drugs and

import licenses for new drugs Its major functions include

Controlling quality of imported drugs

bull Coordinating activities of State Food and Drug Administration

bull Enforcing new drug legislation

bull Granting approval to new drugs

2 State Food and Drug Administration

The State Food and Drug Administration (SFDA) monitor manufacture and sale of

pharmaceuticals in their respective states They control clinical trials carried out by

companies in their jurisdiction However approvals for setting up manufacturing

facilities and obtaining licenses to sell and stock drugs are provided by the state

governments only

7

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 5: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Drug Policy 1986

Drug Policy of 1986 titled lsquoMeasures for Rationalization Quality Control and

Growth of Drugs and Pharmaceuticals Industry in Indiarsquo aims at ensuring easy

availability of essential and life savings drugs of good quality at a reasonable price

and strengthening the quality and quantity of drug production through policy

interventions Drug Policy prescribes a framework for quality control and rational

use of drugs Broadly the policy covers all facets of the pharmaceutical industry

such as quality investment pricing Research amp Development (RampD) and

licensing

The Essential Commodities Act 1955

The Essential Commodities Act 1955 ensures easy availability of essential

commodities to the consumer and protects the consumer from exploitation of

unscrupulous traders This act covers production and supply of essential

commodities for maintaining or increasing supplies and for securing their equitable

distribution and availability at fair prices Essential Commodities Act is

implemented by State Government or Union Territory Administrations under

active supervision of the Central Government

Indian Patents Act 1970

This Act covers patent rights and exclusivity (distinctiveness) of the patent holders

to manufacture sell and distribute the products in India Till now only process

patent were granted under this Act for foods medicines drugs and substances

prepared or produced by chemical processes There are several amendments in this

Act to bring it to international standards

bull The Patents (Amendment) Act 1999 [Act 17 Of 1999] With Patent Rules 1972

bull The Patents (Amendment) Act 2002

5

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull The Patents (Amendment) Bill 2003

bull The Patents (Amendment) Ordinance 2004

bull The Patents (Amendment) Act 2005

From January 2005 product patent is adopted in accordance with Trade-Related

Aspects of Intellectual Property Rights (TRIP) provisions under WTO agreement

The Drugs Price Control Order 1995

Drug Price Control Order (DPCO) 1995 is an order issued by the Government

of India under Section 3 of the Essential Commodities Act 1955 to regulate the

prices of drugs The order lists price-controlled drugs procedures for determining

drug prices method of implementing prices fixed by government and penalties for

contravening provisions among other things

DPCO is implemented by National Pharmaceutical Pricing Authority (NPPA)

Good Manufacturing Practices-

Good Manufacturing Practices (Schedule M) prescribes standards for

manufacturing facilities and processes It lists requirements that facilities such as

premises plants equipments and materials need to follow The government has

issued a notification on December 11 2001 making cGMP mandatory under

schedule M of the Indian Drugs and Cosmetics Act 1940 and finally fixed July 1

2005 as the deadline for the compliance of the norms This ensures that the drugs

manufactured in India are of world standards

6

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Pharmacy Act 1948

This Act regulates the profession of pharmacy It deals with various pharmacy

issues such as professional education and requirements for registration

Regulatory Bodies

1 The Drugs Controller of India

The Drugs Controller of India (DCI) comes under the purview of Ministry of

Health It is a major body in the pharmaceutical industry governing issues such as

product approval and standards clinical trials introduction of new drugs and

import licenses for new drugs Its major functions include

Controlling quality of imported drugs

bull Coordinating activities of State Food and Drug Administration

bull Enforcing new drug legislation

bull Granting approval to new drugs

2 State Food and Drug Administration

The State Food and Drug Administration (SFDA) monitor manufacture and sale of

pharmaceuticals in their respective states They control clinical trials carried out by

companies in their jurisdiction However approvals for setting up manufacturing

facilities and obtaining licenses to sell and stock drugs are provided by the state

governments only

7

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

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The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 6: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull The Patents (Amendment) Bill 2003

bull The Patents (Amendment) Ordinance 2004

bull The Patents (Amendment) Act 2005

From January 2005 product patent is adopted in accordance with Trade-Related

Aspects of Intellectual Property Rights (TRIP) provisions under WTO agreement

The Drugs Price Control Order 1995

Drug Price Control Order (DPCO) 1995 is an order issued by the Government

of India under Section 3 of the Essential Commodities Act 1955 to regulate the

prices of drugs The order lists price-controlled drugs procedures for determining

drug prices method of implementing prices fixed by government and penalties for

contravening provisions among other things

DPCO is implemented by National Pharmaceutical Pricing Authority (NPPA)

Good Manufacturing Practices-

Good Manufacturing Practices (Schedule M) prescribes standards for

manufacturing facilities and processes It lists requirements that facilities such as

premises plants equipments and materials need to follow The government has

issued a notification on December 11 2001 making cGMP mandatory under

schedule M of the Indian Drugs and Cosmetics Act 1940 and finally fixed July 1

2005 as the deadline for the compliance of the norms This ensures that the drugs

manufactured in India are of world standards

6

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Pharmacy Act 1948

This Act regulates the profession of pharmacy It deals with various pharmacy

issues such as professional education and requirements for registration

Regulatory Bodies

1 The Drugs Controller of India

The Drugs Controller of India (DCI) comes under the purview of Ministry of

Health It is a major body in the pharmaceutical industry governing issues such as

product approval and standards clinical trials introduction of new drugs and

import licenses for new drugs Its major functions include

Controlling quality of imported drugs

bull Coordinating activities of State Food and Drug Administration

bull Enforcing new drug legislation

bull Granting approval to new drugs

2 State Food and Drug Administration

The State Food and Drug Administration (SFDA) monitor manufacture and sale of

pharmaceuticals in their respective states They control clinical trials carried out by

companies in their jurisdiction However approvals for setting up manufacturing

facilities and obtaining licenses to sell and stock drugs are provided by the state

governments only

7

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 7: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

The Pharmacy Act 1948

This Act regulates the profession of pharmacy It deals with various pharmacy

issues such as professional education and requirements for registration

Regulatory Bodies

1 The Drugs Controller of India

The Drugs Controller of India (DCI) comes under the purview of Ministry of

Health It is a major body in the pharmaceutical industry governing issues such as

product approval and standards clinical trials introduction of new drugs and

import licenses for new drugs Its major functions include

Controlling quality of imported drugs

bull Coordinating activities of State Food and Drug Administration

bull Enforcing new drug legislation

bull Granting approval to new drugs

2 State Food and Drug Administration

The State Food and Drug Administration (SFDA) monitor manufacture and sale of

pharmaceuticals in their respective states They control clinical trials carried out by

companies in their jurisdiction However approvals for setting up manufacturing

facilities and obtaining licenses to sell and stock drugs are provided by the state

governments only

7

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 8: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

3 National Pharmaceutical Pricing Authority

National Pharmaceutical Pricing Authority (NPPA) was established on August 29

1997 as an independent body following the recommendations of Cabinet

Committee after the review of Drug Policy in September 1994 It has been

entrusted with the task of fixationrevision of prices of bulk drugs and

formulations enforcement of provisions of the DPCO and monitoring the prices of

controlled and decontrolled drugs in the country

The following are the functions of the NPPA

1048766 It deals with all legal matters arising out of the decisions of the authority of

DPCO

1048766 It mainly monitors the availability of drugs identify shortages if any and to

take remedial steps

1048766 It mainly collects maintains data on production exports and imports market

share of individual companies profitability of companies etc for bulk drugs and

formulations

1048766 It undertakes and or sponsor relevant studies in respect of pricing of drugs

Pharmaceuticals

1048766 It recruits appoints the officers and other staff members of the authority as per

rules and procedures laid down by the government

1048766 To give advice to the central government on changes revisions in the drug

policy

1048766 To render assistance to the central government in the parliamentary matters

relating to the drug pricing

8

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 9: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

4 Department of Chemicals and Petrochemicals

Department of Chemicals and Petrochemicals under the Ministry of Chemicals and

Fertilisers monitor regulatory bodies in accordance with policies and legislation

SFDAs are responsible for enforcement of the policies at the state level The

department of chemicals and petrochemicals has the final word on all issues related

pharmaceutical industry

9

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 10: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

The structure of the department as given in figure 81 is mainly headed by the

Ministry of Chemical and Fertilisers followed by the Minister of state Under the

Minister of the State there are four members which include two Joint Secretaries

and one Economy Advisor and one Deputy Director General In between the State

Minister and Joint Secretary there is an additional Secretary for financial

Foreign Investment promotion board

Foreign Investment Promotion Board (FIPB) promotes and coordinates foreign

investment under the guidance of Ministry of Industry It receives investment and

collaboration proposals and based on the prevailing government policy either

approves or rejects them A rejection does no disqualify an applicant from applying

again Proposals up to Rs 6 billion need the approval of Industry Minister while

proposals above that limit need the approval of the Cabinet Committee on Foreign

Investment

FIPB provides a single point clearance for foreign investments with guidance on

products licensing and collaboration terms While granting approval FIPB may

impose restrictions on certain activities or prescribe lock-in period for foreign

equity The documents that need to be enclosed with application process include

the annual report corporate profile and product profile Fifteen copies of the

application need to be submitted to FIPB The application is circulated among

ministries that are related to the proposal and their concerns are noted before a

decision is taken

10

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 11: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Central Drugs Standard Control Organization

The Central Drugs Standard Control Organization (CDSCO) has four zonal offices

at Mumbai Kolkata Chennai and Ghaziabad The zonal offices work in close

collaboration with the State Drug Control Administration and assist them in

securing uniform enforcement of the Drug Act and other connected legislations on

all India basis As per the Drug and Cosmetic Act the state government is

responsible for the regulation of the manufacture sale and distribution of drugs

while the central government is responsible for the approval of new drugs clinical

trials in the country The functions of the drug control administration undertaken

by the both central and state government are given below Functions of Central and

State Government Statutory Functions of the Central Government

bull Laying down standards of drugs cosmetics diagnostics and devices

bull Laying down regulatory measures amendments to Acts and Rules

bull To regulate market authorisation of new drugs

To regulate clinical research in India

bull To approve licenses to manufacture certain categories of drugs as Central Licence

Approving Authority ie for blood banks large volume parenterals and vaccines

amp sera

bull To regulate the standards of imported drugs

bull Work relating to the Drugs Technical Advisory Board (DTAB) and Drugs

Consultative Committee (DCC)

bull Testing of drugs by Central Drugs Labs

bull Publication of Indian Pharmacopoeia

Other functions of the Central Government

Coordinating the activities of the State Drugs Control Organizations to achieve

uniform administration of the Act and policy guidance

11

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 12: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Guidance on technical matters

bull Participation in the WHO GMP certification scheme

bull Monitoring adverse drug reactions (ADR)

bull Conducting training programmes for regulatory officials and govt analysts

bull Distribution of quotas of narcotic drugs for use in medicinal formulations

bull Screening of drug formulations available in Indian market

bull EvaluationScreening of applications for granting No Objection Certificates for

export of unapprovedbanned drugs

Statuary Functions of the State Government

Licensing of drug manufacturing and sales establishments

bull Licensing of drug testing laboratories

bull Approval of drug formulations for manufacture

bull Monitoring of quality of drugs amp cosmetics manufactured by respective state

units and those marketed in the state

bull Investigation and prosecution in respect of contravention of legal provisions

bull Pre- and post- licensing inspection

bull Recall of sub-standard drugs

Central Drug Authority

Presently Indian regulatory environment is in the evolution In January 2007 the

central government had approved for the formation of the Central Drug Authority

(CDA) The organizational structure of CDA is as similar to the US Food and Drug

Administration (USFDA) It is a very strong independent empowered and well

equipped with professional managed body CDA facilitate in upgradation of the

12

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 13: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

national drug regulator uniformity of licensing and speed up the process with

enforcement and improvement of drug regulations

The administration structure of the CDA consists of 3 Joint Drug Controllers 2

Deputy Drug Controllers 6 Assistant Drug Controllers 50 Drug Inspectors 5

Technical Experts 1 Administration Officer and 1 Accounts Officer

The following are the responsibilities of Central Drug Authority

bull New drug approvals and clinical trials

bull Regulatory affairs and environment

Price Controls

Drug Price Control Order (DPCO) was first introduced in 1970 in the country

with the aim of keeping prices of essential drugs low Later it went through a series

of revisions in 1979 1987 and 1995 Thanks to DPCO drug prices in India are

one of the lowest in the country

DPCO has been blamed for among other things depressing profits of companies

and together with inadequate patent protection suppressing foreign direct

investment Over a period of time government has been relaxing price controls

The number of drugs under DPCO control has come down from 370 in 1979 to 143

in 1987 to 74 in 2005 As per the proposed pharmaceutical policy there is a plan to

bringing 354 essential drugs under price control in 2008 by NPPA

According to DPCO 1995 bulk drug prices are fixed by NPPA to ensure

availability at a fair price from different manufacturers These prices are fixed from

time to time by notification+ in the official gazette All formulations containing

these bulk drugs either in a single or combination form fall under the price control

category New Drug Policy 2002 however brings bulk drugs or formulations

under price control only if they meet the following criteria

13

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 14: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

If a manufacturer has an annual turnover of Rs 250 million and a single firm has a

market share of 50 or above

bull It has a turnover of Rs 100ndash250 million and a single formulator has a market

share of 90 or more Earlier these limits were lower A turnover of Rs 40 million

instead of Rs 250 millon in case of a formulator having a market share of 50 or

above A turnover of Rs 10 million instead of Rs 100ndash250 millon and if a

formulator had 90 share of the market or above these drugs are controlled drugs

Now only 74 out of 500 commonly used bulk drugs are under statutory

price control Drugs where there is sufficient market competition ie where there

are at least five bulk drug producers and at least 10 formulators and where none

has more than a 40 share of retail trade price control is not mandated by the

government Such drugs falling outside government price control and are called

decontrolled drugs However genetically engineered drugs produced by

recombinant DNA technology and specific cellissue targeted drug formulations

will not be under price control for five years from the date of manufacture in India

Pricing of Scheduled Bulk Drugs

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-tax

return of 14 on net worth or a 22 return on capital employed (fixed assets plus

working capital)

The time frame for the granting price approvals for scheduled bulk drugs is for

four months from the date of the receipt of the complete prescribed information

For a new plant an internal rate of return based on long term marginal costing is

allowed For a bulk drug produced from basic stage a post-tax return of 18 on

net worth or a return of 26 of capital employed is allowed The retail prices of

scheduled drugs manufactured in India are calculated based on basis of following

pricing formula

14

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 15: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Retail Price = (Material cost + Conversion Cost + Packing Material Cost +

Packing Charges) x (1 + Maximum Allowable Post-manufacturing

Expenses100) + Excise Duty

Pricing of Scheduled Formulations Imported into India

The landed cost of the goods is considered adding cost with inward freight and

clearing charges and import duty Additionally 50 more is added to cover

distribution cost including trade margins and profit to arrive at the retail price

Sales taxes if any are allowed to add separately The price to the retailer must be

approved retail price less 16 The margin to the wholesaler should be 8 There

is no restriction on the price overseas manufacturer charges to the importer on

which the price will be based

Pricing Regulations

Price Approval No imported scheduled formulation can be sold or disposed

without prior approval of price from NPPA Marketing of new pack new

formulation or new dosage form without obtaining prior approval of its price from

NPPA is not allowed When a manufacturer introduces a formulation similar to an

existing one in a new pack the price is reworked based on the norms that the

NPPA may announce In other cases the importer or manufacturer has to file

details justifying the price in the appropriate form and has to receive NPPA

approval

15

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 16: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

The approved prices may be same or lower than applied A similar procedure

applies to price revisions

Price Fixing NPPA is given power to fix ceiling price of scheduled formulations

based on the cost structure or efficiency of the bulk drug manufacturers The

ceiling price can be reconsidered and changed by the NPPA on its own or on

application made by a manufacturer

While fixing the price the pre-tax return of the manufacturer or importer should

not exceed the pre-tax return specified in the third schedule to the DPCO The pre-

tax return rates vary as per case from 8 to 13 New drug which has not been

produced elsewhere if developed through indigenous RampD would be outside

price control for 10 years from the date of commercial production in favour of

company Filing of Price Lists In case of scheduled formulations manufacturer

must file a price list of all the prices fixed with the State Drug Controllers dealers

and government along with NPPA official price notification reference The price

list should be prominently displayed by dealers in their premises Also in case of

non-scheduled formulation the circulation of price lists is mandatory

Price Labelling Rules state all packages of formulations (the outer container) must

bear the retail price (whether fixed by NPPA or not) with the words ldquoretail price

not to exceedrdquo preceding the price and the words ldquolocal taxes extrardquo after the price

Intellectual Property Rights

Indian Patents and Designs Act were passed in 1911 and several amendments were

made to this act between 1911 and 1970 and then finally The Patent Act 1970

was passed India is a signatory to the Paris Convention and the Patent Cooperation

Treaty 1970 The Patent Act 1970 gives the holder exclusive rights to

manufacture sell and distribute the product in India For foods medicines drugs

16

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

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The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 17: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

and substances prepared or produced by chemical processes only process patents

are granted

Interestingly India had a product patent regime for all inventions under Patents

and Designs Act 1911 However in 1970 Indian government introduced new

Patents Act excluding pharmaceuticals and agrochemical products from product

patentsmdashproviding the opportunity for Indian players to reverse engineer drugs

and discouraging multinationals from playing a greater role in Indian market Now

any manufacturer can produce a molecule under patent protection in other

countries through a different process and sell it in the Indian market without any

legal challenge by the patent holder The Act provided 5 to 7 years of process

protection for pharmaceuticals The party however ended in January 2005 with

Indian market embracing product patents

The third amendment to the Patents Act 1970 was introduced through the Patents

(Amendment) Ordinance 2004 wef January 1 2005 This ordinance was later

replaced by the Patents (Amendment) Act 2005 (Act 15 of 2005) on April 4 2005

which was brought into force from January 1 2005 Salient features of this

amendment are

bull Extension of product patents to all fields of technology including food drugs

chemicals and micro organisms

bull Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Introduction of a provision for enabling grant of compulsory licence for export of

medicines to countries which have insufficient or no manufacturing capacity to

meet emergent public health situations

bull Modification in the provisions relating to opposition procedures with a view to

streamlining the system by having both pre-grant and post-grant opposition in the

17

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 18: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Patent Office

bull Strengthening the provisions relating to national security to guard against

patenting abroad of dual use technologies

bull Rationalization of provisions relating to time-lines with a view to introducing

flexibility and reducing the processing time for patent application

The Indian Patents Act 1970 has undergone a thorough recast following various

international treaties including the TRIPS Agreement The life of a patent has now

been increased to 20 years uniformly India is a member of the following

international organizations and treaties in respect of patents

loz World Trade Organization (WTO)

loz Convention establishing World Intellectual Property Organization (WIPO)

loz Paris Convention for the Protection of Industrial Property

loz Patent Co-operation Treaty (PCT)

loz Budapest Treaty

Legal Procedure- In India patents need to be registered with Controller General of

Patents Designs and Trade Marks This application is filed with a provisional

specification The complete specification should be filed in the next 12 to 15

months The patent application and specifications are studied by the examiners

Usually it takes 18 months to examine the application If the specification is

accepted after examination the notice of patent is advertised in the governmentrsquos

official gazette Three monthrsquos notice time is given to opposition to file objections

The patent applicant in turn needs to address objections within a month If

objections are successfully dealt with then the patent is sealed A patent date is

given on the date when the complete specification is filed For items of food or

medicine the process patent is granted for five years from the date of sealing or

18

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 19: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

seven years from the date of the patent whichever is earlier Patents can be legally

licensed to other parties for use in India or any part of the country

From 2005 onwards the patents of outside companies are protected through EMR

in India EMR is not given for items based on Indian system of medicine

(Ayurvedic or Unani) or if the items are already in the public domain EMR is

granted to an item which is already approved to be sold and distributed in a

convention country (A convention country is the country with which the Indian

Government has a reciprocal arrangement for dealing with patent applications)

EMR is also granted if the invention has been made on Indian ground and a

process patent has been applied for and granted on or after January 1 1995

Compulsory Licensing and Revocation of EMR

The provision of compulsory license states that two years from the date of approval

of EMR any one can apply to the controller alleging the unmatched requirement of

the public with regard to that item or unavailability at a reasonable price and may

request for a compulsory license to sell or distribute that item The controller will

order the EMR holder to grant a license to the applicant for sale in case the

application is justified The controller considers the time that passed since the date

of EMR approval the ability of the applicant to sell or distribute to the public and

the capacity of the applicant to provide capital for the operation

The controller also has powers to revoke an EMR any time in the public interest

The central government may sell or distribute the item reserved for EMR by itself

19

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 20: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

or through any other person (other than EMR holder) in public interest and restrict

selling price on recommendations of an approved authority

Permission for residents to apply for patents outside India

After amendment in law Indian residents are permitted to apply for patent abroad

without permission of the controller Earlier written permission of the controller

was necessary

Trademarks

Trade and Merchandise Marks Act 1958 regulates trademark issues in India

Registered trademarks are valid for a period of seven years and the possibility of a

renewal exists Now only goods and not services are eligible for registration For

any item trademarks should not be objectionable from religious or social point of

view The trademarks should not be registered earlier or applied to be registered in

India The trademark can be registered even if the item is not produced or sold in

India

Legal procedure Applications are filed with Trade Mark Registry Office In the

first step of application a search application is filed to determine whether proposed

registered trademark is already registered by someone else or whether an

application for the same is pending for approval Thereafter if the search proves

trademark as identical the applicant is then given a registration number in few

months time and then the examination process begins which is specified to be done

with in a year by law Once the trademark is cleared by the examiner notice

inviting objections is to be published in the Trademark Journal a government

publication The law gives 3 to 4 months time to consider the objections After

objections the applicant has two months to reply failing which it will be assumed

20

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 21: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

that he has abandoned the application Then after six months the certificate of

registration is received However when registration is granted the effective date of

start is the date of the original application With regard to convention countries a

person of that country is allowed to apply for registration within six months of its

registration in its home country Heshe would be deemed to have been registered

in India as of the date of hisher home country application

Manufacturing

Manufacturing License License is a must for any drug to be manufactured in

India Manufacturing is considered to be any process or part of a process for

making altering ornamenting finishing packing labelling breaking up or

otherwise treating or adopting any drug with an intention to sale or distribution It

does not include dispensing or packing at the retail sale level A license is required

for each such location at which drugs are to be manufactured and also for each

drug to be manufactured License need to be renewed periodically after validity

Drug and Cosmetic Act gives outline of the Good Manufacturing Practices (GMP)

and requirements of premises plant and machinery The items covered under the

Act are locations and surroundings buildings water supply disposal of waste

requirements for sterile products manufacturing areas (areas access and surfaces)

working space and storage areas health clothing and sanitation of workers

medical services and equipment standards It also includes rules for maintenance

of raw materials and records master formula records and batch manufacturing

records Manufacturing operations and controls are also specified

including general controls precautions against contamination and mix-up

reprocessing and recovery product containers and closures labels and other

printed materials Distribution records and records of complaints and adverse

21

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 22: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

reactions are also part of it Quality control system requirements include functions

of the quality control department to coordinate

Drug and Cosmetic Act also specifies other conditions for the grant or renewal of a

license

bull Competent technical staff in

pharmacypharmaceuticalchemistrysciencechemical

engineeringchemical technologyequivalent foreign qualification with experience

in drug manufacturing experience

bull Requirements of the testing laboratory and qualifications of the head of the

testing unit

Industrial Licensing

For certain drugs manufacturing license from central government in accordance

with Drug Policy and Industrial Policy is required The number of drugs in this

category has gone down recently and only drugs that involve use of recombinant

DNA technology using nucleic acids as the active principles and formulations are

in this category The applicant in these cases has to apply for an industrial license

A Letter of Intent (LOI) or in-principle approval is granted if the application is

satisfactory and the applicant needs to set up the factory within a specified period

The LOI is converted into an Industrial License (IL) once the factory is established

to the satisfaction of the authorities IL specifies various conditions like the annual

capacity up to which the unit can manufacture the licensed item All other

manufacturing units need to file an Industrial Entrepreneurrsquos Memorandum (IEM)

with details of the proposed items to be manufactured capacity location source of

technology raw material requirement the process description

22

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 23: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

and other details

Additional ApprovalsRegistration

Other additional approvals or requisites for manufacturing include

bull License for import of capital goods other than those freely importable under the

Import Policy

bull License for import of raw materials other than those freely importable under the

Import Policy

bull Registration under Factories Act

bull Lease or purchase of land

bull Clearance from Pollution Control Board

bull Registration under Labour Laws

bull Building permissions

bull Securing supply of electricity and power

bull Excise duty registration

bull Sales tax registration

bull Explosives license

bull License to store petroleum products

bull Registration under Boilers Act

bull Registration with the State Director of Industries

bull Registration under Standards of Weights and Measures Act

All these formalities are to be complied with at the state or local government level

where the factory is located except import licensing formality

Imports

23

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 24: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Imports into India are governed by Foreign Trade (Development amp Regulation)

Act 1992

Under this Act imports of all goods are free except for the items regulated by the

policy or any other law for the time being in force Certain pharmaceuticals

products are placed on the restricted list such as tallow fat animal rennet wild

animals and unprocessed ivory These cannot be imported on grounds of security

health and environmental protection or because they might be reserved for

production by small scale industries Registration with Regional Licensing

Authority is a pre-requisite for import of goods The customs will not allow release

goods unless the importer has obtained IE Code Number from Regional Licensing

Authority

Imports of Capital Goods and Raw Materials

Under Open General License most capital goods raw materials and spare parts are

generally permissible on payment of the appropriate import duty with exception for

certain specific items where license is required Director General of Foreign Trade

is the licensing authority under the Ministry of Commerce A drug to be imported

requires an import license with permission of the DCI There are no quantitative

restrictions on import of capital goods and intermediates Import of second-hand

capital goods is permitted provided they have a minimum residual life of five

years

Pharmaceutical Imports

Most pharmaceuticals can be freely imported into then country under foreign trade

law excepting certain drugs that need a license from Drug Controller of India

Those products are allowed to be imported subject to expiry conditions

24

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 25: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

An Indian agent should be appointed by the foreign manufacturer to apply for the

import license That agent has to be a registered entity in India The import license

is renewed on a yearly basis expiring on December 31st every year Importer needs

a license to stock and sell drugs If the importer does repacking or labelling in

India he needs a drug manufacturing license A single license may be sufficient for

all drugs imported from one manufacturer provided that the drugs are

manufactured at one or more than one factory functioning conjointly as a single

unit otherwise separate license is required for drugs manufactured by each unit

Before granting import license to any new drug DCI approval for sale or clinical

trials is required The foreign manufacturer must mention the Indian agent as its

authorised agent in the license application The application should also mention the

date on which the manufacturer has started making drugs at the relevant factory

premises The manufacturer should undertake to inform DCI of any change in

location of manufacturing and comply with the Indian standards of drugs and other

conditions of license

New Drug Approval Process The Drugs and Cosmetics Act 1940 defines a drug

as ldquoAll medicines for internal or external use of human beings or animals and all

substances intended to be used for or in the diagnosis treatment mitigation or

prevention of any disease or disorder in human beings or animals including

preparations applied on the human body for the purpose of repelling insects like

mosquitoes Such substances (other than food) intended to affect the structure Or

any function of the human body or intended to be used for the destruction of

vermin or insects which cause disease in human beings or animals as may be

specified from time to time by the Central Government in the Official Gazetterdquo

According to this Act definition of drug also includes substances used as any

component of a drug (including empty gelatine capsules) and such medical devices

25

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 26: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

for treatment mitigation and diagnosis of disease or disorder in human beings or

animals

Drug Approval Procedure

An approval from DCI is necessary to import market or manufacture a new drug

Any new drug that is not used in India previously or is not in use for less than four

years globally must get approval for import or manufacture in India by DCI DCI is

also responsible for approval of licenses of specified categories of drugs such as

blood and blood products IV fluids vaccine and sera The application for

permission to import or manufacture should be accompanied by the following

items

bull Description of drug and therapeutic class

bull Clinical and pharmaceutical information

bull Animal pharmacology

bull Animal toxicology

bull Humanclinical pharmacology (Phase I)

bull Exploratory clinical trials (Phase II)

Confirmatory clinical trials (Phase III)

bull Special studies (if conducted)

bull Regulatory status in other countries

bull Marketing information

If the drug is already approved in other countries then some of the above

mentioned items are not required In case a drug is already approved and marketed

abroad then only Phase III trials may be required in India other trials details are

exempted Again the phase III trials should be conducted on a minimum of 100

patients across 3ndash4 locations in the country There are cases where DCI agreed to

dispense with the need for local clinical trials depending on the public interest

26

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 27: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Similarly submission of data related to animal toxicology reproduction studies

teratogenic studies prenatal studies mutagencity and carcinogenicity may be

relaxed or modified if the drugs are in use in other country for several years (more

than 4 years) and there is adequate evidence regarding the safety of the drug DCI

permission is required to import samples for clinical trials and to carry out the

clinical trials in India for any new drug If the new drug is a fixed dose

combination (FDC) of an already approved active ingredients and the additions or

combinations are merely for convenience and the ingredients are unlikely to have

any significant interaction of a pharmacokinetic nature then no additional animal

or human data are generally required In such cases marketing permission may be

granted if the FDC has an acceptable rationale If first time combination is likely to

have significant interaction of a pharmacodynamic or pharmacokinetic nature then

it is treated as a new drug

If the new drug is a fixed dose combination (FDC) of an already approved active

ingredients and the additions or combinations are merely for convenience and the

ingredients are unlikely to have any significant interaction of a pharmacokinetic

nature then no additional animal or human data are generally required In such

cases marketing permission may be granted if the FDC has an acceptable

rationale If first time combination is likely to have significant interaction of a

pharmacodynamic or pharmacokinetic nature then it is treated as a new drug

Though the approval time depends on the requirement of clinical trials it generally

takes three months to get approval after submission of the final dossier In fact the

actual time taken to get approval depends on effectiveness of follow-up with

authorities by local agent

Product Standards

27

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 28: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

No drug can be imported manufactured stocked sold or distributed unless it

meets quality and other standards laid down by Drug Controller Authority (DCA)

According to standards set by DCA the product should comply with the

ingredients displayed in the prescribed manner on the label or container and such

other standards as may be prescribed It ensures that the drug is not misbranded or

adulterated or spurious General standards are set for all patent or proprietary

medicines tablets capsules liquid orals injections and ointments In a

proprietary vitamin drug the percentage of Active Pharmaceutical Ingredient

(API) should not be less than 90 of the labelled contents (gt100 not a problem)

But it is except antibiotics and enzymes where it should lie between 90 and 110

of the labelled contents

If the drug is already in the Indian pharmacopoeia (IP) the drug must meet

standards of identity purity and strength mentioned in the current edition of the IP

or previous IP

Standards are also prescribed for other types of drugs such as sera antigens and

other biological products separately According to the Act drugs should not be

misbranded adulterated or spurious A drug is considered to be misbranded if it is

so coloured coated powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is or it is not labelled

in the prescribed manner or if its label or container or anything accompanying the

drug bears any statement design or device which makes any false claim for the

drug or which is false or misleading in any particular

Adulterated drugs are those that contain any filthy putrid or decomposed

substance or which has been prepared or packed under unsanitary conditions or

contaminated with filth or contains any toxic or poisonous substance or contains

colours other than those permitted or if it has been mixed with any substance so as

to reduce its quality or strength According to Drug and Cosmetic Rules permitted

28

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 29: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

colours are certain natural colours artificial colours coal tar colours and

aluminium or calcium salts (lakes) of the permitted water soluble colours

The power to prohibit import manufacture or sale of any drug including those that

are deemed as ldquoirrational drug combinationsrdquo vests with the central government

Labelling Appropriate labelling is essential for sale of drugs in India The law

demands that the label should be printed in indelible ink containing trade name and

generic name of the drug the net contents in terms of weight measure volume and

likewise The contents of active ingredients must follow the prescribed form and

manner The name and address of the manufacturer along with the address of the

premises where the drug has been manufactured is a must The batch number and

date of manufacture must be provided as well as the drug license number under

which it is manufactured (if manufactured in India)

In the case of certain products including vitamin products the label must bear the

date of manufacture and the date of expiry of potency fixed by the manufacturer

and the import license number if the product is imported According to Standards

of Weights and Measures Act 1976 (SWM) and the Packaged Commodities Rules

1977 (PCR) the label of imported package should have the name and address of

the importer and the retail price Under the SWM the size and contents are to be

on the principal display panel of each container Medical prescription is a must to

sell certain drugs and these have to be labelled accordingly along with the

schedule of the DCA under which they are classified Certain other drugs have

to be labelled as ldquoto be used under medical supervisionrdquo

Tariff Structure The Customs Act regulates levying of tariffs on imports and

exports and frames the rules for customs valuation The Customs Tariff Act

specifies the tariffs rates and provides for the imposition of anti-dumping and

29

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 30: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

countervailing duties Most tariffs are ad valorem tax (it is a tax based on the value

of real estate and personal property) in India except few items Tariff rates excise

duties regulatory duties countervailing duties and the like are revised in each

annual budget In the recent budget (2008-09) the great relief has been provided

for the both export and import of life saving drugs by reducing the export duty to

8 and 5 reduction in customs duty for imported Life Saving Drugs The

pharma biotech industry has many positive changes which reduced Cenvat to

824 125 weight reduction on outsourced RampD and reduction in custom duty

on raw materials for ELISA kits to 1872 and specific vaccines and

Biotherapeutics to 936 The tariff has not changed in bulk drugs whereas in

formulations excise duty has changed from 165 to 82 as in table 82

Local Manufacturing Duty

If any product is manufactured in India then the tariff structure would resemble

the example set out in Table 83

30

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 31: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Sales Tax

Sales tax is levied on both locally manufactured drugs life saving drugs and RampD

outsourced ones Sales tax is levied at the point of sales on the selling price to

customer The rate of sales tax is same for both Indian and imported items The

budget (2008-09) has raised the allocation of funds for the healthcare sector by

15 to Rs 165 billion which will have positive impact on demand for healthcare

products The 125 weighted average tax deduction for outsourced RampD expenses

is a good development for research-oriented companies The reduction in customs

duty on some life-saving drugs and bulk drugs from 10 to 5 as well as the

reduction of excise duty on pharmaceutical products from 16 to 8 for

formulations and the total exemption of excise duty on specific life-saving drugs

will bring gains to this sector

Value Added Tax (VAT) was introduced in India on April 1 2005 is hailed to

become a prominent initiative in the history of indirect tax reforms VAT is a tax

31

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 32: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

leived on the value added to a product at each stage of its production from raw

material to finished product

VAT is presently in effect in more than 115 countries It is an effective manner of

broadening the tax base and mobilizing large revenues in an equitable manner

Marketing and Distribution- Licensing of sales outlets and stock holding

Sales outlets or pharmacies or stockholding point of drug must be licensed by the

state government If drugs are soldstocked for sale at more than one place a

separate license is required for each such location The issued license remains valid

till December 31st of a calendar year after which it needs to be renewed The

government grants licenses based on the following conditions

bull Specified minimum area and equipment

bull Compounding of drugs on the premises by a registered pharmacist

bull Sales of any drugs on prescription should be under the supervision of a registered

pharmacist (qualification and experience profile are specified) and a prescription

register (for compounded drugs) or cash or credit memo book (for other medicines)

should be Maintained

bull Prescription register or sale memo should contain the specified particulars of the

sale including batch number of manufacture in case of prescription drugs

bull No prescription drug is to be sold without a prescription Restricted licenses are

also granted to outlets that do not need the services of a registered pharmacist and

where no compounding takes place The outlets are allowed to use titles such as

Pharmacy or Pharmacist only if they use the services of a registered pharmacist

and maintain a pharmacy for compounding In case of drug wholesaler and retail

outlets registrations are required under the following Acts

bull The Shops and Establishment Act

bull The Standard of Weights and Measures Act

32

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 33: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

bull Labour Legislation

bull Sales Tax

Prescription Drugs DCA has clearly specified certain drugs to be sold only under

prescription So it is implied that the rest can be sold without prescription as Over

the Counter (OTC) But many prescription drugs are sold without prescription

which is a common practice as people also take medical advice from pharmacists

Advertisement and Promotion Prescription drugs are prohibited to advertise in the

general media like OTC drugs Advertising options are limited to trade journals

such as chemist guides directories and medical magazines Sponsorship is also

permitted Conducting conferences in India as well as abroad in the presence of

several doctors at company cost is a common practice The conferences make

doctors aware about the products by distributing various informative items along

with complimentary items Making doctors aware of products through medical

representatives is also a common practice

Regulations of Advertising Prescription drugs apart little advertising restrictions

apply to other drugs But the advertisements should not claim anything

unjustifiable and in such a case complaints can be made to the Advertising

Standards Council of India (ASCI) a self regulatory body ASCI may ask the

advertiser to withdraw or modify the advertisement if complaint is genuine

Packing and Labelling

33

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 34: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

Major legislation affecting packaging and labelling are SWM and PCR General

requirements of SWMPCR are that the package should disclose necessary

information in a proper wayMajor provisions include

bull Details such as manufacturerrsquos name date of manufacture commodity contents

weight and price should be printed on all packs

bull Display panel should be as per the rules (size size of letters etc)

bull Declaration of quantity as per the norms and in the prescribed manner

bull The declaration of units or weight measures or numbers as per norms

bull Specified commodities should be packed in prescribed pack size and within the

prescribed margin of error

Distribution In India there is no national level distribution channel Therefore

producers or importers build a network of their own comprising carrying and

forward agents (CampF) and wholesalers The first step in distribution is from

manufacturing site to the national depot which is run by either company or CampF

agents CampF agents operate depots on the companyrsquos behalf but employ their own

staff The goods are dispatched from companyrsquos location to the depot From CampF

depot goods are sent to wholesalerrsquos point The wholesaler directly pays the

company with CampF agent getting a percentage Wholesalers sell the goods to

various retailersmdashwho sell them to consumers A wholesaler receives commission

between 8ndash10 of the sale price The companyrsquos sales representatives coordinate

with both CampF agent and wholesaler to expedite sales and dispatches

Brands Brand names should not be used by any other party if already existing or

already registered by any other player There is no restriction on the use of foreign

brand names on products sold within the country whether locally manufactured or

otherwise The brand names may even be licensed to an Indian party The common

34

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 35: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

practice for brand names is to use as part of an overall foreign collaboration though

there is no restriction on having trademark agreements alone

Restrictive Trade Practices Monopolies and Restrictive Trade Practices Act 1969

(MRTP) checks monopoly of industrial groups and prevents restrictive trade

practices It deals with restrictive trade practices such as price fixing dealership

agreements with restrictive clauses unfair promotions misleading advertisements

etc

The main regulatory body in India is

The Central Drug Standard Control Organization (CDSCO) under the Ministry of

Health and Family Welfare

bull CDSCO is presided over by the Drug Controller- General of India (DCGI) who

is in charge of approval of licenses for drugs at both the Central and state levels

bull India introduced the product patent regime in accordance with the TRIPS

agreement in January 2005 with an amendment to the patent act

bull Foreign direct investment (FDI) up to 100 per cent is permitted through the

automatic route in drugs and pharmaceuticals

35

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 36: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

DUNKEL DRAFT TEXT

PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT

The General Agreement on Tariffs and Trade (GATT) was established in 1948 and

since then there have been several rounds of negotiations The current round the

Uruguay Round however is different from earlier sessions because many new

issues such as Trade-Related Intellectual Property Rights schemes have been

included in the agenda These new issues directly impinge upon people around the

world in some form or another said Mr B K Keayla convenor of the Indian

National Working Group on Patent Laws at the three-day International Conference

on Patent Regimes which took place recently in New Delhi India (see also page

17)

The patent regime as proposed in the TRIPS text of the Dunkel Draft Text provides

for rights and rights only for the patent holders The obligation to serve the public

interest is totally nonexistent The leverage available to the governments in the

patent system to ensure public interest through compulsory licensing licensing of

rights and revocation of patents have been totally set aside said Mr Keayla

Imports would become subject to patent-grant obligation

Enjoying this article Have the leading Biopharma news amp analysis delivered daily

on email by signing up for our FREE email newsletter here

The possibility of ensuring any competitive environment will be systematically

eliminated The aspirations of the developing countries to derive benefits from the

international trading system would be totally negated The fact remains that the

concerns of the developing countries which were shown in the November 1990

Draft Final Act of the Uruguay Round were unilaterally deleted in the DDT of

36

PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

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PHRAMA LEGAL ASPECT SANDESH BHOIR

December 1991 which now represents only the one-sided interest of the highly-

developed countries he continued

On the specific provisions relating to the new patent systems in TRIPS Mr Keayla

pointed out that the DDT has been presented as a package to the contracting parties

to accept it as a whole and that there is no specific agreement which may be even

detrimental to their national interest This kind of outcome from negotiations on

international trading systems will have no lasting life It will face a tremendous

resistance from all over the world when people start experiencing its impact he

warned

The other important aspect of the Dunkel proposal is that it is in the nature of a

self-executing treaty All proposals contained in the DDT will have to be

implemented in the national laws and policies of sovereign countries This is an

undemocratic feature says Mr Keayla which challenges the sovereign law-making

authorities in different countries

Mr Keayla points out that Article 27 of the DDT provides that patents shall be

available for any inventions whether products or processes in all fields of

technology This he says leaves no choice with the member countries to exclude

certain technologies and sectors of the economy from the patent system

The scope of patentability when taken with the patent term of 20 years in the

chemical field would mean that it would be possible to extend the patent regime in

some form or other for a long time There would be product patent protection for

20 years and then process patent for another 20 years says Mr Keayla In the USA

patents are being taken for drug formulations dosage forms and usage forms This

kind of patent could also be taken for a further period of 20 years he adds

37

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

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Page 38: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

During the process patent regime reversal of the burden of proof has also been

provided The sum total of all these provisions would mean that the patent regime

for a particular product could get extended to a period possibly as long as 40-to-60

years There will be no competitive environment Mr Keayla believes that in such

conditions people will suffer the impact of monopolization and domestic drug

industries will have a slow death

Article 27 also provides that patent rights would be enjoyable without

discrimination as to the place of invention the field of technology and whether the

products are imported or produced locally This has serious implications because a

patent holder would be able to exclude others from manufacturing by taking

product patent protection and then would resort to importation thus establishing a

total trading monopoly

Mr Keayla argues that sovereign governments should have the right to draw up

their own laws within the framework of the global system that may be evolved

through negotiations and keeping in view the aspirations of all

Under Article 28 exclusive rights have been provided for the product patent holder

and the process patent holder The significance of these exclusive rights are

important when we find that exclusive rights for imports have also been provided

for the patent holder Here it may be difficult even for governments to import

patented products from many sources that may get established elsewhere in the

world through sub-licensing The impact of this provision would be realized when

there are emergent conditions This right should not be available to the patent

holder at all according to Mr Keayla

The instruments of compulsory licensing and licensing of rights for working of a

patent are totally nonexistent in the proposed patent regime In place of

38

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 39: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

compulsory licensing Mr Keayla says that some totally weak provisions have been

provided in Article 31 which also has a conspicuous title Other use without

authorization of the right holder

Provisions contained in this article do not provide for a similar kind of authority to

the national government to ensure the working of the patent There is some

possibility provided for authorization by governments when there is a national

emergency or other circumstances of extreme urgency or in case of public

noncommercial use Such authorizations have limited scope and can be terminated

when the circumstances for authorization cease to exist Furthermore the usage

shall be nonexclusive nonassignable and only for the domestic market

No one will be interested in taking up such an authorization according to Mr

Keayla because no one would be interested in noncommercial ventures

Furthermore no entrepreneurs would be developing technologies and waiting for

an emergency or contingency to occur It takes easily three-to-four years to

develop process technologies of any new molecules This means that the

provisions in Article 31 are virtually of no consequence says Mr Keayla

He says that what the industry should be asking for is clear provision for automatic

licensing of rights and compensation to the patent holder through a royalty system

for the use of the patent Details of this mechanism can be worked out and for this

reason Mr Keayla advocates support of the Cartagena declaration which was

issued by the Latin American National Pharmaceutical Industries Association

ALIFAR at the end of its annual meeting in Cartagena Colombia in June

(Marketletter June 14)

The declaration rejects intervention by the USA to impose monopolies regarding

medicines it alerts legislators and governments to the consequences of approving

39

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 40: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

such patent legislation and advocates alternative systems based on economic and

competitive freedom it recognizes the rights of innovative companies but supports

the idea that legislation should reconcile this with the national industries

consumers and with the public health objectives of each government The

ALIFAR countries support a legal system allowing any company that can produce

medicines to do so whilst paying the patent holder a royalty fixed by law the

declaration also rejects the creation of artificial barriers to market access

particularly in relation to registration and approval of medicines

A guest speaker at this years ALIFAR annual meeting Mr Keayla says that the

Cartagena declaration is the only valid alternative which can be offered for final

negotiations regarding patent protection Analysis has shown that the patent holder

would be better compensated and there would be no grudge against the strong

patent system proposed

Mr Keayla says that the exclusive marketing right provision for a five-year

period as suggested in a transitional arrangement makes a mockery of the national

patent system which would be rendered useless

He would like to see a clear transitional period proposed but suggests that a ten-

year transitional period is not adequate India took 20 years to revise the Colonial

Patent Act the Patents and Designs Act of 1911 If we were to demolish our own

progressive patent law (the Indian Patents Act) that has been in operation since

1970 we would need a very long period as there would be tremendous resistance

he commented

The Indian industry has been able to produce basic drugs covering various

therapeutic groups and has almost reached self sufficiency in production of bulk

40

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT
Page 41: Pharma Legislation

PHRAMA LEGAL ASPECT SANDESH BHOIR

drugs The industry has also developed the capability of producing enough surplus

of bulk drugs for worldwide exports

Growth In The Indian Market Since the Indian Patents Act was enacted in 1970

the production of pharmaceutical products in India has grown more than eightfold

from 5 billion rupees ($1606 million) in 1974 to over 40 billion rupees ($13

billion) in 1991

In recent years there has been a sharp rise in exports by the industry In the six

years between 198586 and 199192 exports have grown from 14 billion rupees to

128 billion rupees Exports to the USA have increased around threefold in the

period from 1991 to 1992 The domestic industry has helped greatly in not only

providing drug security but also in getting access to foreign markets

Significantly out of the top five companies operating in India only one Glaxo is

an affiliate of a multinational company and the rest are Indian companies

Furthermore 80 of the bulk drugs are produced by Indian companies

Share Of Patented Drugs In India Therapeutic Groups under patent

Antibiotics 4023 Antibacterials 9880 Systemic antifungals 2566 Antileprotics

6996 Cardiovasculars 4018 NSAIDS 2216 Tranquilizers 7442 Anticonvulsants

6593 Antipeptic ulcer agents 6592 Oral antidiabetes agents 5530 Antiasthmatic

agents 4753 Antihistamines 2134 Cytostatics and antileukemics 3241

Contraceptive hormones 8879

The table above shows that all the latest drugs are in extensive use in India and that

the US Trade Representatives claims that Indias domestic industry produces no

more than 5 of patented drugs is false says Mr Keayla

41

PHRAMA LEGAL ASPECT SANDESH BHOIR

42

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PHRAMA LEGAL ASPECT SANDESH BHOIR

42

  • PATENT ISSUES AND TRIPS OF THE DUNKEL TEXT